on retailing, bazaar hosting and the directing of ire // 07 Jan 2009

Caveat: I recognize that this is totally half-baked, but am optimizing for speed over fully-bakedness.

So there’s the requisite amount of noise today on blogs & Twitter about the price tag for “upgrading” your library to non-DRM’d music. Freedom-loving music buyers are directing ire at Apple for double dipping — charging them again for the tracks they’ve already paid for.

Leave aside for a moment whether said freedom-loving music buyer is in the right. That argument isn’t worth having.) Instead, let’s look at this a bit differently: what if the iTunes music store had been architected like the App Store? Where would the ire be directed then?

In the App Store, Apple’s “just” a channel, the host of the bazaar. When you buy an app, you buy from the developer, and they’re the ones that not only build the product, but set the price and do the marketing. And this means that when Apple comes along with iPhone 3.0 software, or a new device form factor, or even just some new feature that necessitates a new version of the app, the developer is the one who makes the decision about whether or not to charge the user for that new version.

And in the music store, Apple’s a more classic retailer — the manufacturer of the product (in this case the label, and yes, I know that’s the bug here) isn’t as important as the label on the product (artist name) or the retailer itself. The analogy isn’t quite parallel, obviously, but posit for a minute for that the ability to sell DRM-free music is a new “feature” of the platform, and that the content on that platform needed to be upgraded to take advantage of that new feature. Since the manufacturer / label is subjugated to the retailer / Apple, the decision to charge users an additional $0.30 per track for the upgrade appears to consumers to be Apple’s decision, regardless of whatever boardroom negotations had to happen to reach the place where they could offer this service.

I know there are a ton of historical reasons why the music store doesn’t work like the App Store (major labels, RIAA, fear, doubt, greed, ego, etc.). But the difference in the way the App Store works couldn’t be starker — they provide a valuable service (distribution, discovery, promotion and integration), extract rents for that service (30%), and then get out of the way. (Well, sorta.)

Here’s the point (finally!): if the music store worked like the App Store, the ire of the freedom-loving music buyer wouldn’t be directed at Apple today; instead it would be directed at the labels who chose to charge their listeners to convert the music they’ve already paid for into a format they should have offered from day one.