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Apple vs. EveryoneEvery media conglomerate wants to start its own online venture. Will iTunes survive?

By Ivan Askwith
Posted Wednesday, Oct. 17, 2007, at 12:37 PM ET

(Continued from page 1)

Option 1: Apple backs down. Apple decides that selling content through iTunes is critical to the success of its assorted digital media devices. As all of the major labels, networks, and studios abandon the iTunes Store for alternate distribution strategies, Apple gives in and allows NBC et al. to set their own prices. After all, Amazon sells products for lots of different prices, and nobody finds it too difficult to use.

Why it won't happen: Allowing media conglomerates to set their own prices won't keep them from seeking additional distribution partners. And while Amazon might improve its selection of content, it's not likely to gain much footing with iPod users: At present, Amazon Unbox isn't even available for Mac users, and content can't be loaded onto iPods. Unless all of the major content providers strike deals with a single distributor, consumers will be forced to seek out music and movies across multiple platforms and services. The continued success of the iTunes Store in the face of a growing number of competing services suggests that most consumers would rather get their media from the single source with the best selection rather than from a dozen independent providers.

Option 2: The networks back down. Muttering under their collective breath, the networks resign themselves to selling content through iTunes in order to continue reaching Apple's user base.

Why it's likely to happen: The television networks and record labels will continue exploring alternate distribution channels that yield higher profits and greater control, but unless they're willing to put pride over profit, the networks can't afford to ignore or abandon iTunes.

Option 3: No one backs down. Apple remains committed to uniform pricing (which it will), and the networks remain committed to controlling the pricing of their content (which is probable). Convinced that the success of the iPod hinges on the availability of exclusive, desirable, accessible media content, Apple begins exploring new strategies that sidestep the existing industry structures altogether.

One such approach would involve Apple forming direct relationships with artists. Through iTunes, Apple could embrace the growing number of musicians looking to escape the confines of the major labels, a roster that includes Radiohead, Trent Reznor, and Madonna. It's doubtful that most artists would agree to release their work exclusively through Apple, but it's not hard to imagine an artist giving Apple an exclusive advance distribution window in exchange for placement in an iPod commercial, a tour sponsorship, and a higher share of revenues than the labels and networks are willing to offer. And while it's outside of its current business model, Apple could even invest in saving fan-favorite television shows from cancellation: Imagine iTunes as the exclusive distributor for Arrested Development, Firefly, or Veronica Mars.

If the networks turn their backs on iTunes altogether, Apple could also retaliate by moving to a service-based approach. The company has already released a networked set-top device called the AppleTV that allows users to stream photos, music, and video content from computers to a television set. Thus far, response to the AppleTV has been lukewarm, but Apple could change this with a single, simple move: Introduce DVR capabilities.

By letting people record any television content they please and load it into iTunes and their iPods with one-click ease, Apple could avoid having to cut deals with anyone. The company could even sweeten the pot by leveraging its online services and allowing users to save any recorded show to their .Mac accounts, making their favorite television broadcasts accessible from anywhere. Would Apple take such aggressive action against the networks? That's hard to predict, both because Steve Jobs sits on the board of the Walt Disney Co. and because such an approach could damage Apple's ongoing relationship with each network's affiliated music labels. But from an audience perspective, this would be a fantastic outcome, and one that would go a long way toward restoring Apple's flagging reputation as a champion of consumer interests. Networks take note: Whether they sell your content or give it away, Apple's not going away.

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Ivan Askwith is a lead strategist with the creative agency Big Spaceship and an adviser to MIT's Convergence Culture Consortium.
Illustration by Mark Alan Stamaty.
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