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It's Getting Bigger: The Online Music
Bubble
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Man + dog seem to be getting into the online Music industry.
Coca-Cola is the most recent entry in a parade of iTunes
Music Store wannabes. Who've we got so far? Let's see.
BuyMusic.com, Napster,
Puretracks, Dell,
and the list goes on. Even the mighty Walmart
is apparently getting into the act.
Some history might be in order.
In the late nineties, the word "Internet" pretty much sent every
business with a two sheets of paper running off in all directions.
Established companies were scared into throwing together an online
"presence." New, upstart dot-coms pledged to radically redefine how
the world does business and put traditional companies out to pasture.
Venture capitalists went haywire looking for the next great thing
buried inside a ten-slide PowerPoint presentation. Generally accepted
financial yardsticks like, err, having a product, revenue, and
profits, were tossed out the window.
I'm dating myself, but it seems like it was just yesterday. Any
other old fogies remember the good ol' days?
Can anyone see any parallels between what happened then and what's
happening now in the online music industry? Let's see. No profits to
speak of, flat revenues, and questionable business models. Crickey!
It's Groundhog Day!
To be absolutely fair, Apple has made a good go of this. Flat (or
non-existent) profits aside, if you throw the iPod into the equation,
their business model makes sense. It's the wannabes that seem to be
barking up the wrong tree. Let's be sensible here. There are only a
finite number of people who will actually want to buy music online.
Surely those who are online know where to download music for
nothing.
This, of course, means that anyone who wants to play in this space
will have to somehow get people to pay money for something other than
the music itself.
Apple, for instance, is offering a few things that people are
willing to pay for. They are guaranteed music quality, consistent
licensing, and hardware integration. No one's paying for the music,
really.
Competitors seem to be falling into the trap that the only thing
that matters is the music. Take BuyMusic (please). I mean, really,
what are they offering here that can't be had for free from Kazaa or
Morpheus?
And it looks like others are piling on. Here's a clue, fellows:
It's not the music. The music should be free. Concentrate on the
service. Make people pay for the service.
As with the dot-com bubble, the inevitable shakeout will come soon
enough. And, even with those tiny to non-existent profits, Apple is
the most likely candidate to remain standing after the dust settles.
Stephen Van
Esch is the founder and president of
the
E-learning Foundry, an online training
resource for Mac users. Steve loves the Mac and is doubly bilingual,
since he's also fluent in Windows and French.
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