Following my post about EMI’s financial results' risk guidance for Apple’s dominance of the download market, there has been some questioning about whether this is actually a big deal or not. The likes of Warner Music and Google make similar risk warnings in their results, so no big deal then? Wrong. This is in fact further evidence of just why it is such a big deal.
The labels are still kicking themselves for having let MTV build a business around their promotional videos. Once they’d realized their error, it was too late: MTV was too powerful and was making too valuable a contribution towards their business for them to simply turn off the tap. Some label execs stated they weren’t going to let Apple "do an MTV." Whether they like it or not, they did.
Apple’s dominance of the download market is a huge deal. I’d argue that EMI and WMG are actually downplaying the importance. It’s not in their interest to scare investors with the news that a company they often don’t get on with too well effectively controls the destiny of one of the only parts of their business which is still growing and which they expect to be their future.
Apple’s dominance is such that would-be new entrants have to think as a priority about what their "Apple strategy" should be. Should they be MP3 or build an iPhone app? Should they integrate themselves into the iTunes ecosystem or co-exist? Anyone who intends to be a key player in the digital music space is inherently competing with Apple. (See my colleague Ian Fogg’s fantastic report ‘Competing With Apple’ for more on this topic.)
Don’t get me wrong. I am a big advocate of Apple’s role in the digital music space. Its track record is peerless. Without Apple, we’d probably still be stuck with PC-tethered downloads and with 50%+ piracy rates. Apple has shaped the digital music market and will hopefully take it another major step forward soon. But its dominance is so strong that the only realistic way to compete with Apple is to compete around it with offerings that complement the iTunes experience rather than attempt to unseat it, e.g., Shazam, SoundCloud, Last.FM, MXP4, Pandora, even Spotify. And more often than not, that actually means integrating into the iTunes ecosystem, thus further strengthening Apple’s role.
So, the role of Apple in the digital music space is much more important than some risk guidance note in financial results.