The sales of CDs and records has been falling for years. When iTunes arrived and online sales of music took off; for a brief period of time it seemed as if a messiah had arrived who would put an end to the troubles of the music industry. It was not to be.
The troubles for the music industry began with the increasing penetration of internet. It has nothing to do with how the distribution took place. Around the mid 80’s music started going digital. By the mid 90’s it was truly digital. More music was being distributed on CDs rather than on tapes or records. The real trouble for the music industry began when copying became possible.
Vinyl records could not be copied. Cassette tapes could be, but involved a lot of work. I remember having to spend hours playing each cassette that needed to be copied. At times it was just not worth it. CDs made copying a lot easier. I could be done with copying a CD in a matter of minutes and the quality was also as good as the original. I am from the Tape Cassette generation and I used to have to go to my friends place and get the Cassette or CD from him and record or rip at home. I was constrained by the distance that I could travel and the fact that all this consumed time.
The geographical constraints and time constraints diminished the injury that copying caused to the industry.
Internet changed all of that. The internet made the distribution of the ripped content easy. I could suddenly send across a song that I loved to a friend as a attachment on e-mail. Unintentionally, I was killing the music industry. When a music file was available for free, there was no further reason to buy it.
The dial up internet was constrained for speed. It made distribution of large number of songs still quite difficult. Every year after 2000, internet speeds have been gradually rising up. As the internet speeds increased, sharing larger and larger files became ever easier and piracy became the way to go. When I can get music easily for free, why should I bother paying for it? Then came along torrents (peer to peer sharing) taking internet distribution to a ‘Pro’ level. Today, it is possible to get the entire discography of any artist on any torrent site. The entire exercise of finding the torrent and downloading the file would take less than 10 minutes.
Streaming is one format that got around the problem of downloading by not permitting the users to download the song at all. Songs, Spotify, Pandora, Beats and many other are taking varied approach to allow listeners to consume music. The issue with this format is that it does not have the strength to generate revenues the way downloading does. So the content gets consumed millions of times at a fraction of the revenue that downloads generate. Artists have been getting paltry cheques from the streaming companies and it does not make any sense to support this format.
Music Artists as content creators are being hunted. Their ability to monetise their creation is being threatened. The need of the hour is a solution, but what might that be?
For a solution the Music Industry needs to look at the Film Industry. They are also content creators whose content is equally susceptible to piracy and hurt by the advent of the internet. You can just as easily find any movie on any torrent site. Why is it that the Film Industry does not seem to be in a state of turmoil?
The Film Industry uses this thing called ‘Windowing’.
A movie makes its money from various ‘Windows’. The first window is the Box Office, then the Cable Rights and then finally the rights to Internet and CD distribution. By the time the box office is done, the producers have recovered the production cost along with a sizeable profit, so the monetary losses that they take due to the copying and piracy of the digital format is not as hurtful to them.
The Music industry needs to come up with a format that allows them to rapidly monetise the initial buzz and excitement surrounding the release of their songs. They must not immediately make it available in digital format for everyone to download. It should be controlled through a Window that does not allow for easy copying. The moment digital content is downloaded, its as good as free. (Even Walter Issacson’s recent book ‘The Innovators’ is not available in e-book format).
Taylor Swift recently pulled her music from streaming site Spotify and netted a neat $12 Million in sales, causing a stir. I feel streaming is unfair to the artists, but letting people download is no better. Agreed, it allows for cash to flow in but the music is copied as quickly as well.
One possible format could use an event based release for the songs, where the musicians have control over the channel of release and listeners pay per use. Once the initial 6 months are monetised through such a channel, the next step can be to allow downloads before finally allowing streaming to take place. The essence of success is to delay the inevitable availability of the content in digital format. That is the best way to ensure that the content would be paid for and the artists can monetise the content that they have worked on.
Apple launched the new iPhone 6 in larger screen sizes. The moment the launch event ended, the entire web was abuzz with jokes about how Apple had done exactly what Samsung had done years ago. There were comparative picture, which were circulating all over the web.
