iTunes, the Middleman People Want

by Chris Seibold Oct 05, 2006

For the sufficiently geeky or antisocial, the car buying experience is one of unmitigated unpleasantness. You stop to browse and you are unavoidably thrust into a conversation with a sales person. The smallest indication that a purchase may occur at some point inevitably results in the now standard “If I can get these numbers to X, can I earn your business?” The geek wonders why all the rigmarole is necessary. Why don’t automakers sell cars the same way bread makers sell bread? The prospect is enticing, imagine strolling onto the lot, firing up the complimentary car dolly and towing your choice of vehicle, with a giant UPC code on the side, to a self-check lane. The purchase could be completed with one less middleman, thereby saving the consumer the salesmen’s cut. The truth is far different, people want the middleman. A car is a huge purchase and the buyer wants a face to associate with the purchase. In that fashion, they have a go to person for questions and somewhere to assign blame.

Naturally, a car purchase is not a typical transaction, for lower priced goods getting the middle man out of the deal would seem to be much, much wiser. If one is buying a coffee maker or a box of paperclips, there really isn’t a need to have someone there to answer questions. The capacity of the coffee maker is likely stated on the box and the minutiae differentiating the quality of paperclips (do they have the little ribs? If so why? If not why not?) is something the mass hordes of paperclip buyers feel they can make it through this earthly trek without knowing.

Seemingly, in that case we’d be better off without the intermediary. Or would we? The most popular middleman for commerce of the mundane is Wal-Mart. While the floors may be grungy and the lighting reminiscent of a gray Seattle morning Wal Mart manages to sell shoddy merchandise at low, low prices. But Wal Mart also provides a valuable service in their middle man role. It offer consumers choice. You can get ridged or unridged paperclips, you can choose from a dozen different coffee makers, the variety of prepackaged, sliced, white bread is almost as astonishing as the lack of differences between said loaves. The direct from the manufacturer directly to the consumer model just doesn’t work well for manufactured goods.

But what of the case where the goods weren’t mass-produced, what if they were merely mass replicated? Naturally, digital music fits right into this definition. The current drill is as follows: Artist records music, labels promote music, stores and iTunes sell music. The stores and iTunes keep a little bit of the cash and send the rest to the labels. The labels keep a bunch of the dough and send a pittance to the arist.

Physical record stores provide a service; they store the physical CDs some monetary incentive is obviously owed. With the other middlemen, iTunes and the labels the case isn’t as clear. The labels argue that without them there would be no effective promotion for the artists music, and as promoters, they are essential. Which is an interesting concept, how would the world ever know about a new U2 album if the labels didn’t advertise, those guys are providing a valuable service to under exposed artists. On the other hand, it could be argued, more effectively, good artists make a living with or without massive label support. One recalls the tale of that nowhere group R.E.M., a surprise hit suddenly they were everywhere. It wasn’t the label that got them going, R.E.M. had made twelve albums before “The One I love” first enthralled listeners, then annoyed listeners and finally catapulted the group to fame. Well, if you count an appearance on Sesame Street as the ultimate arbiter of fame.

So, it is likely the case that the labels are very good at promoting what is already popular and forcing prepackaged, polished acts on the unsuspecting pubescent public but they aren’t nearly as adept at giving people what they actually want to hear. For that to happen, artists must promote themselves.

If the labels aren’t providing anything more that popularizing the already popular is that middleman people could do without? The answer is yes. When purchasing music people don’t care what the label the music was published by, they are after the songs.

If the labels are a superfluous middlemen, existing only to promote the most profitable acts then surely iTunes is just as extraneous. There is nothing to prevent the artist from selling directly to the consumer and the profits would go straight into the bank account of, say, Beck. Put differently, where is the consumer benefit?

Here the answer is clear. We see the Wal Mart model in play yet again. People simply don’t want to surf to 40 different sites to buy forty different singles. While the notion is prevalent that the popularity of Napster and LimeWire was predicated on the notion of valued goods for free the convenience aspect was every bit as strong a motivator.

The middleman, of course, doesn’t have to be iTunes. Any service that aggregates enough music with terms palatable to the consumer could be the defacto reseller. The selection the store provides, the time it saves and provides a feeling of security concerning the quality of the download adds up to one thing: As much as people abhor the concept of a middleman, they secretly want the assurance the middleman provides.

Comments

  • If the labels sold you tunes directly they would want to charge you for what they think is the cost of the content - your arm and your legs - with no remorse.

    They are beginning to hate with disgust Mr. Stephen P. Jobs, the man who smooth-talked them over to give the keys to their very kingdom.

    That is the reason they are now very reluctant to join the party along with Disney. They think they can control their internet future without iTS. I wish them good luck for they won’t. They will have to grab and hop on the bandwagon in a short while. They will have no choice.

