Apple changed the music industry forever. Not with the iPod which changed how we consume music, but with iTunes. When iTunes was introduce a decade ago (2003) the record industry was worth $38 billion. Last year total sales were $16.5 billion.
It’s not that iTunes is cannibalizing all of the music sales. The landscape for how we consume media, ownership of that media and transferring of media has shifted radically. From peer to peer sharing through networks like Bittorrent to streaming through Youtube, the consumer behavior behavior that drives music sales is nothing like it used to be.
If you’re in any form of media or content consumption business, you need to continually evolve to consumer demands or create new ones.
But why was Apple able to dominate the market and own almost the entire digital music sales? They are after all a technology company, not a media conglomerate.
1.) Master the network effect
Apple had the iPod users before the iTunes store was created. The store isn’t a pivot, but merely an extension of the business. With the iTunes store Apple is filling a customer need, but at the time in 2003 we didn’t even know that this was something we wanted.
There’s a blue ocean in every market, no matter how competitive it may be. Record companies were all fighting on digital sales, Jobs brought them together and inked a deal that was very advantageous for Apple.
Are there better ways to buy music out there? Probably.
But we often underestimate the network effect.
When network effect is present, the value of a product or service is dependent on the number of others using it.
Just like if there’s a cryptocurrency created that’s better than Bitcoin, having users adopt it and use it is inherently more difficult than improving on something.
Google+ is better than Facebook in a lot of ways but I don’t think this worries Zuckerberg at night.
Takeaway: Ship early and get people to start using your product, reading your blogs or trying your service. Listen to their feedback, monitor their behavior and adapt!
Once you have dedicated users, it’s easy to expand into new lines and offer them other products.
2.) Make The Experience Frictionless
iTunes was their platform and transferring songs from your iTunes to your iPod was / still is seamless. Aside from entering your password to confirm the payment, there’s zero friction going from purchasing a song for 99 cents to syncing it to your iPod.
Even 99 cents for a song… we mentally compare that to another good and determine whether it’s a fair price or not. So even the price of a song on iTunes, is frictionless. That’s one small part of the Apple experience.
Apple continues to remove the friction by eliminating the need for cables, you can sync it all wirelessly or even to the cloud.
I save all of my information on Amazon.com and am a Prime Subscriber. When I buy a prime item, I click one button and it’s delivered in two days (almost precisely) without having to pay shipping.
With my Roku player, I turn it on and can instantly find the shows I want to watch on Netflix, Hulu, HBO Go and Amazon Streaming.
As a consumer who’s time is valued, I support these companies because they make it so damn easy for me.
Being frictionless is about making the process simple.
Have you purchased anything with Square before? It’s such an easy experience!
You might not have the same resources as these billion dollar companies, but there are steps in your process that can be refined to make it easier for consumers.
Take the time and write down a desired action or conversion. Then build the funnel for that conversion backwards and see all of the steps that it took for the prospect / client to get there.
I’m sure there are places they could drop off, steps you could remove or parts that you could provide extra value to improve the chances they do that action.
Problems are going to happen. Software bugs, shipping losses and crazy customers demanding outrageous things. But if you make this experience easy, your customers will love you and they’ll stick around.
3.) Don’t React. Follow Your Plan.
Pandora, Spotify and all of the other streaming music apps do pose a threat to Apple’s business with iTunes. With cash reserves greater than the United States, they could easily put a streaming service into development and could have even been in the market before the new wave of apps arrive.
Why didn’t they?
One – we don’t know how streaming is going to play out.
Royalty fees make streaming almost unprofitable and with so many other consumption options available, it’s challenging for anyone to get users to convert into paying customers.
Two – it would confuse the shit out of their customer base.
Apple tried to combine social with music and failed. The product was confusing and the integration with iTunes was even worse.
People know iTunes as a place to buy music. Changing that perception is tough.
When you look at people entering your market, the first reaction is immediately to go into defensive action. Okay let’s offer the same feature they have or run a competitive promotion.
If you’re the leader or even a major player, keep focused on the things you need to do to grow your business.
This doesn’t mean ignore threats. Almost all threats should be taken seriously. Just don’t go out and change your strategy every day because someone else is doing something a little different.
Hype is short. Relationships (usually) aren’t.
A few threats that were idiotically ignored:
- The Amazon Kindle
- Netflix DVD subscriptions
Analyze your market and critically examine where you think it will be in 10, 15 or 20 years from now. Netflix was founded in 1997… no one really even used the “net” then.
If you’re in business, you should be playing long ball and ready for the long term.
That means working towards your goals each day, even if competitors are tinkering and doing other things.
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