Samsung just could not withhold their exuberance! They even released a TV ad within a matter of days.
As the dust settles on the event one things is obvious; Apple can sell 10 times as many (profitable) phones as Samsung can ever manage to.
In fact it is high time that Samsung should shut up and watch how Apple sells its larger phone like gangbusters, at a price much higher than itself and in quantities that it can only dream of. Apple keeps serving them a masterclass in marketing and they keep ignoring it.
Well how does Apple do this time and time again? It is called community building.
Apple has a loyal community
Apple has a loyal community that supports it. Community building is a long drawn process and it takes years of hard work and commitment to build one. Apple probably has one of the biggest communities in the planet. The sales reflect that!
Why can’t Samsung build a community? In order to build a community, you need to stand for something. Take an argument between an Apple fanboy and a Samsung user, each will favour the brand that they own, but let us twist this a bit. Let us say the argument was between a Samsung user and a Nexus or Moto user, things get a little more muddled. A Samsung user might concede.
“If you don’t stand for something, you will fall for anything.”
Samsung is the kind of company that does not have a plan. They have no stand. Look at what they are doing with their wearable line up. There is one running Tizen and one running Android. Standing for something?
They spend their considerable Billions on marketing talking about Apple products in the hope that people might buy their story about the inferiority of Apple products, instead of highlighting the strength of their own. I would suppose that it is a sad state of affairs, when you need to necessarily compare yourself with your biggest competitor to even be able to remotely highlight the superiority of your product.
Care and find customers who care
Build a product that 100 people can love, really love. That is the advice given by Sam Altman, the founder of Y Combinator to startups. When you get people to love your products, they go out and sell it for you. The effort that needs to be extended towards marketing is lower, they get more involved and are willing to forgive you when you make mistakes.
Well, Apple did that when they started; and, they never stopped. This is the precise reason why, they have a massive loyal user community who would stand up and even promote the brand whenever the need arises. Apple was the reason, the term fanboy came into existence. You may have heard Apple fanboy a lot, have you heard Samsung fanboy as much? Android fanboy perhaps, but not Samsung fanboy.
So how did Apple build this community of lovers? It has taken decades over which many of these pillars have been established.
The Pillars of Apple Community
Platform – Platforms make it possible for people to build on top of it. People perceive the benefits and shortcomings of a platform in the way that they treat them. By the time Steve Jobs came back in 1997 to Apple, he was clear that Apple had lost the platform war to Windows and acknowledged the same publicly. This did not necessarily mean that he had given up owning a platform. He knew that the Platform is the only place for a company to take a stand, all hardware could be copied. Even his entry back into Apple was facilitated by the platform that he sold to Apple.
OS X & iOS – The Mac ran the Mac OS till version 9 (Mac OS 9). OS X was actually the rebirth of NEXTStep as a the Mac OS. OS X was Steve Jobs bringing his cumulative work done at NEXT to Apple, which was launched in 2001. OS X was modified to iOS for mobile devices. Since both the operating systems are closed platforms which Apple owns, they have been able to provide a set of features that “Only Apple” can provide.
You can argue about the merits and demerits of iOS and Android or Windows, Linux and OS X; but one thing that you cannot take away is that these platforms tend to polarise people. This polarisation is what leads to love for a particular platform against others.
There are two quotes from Steve Jobs that comes to mind.
People who love their software build their own hardware ~ Alan Kay (which Steve often repeated)
Picture of one of the first buyer of Windows 95 Picture of one of the first buyer of iPhone
For me the only difference between the two pictures is how the software was being distributed. Apple kept Alan Kay’s quote in mind and decided to distribute their software through their own devices which is at the heart of spurring all of the profits. Microsoft stuck to making money by selling the software directly to customers and OEM.
