Yes, I know, the Apple Keynote big ticket items are the Air and Video rentals. Ok – that’s fine. But for me I liked the iTunes music sales part. They have sold 4 billion songs, and 20 million in one day. Despite the fact that iTunes is really all about selling iPods, here is the quote I like the best:
“We’ve never offered a rental model in music because we don’t think people don’t want to rent music.”
We wholeheartedly agree. I believe that both the subscription model and the free model are not permanent solutions and are not solutions that people really want. Some think it’s naive to say that people want to buy music, but it’s actually true. And you really need look no further than 4 billion downloads to answer that.
The real question for us (and the rest of the industry) is how to create a compelling enough experience that people want to pay for music. iTunes has done that by coupling it to the iPod family. For stand alone services, the value will have to be something else, but it’s exceptionally clear that:
When the value is high, people will pay and return
When the value is moderate, people will pay temporarily (ie Napster) and leave
When the product is free, people will use it, but loyalty is low
I get a lot of “How will you compete with Apple? How will you compete with Free?” In a dramatically expanding market, I think the better question is: “How will you add value to the customer so that they want to pay for music?” And I think we have the answer: Context.
Ian Rogers and I are on the same page – you have to provide an environment where scale rules and where context provides the impetus for sales. Meaning – if you provide meaningful and rich context around content and a low barrier to accessing that content, then sales will take place.
In our case, the challenge is in generating enough critical mass such that the meaningful content arises from our users. And critical mass just takes a little time.