Rumors abound this week about Apple creating an all-you-can-eat model for the iTunes music store tied to higher prices for iPods and iPhones. Some have downplayed these rumors as merely wishful thinking, but here's how I think it will shake out.
1) Apple wants to continue dominating the online and retail music sales industries. This will eventually make them money (remember Amazon.com took a while to become the profitable business it is today).
2) Apple can't tie iTunes subscriptions to higher iPod/iPhone/iTouch pricing alone because that would lead to major lawsuits.
3) Apple can't simply open access to iTunes for other players because that gives it only a basic licensing fee ($10-$20 per device) and whatever profit margin it currently makes on music/movies sold.
So, why not combine all of these into one simple package: Dominate sales by licensing open access to iTunes media AND allow for additional all-you-can-eat packages tied to individual Apple and non-Apple devices. This way when Apple doesn't outright sell the device, it at least makes a cut in the license fees AND the all-you-can-eat package fee. At the same time, this drives dependence on iTunes as the delivery mechanism giving it a huge advantage at the bargaining table. This, in turn, removes the anti-competitive/anti-trust legal dilemma because anyone who wants to comply and pay up can join the happy iTunes family. Sure, it's not an open standard, but it could certainly be argued that this would be a fair standard. I know this is the path Microsoft tried with it's ill-fated playsforsure model, but they put the cart before the horse.
We've all heard rumor that iPod sales growth is slowing, and if these rumors are true, why not turn the business model on its head and start making money on the media instead of just the media player?
- Hutch