The Second quote from Steve Jobs came at one of the ‘All Things D’ conferences. He said “ The iPod exists and Apple is in that market place because these really big Japanese consumer electric companies, which created and owned the portable music player market; could not write the appropriate software. They couldn’t conceive of and implement the software and if you look at the iPod, it is just software, software in the iPod itself, software in the PC/Mac, software for storage in the cloud and it is in a beautiful box but it is just software.” He said Apple views itself as a software company.
But the secret he did not let out was that it was still all about the Platform.
Apple Stores – Apple has arguably redefined electronics retail in every way possible. Back when Apple was planning to start its retail stores many said that they would fail without question; sighting the Gateway retail failure. The one thing that nobody had foreseen was that for Apple, the store was going to serve as an alter of worship for all things Apple. Apple Stores were never going to fail because the ultimate goal of the Apple Store was not to sell products!
Apple did not open their retail stores to sell Apple products, although that was a welcome consequence. The Apple stores were meant to be, for the lack of a better way to put it, a university. You came to an Apple store and learnt about all things Apple. You got to try out all of the products that Apple had, get rid of your inhibitions and got really comfortable. Windows was the dominant platform of the time and there were several inhibitions against switching.
For those who loved Apple, there was a place they could drag their ambivalent friends to, to show them how great Apple was. They themselves could come every now and then to learn about the newest and coolest things Apple was doing. They could just come and hang out when they felt like they needed to be close to what they loved.
Second lesson in community building; once you give your users a reason to love you, give them a place they can meet others like themselves. Give them a place where they can get people who do not love you; to sow them why you are awesome.
Music – The next pillar which brought a much larger following was their entry into the music business. People love music. Music inspires a range of emotions, whatever your taste might be, there would be a particular type of music that you really love.
iPod was a device through which you could carry your music anywhere you wanted and enjoy it. The biggest achievement of iPod was to put your entire music library in your pocket. This was a huge breakthrough at a time when most mp3 players could hold only a couple of dozen songs. But more than the device itself, it was the platform which enabled the device that won them legions of followers
Few realise, but Apple actually built an entire platform for their music strategy which is called iTunes. iTunes made it possible to manage all of the music you had, buy music that you loved and manage the device on which you loved to listen to your music. It was a platform that offered ‘Music’. Not only users, even musicians loved the platform, which resulted in many of the musicians loving and supporting the platform.
For several Millions of people, including myself, iPod was the first Apple device that they ever bought. I am pretty certain that for almost as many, including myself, iTunes was the first platform on which they ‘bought’ digital music.
People who really loved music, which is a large group of people, eventually started gravitating towards iTunes and the iPod which brought more and more people into Apple stores and made them discover all the other things that Apple did.
iTunes is viewed as just a software, an app and many have been recently complaining that it has got too bloated and heavy. True, iTunes was meant for music; Apple has been lazily using it for all kinds of content; movies, TV shows and even book distribution. They need to go back to the basics.
iTunes (music) sales seems to be declining though, I do not think Apple would give up on Music that easy. They will most certainly take another swipe at it, because it is important to ensure that the artists who are creating quality content are rewarded for their efforts.
Fitness – There are so many people across the world who are either into fitness or require help with fitness. Fitness affects people more personally than anything else. Apple is slowly courting this segment and seeking to make a dent. Most importantly it is a little difficult to look at fitness in a isolated way, it involves the food you eat, the doctor you consult, the activities that you perform, etc. Seems like an excellent segment to build a community around.
Apple has not done much in this area as yet. Though looking at the roster of people that it has been recruiting over the past year, it is very clear that they are focused on building a compelling offering in this area. You can rest assured that they will build a platform. The Apple Watch, Health app and such are just ingredients which are getting tested in the real world before they bring out a more well-rounded offering to the market.
At the end of the day, people love what you are doing when you care about something that they care about. If you care enough about something, it shows.
Look at what Google does, does it seem like it cares about its customers; well yes, but its customers are advertisers, not you and me.
As long as Apple cares about the things that it works on, there is nothing that can stop their community from growing.
The only way to compete is by caring more. Do you see any company caring more?