Comments on: Apple Stands Alone in Effectively Monetizing Content

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By: Ben Elowitz

Ben Elowitz — Wed, 28 Apr 2010 01:01:49 +0000

Thanks, Robert. I would look at it differently. Apple has built a whole new ecosystem. Yes, it is device-centric, so Apple gets to make a huge pool of profit on the initial purchase up front. But they also get to collect some change every time each of the other content and application providers does so.

More to the point, Apple seems to be the only one who is innovative enough to come out with devices with enough consumer appeal that people keep buying them, and is the most successful to date at creating a marketplace big enough to get third parties from media companies to small app developers adopting it massively. They've made razors so awesome that consumers pay hundreds of dollars for them, and they get to tax tens of thousands of other companies that make the blades.

And now they have a complete offering for those third parties to get audience and make money.

Seems like more smart than lucky to me.

--Ben

By: RobertinSeattle

RobertinSeattle — Tue, 27 Apr 2010 02:55:41 +0000

Ben - You have some good points on Apple's ease-of-use approach to their micropayment solution. However, to bring it into proper perspective, as well as to answer your question as to why this seemingly logical solution hasn't been adopted by others, here's the under-the-covers short answer:

Apple actually makes little money on the songs it sells on iTunes. Their entire business model is based on reversing the time-proven Gillette give-away-the-razors-and-sell-the-razor-blades Marketing 101 rule that has proven itself for almost a century. But instead of making your money over a long period of time by selling the razor blades (in this case the songs), Steve Jobs decided to charge high prices for his iPods and make the profit on the razors instead. Two things came out of this model: You have to have a closed system to carry on this Ponzi scheme (does it start to make more sense now?) and you're now on a treadmill coming out with new models at inflated prices to keep replacing your older cheaper models (and fighting off competitors). And when that market starts to erode, then you have to come up with another razor: the iPhone. When that model starts to get thin (Google Android and Microsoft phones are eating away at the iPhone market), then you come up with the iPad which costs a lot more than netbooks, of course.

I suspect that the surprise unintended consequence was that it really forced Jobs and Apple to continue being innovative (not a bad thing!). However, it may have been more sheer survival than business smarts. Sometimes you just get lucky.

So back to your original question of why other companies haven't embraced the Apple model - does it make more sense now? It never works if you try to expand an unprofitable model out to other platforms.