    What is their choice besides iTS? PlayForSure? Been there with no success. Zune? I extremely doubt Zune will even dent PlayForSure, let alone iTS.

    So, there iTS is the people’s choice for their content provider over the Net whether the studios enthusiastically endorse it or not. Thanks Mr. S.P.J. for your used-car salesmanship skills. wink

    Robomac had this to say on Oct 05, 2006 Posts: 846
  • Anytime car salesmen bother me, I just show them my DeathMatch trophies and they leave me alone. How are you on the whole Dell computers powered by Panda Blood issue? MMmmm, panda blood.

    To be serious, iTunes is successful because of its ease of use on both of the major platforms. Even if the iPod had not been the runaway success that it has been, no other Plays4Sure store or opposing DAP has the ease of use. The Zune has some serious issues to work out before it can be considered as an alternative. The whole social model that they are striving for works well for MySpace or YouTube because it’s cross platform (or cross-browser). How well will that work with hardware? Remains to be seen I guess.

    Guy Serle had this to say on Oct 05, 2006 Posts: 1
  • Good article, Chris - the finger on the pulse, you have.
    I enjoyed.

    Personally, I buy things from the iTS for convenience - and only convience.

    I much prefer having physical CDs with notes (and higher-than-128kbps quality!). But the fact that I can open the iTunes app and instantly buy the Regina Spektor track I heard on someone’s myspace page, or that cheesy 70s tune I just heard on a commercial, with total ease, security, and spending just 79p means I’ll do it anyway.

    The iTS’s convenience is its sole game-changer, in my opinion.

    Benji had this to say on Oct 05, 2006 Posts: 927
  • (and yes, I realise I have exceptionally poor taste)

    Benji had this to say on Oct 05, 2006 Posts: 927
  • and yes, I realise I have exceptionally poor taste -Ben

    Heh, heh…aside from music preferences, you are absolutely correct on that mark - convenience.

    But that’s not all that made iTS what it is today. Napster, Real, MTV Urge, Wal*Mart, or Amazon are just as convenient as iTS to me. But why iTS? Is there other things besides its convenience?

    How about actually allowing what customers want. Make them feel like they are buying a physical media that they have the sense of “owning” that content where in reality, they don’t. The cover arts help in that regard. Cover Flow UI is a great way to drive this metaphor, ain’t it?

    How about the symbiotic synergies of the iPod and iTunes. The connection is seamless and you can’t have one without the other. Although one doesn’t have to enter iTS in the mix but when one does, the experience is elevated beyond what you can do with an iPod and iTunes by themselves.

    It is then safe to conclude that the triumvirate (iPod+iTunes+iTS) and how they work together is what makes the iPod universe really tick.

    If one has an ambition to topple the iPod (Zune?) it would have to compete and win in all of the three pylons of the iPod phenomena. Otherwise, good luck in losing lots of $$$ in the effort.

    Don’t forget that Apple is about to reinforce the iPod system with a fourth pylon in the form of the iTV. It will only get stronger in the next year or two.

    Robomac had this to say on Oct 05, 2006 Posts: 846
  • “Middle man” is a weird conflation here of very different roles.  Labels don’t do what iTunes does, so one being superfluous does not make the other so.  The labels are distributors/promoters.  iTunes is a retailer.  And the salesman is merely an employee, like the guy in the black shirt at the Apple store.

    Our current distribution model for music looks something like this:

    Artist->Label->Store->Consumer

    Each entity provides a distinct function with very little overlap.  The Artist creates the content.  The label distributes and promotes the content.  The Store sells it.  The Consumer buys it.

    Cutting out a middle man (the labels and the stores) shifts the burden in one direction or the other.  Take out the labels, and the distribution and promotion fall either to the artist or the store, neither of whom wants that responsibility.  Take out the store, and retail responsibility falls onto the label.

    While I strongly support diversity at every level of this model, I don’t think it’s necessary to get rid of any of them in particular.

    Beeblebrox had this to say on Oct 06, 2006 Posts: 2220
  • As for the person above me who is sticking to his box in that the old tried-and-true model of: “Artist > Label > Store > Consumer” is somehow sacred and etched in stone.

    That person should read Daniel Eran’s nicely researched series of the iTV impact on us. Let me warn you in advance, it is one of the best damn writing about the subject matter that I have ever seen. That is, you have to be willing to leave your box and explore the new realities of iTunes and what it is really about today and in the near future. If you’ve read David Pogue’s take or Robert Cringely’s wild imagination, you haven’t seen RDM’s yet.

    In short the traditional middleman won’t go away, it will only be supplanted swiftly by the iTunes model since these greedy keyholders-no-longer will defy the inevitable - that people want freedom with their content and artists will happily serve that demand when the tide turns soon enough.

    Robomac had this to say on Oct 11, 2006 Posts: 846
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