Apple, iTunes & the "Piggyback" Players

Steve Jobs introduces new iPod (Getty Images)

When Apple launched iTunes >2 yrs ago, Steve Jobs got hyped again as the risk taking visionary who would save the record industry amid a world gone crazy with content theft as an accepted way of life for the generation born after 1985. Little did we suspect the real strategy (confirmed this week by the actual iPod usage #s)- Apple is just the latest and best of the 'piggyback' players who make real money enabling, enhancing and capitalizing on content theft while paying lip service to providing artists with a path to $.

In fact, based on released data, what Apple has actually done is extend and expand the acceptance of content theft to other generations of computer users (I wonder how President Bush got the tunes on his iPod- if the twins loaded it for him, I think we know...) making a fortune in the process and moving the theft environment from the computer where it was a bit 'clodgy' to the iPod where the many millions are thrilled to play their stolen tunes.

In case you were sleeping, Apple has saved its hide with a classic 'sell razor blades cheap' to enable sales of high margin 'razors' strategy. The great part of the Apple strategy is that they did not have to really go very far in the business of razor blades (iTunes) because free razor blades are so readily available on the Net.

The released data- the average iPod houses only 20 iTunes purchased releases! People are flocking to buy millions of iPods and getting their content elsewhere for free. Meanwhile CD sales are down, quality of new recordings is down (Taylor Hicks is an icon!) and the real musicians (Stones, Springsteen, Greenday, U2) are making most of their $ touring!

What Jobs has actually accomplished is making Apple the biggest winner in the 'Piggyback' space. He has climbed onto the backs of the musicians under false premises and is letting them save his company willingly while they tout him as the next coming. Crazy? Not at all- the music industry has never set its sights on the 'piggyback' enablers (AOL, Yahoo!, Microsoft, Intel, Dell, Google...) choosing instead to try to control consumer behavior in the face of the continuing proliferation of tools and strategies that encourage exactly what is killing them! So they sue kids and destroy Napster, Bit Torrent and others who have never made a penny from their rights while they let the real profiteers move right ahead, killing individual artists in the process.

Bruce Sprinsteen and Bono beg Jobs to let them promote iPods and iTunes for free and PDiddy sits on stage with Terry Semel (Yahoo!) and AOL's Jon Miller (NBA Tech Summit, 2003) "trying to solve the problem" while they have their hands in his pockets!

This is an amazing, willing transfer of wealth from the artists to the internet media companies. Why? Because the labels and rights holders are conflicted. They are better off in the long run if the new channels succeed. They make long term deals to share 'piggyback' wealth with the new channels in ways that do not reward the artists (M&A, investment, etc.). In effect, they 'climb aboard' with the piggybackers whle the artists trudge along because the hype about chasing Bit Torrent and Napster creates the false impression that the rights guys are doing something to protect artist rights!

What should artists do? Not everyone can create their own direct to consumer system like the touring Stones and Bono have done. The answer is clear but the path uncertain. The envronment is screaming for a new kind of rights player. For a minute it looked like Elevation was the team (Quadrangle before them), but they got lured into the quick wealth of playing the market with the piggybackers.

Someone will sense the oppty and put 5-10B in place and put a real rights enhancement system in place with toll booths on both the free and paid internet using systems that exist... this is screaming for a Mark McCormack type person to step forward and 'just do it'... mmmm let's see, if you bought Artists Direct, let Williams & Connolly be an investor, then set up a protective investment pool for artists and their unions and engaged the piggybackers in a very real 'come to Jesus' discussion....

Just dreamin?

We'll see.