The digital music market: is there room for anyone but Apple?

Anyone who has read my blog knows that I think that Apple owns the music player business.  I’ve said it many times before but I need to add an asterisk to that.  Apple has the market share and the momentum but there is room for other viable businesses, and you can see them when you look
at music subscription products like Rhapsody and items like the Samsung players.

I own a Samsung T9 which is a fine little machine, but it’s not an Apple product.  Apple products are fashionable and have the best user interfaces.  They also don’t have a lot of competition.  You might bet against Dolce and Gabbana over the long term because the apparel fashion industry is somewhat crowded, but the consumer device market is filled with so much poorly designed and poorly interfaced crap that Apple could do half as good a job and still be a market leader. 

However other businesses do exist inside this sphere, they just can’t ever form a great threat to Apple’s market share.  Take as an example the Rhapsody music subscription service.  I’ve reduced my monthly music budget by using the $15 all you can eat Rhapsody service and one of the compatible players.  It has a huge catalog, and while it isn’t everything in the world, even if I bought the occasional album that wasn’t there I still wouldn’t approach my former four-cd-a-month budget.

I’ve used the Samsung T9 with Rhapsody for almost a year, and I just today was looking for something small that has a built in USB connector so I can just plug it into a laptop or cpu.  I came across the Samsung YP-U3 in Best Buy for $70 and picked it up.  You know what?  The interface blows.  The button that brings up menus is part of an icon that looks like a looping arrow.  You might think that pressing that button would cause the player to replay that song or segment over and over, but you’d be wrong.  Clearly an idiot designed this interface, but once I read the manual and translated the interface from Moron Engineer into Consumer I was trained and it made sense.  (I personally think good interfaces don’t require any manuals or user training)

This thing is slightly cheaper than the iPod Shuffle and even if it wasn’t, I’m saving a lot of money by not buying music on the iTunes store and instead using Rhapsody.

The Rhapsody music business I’m assuming is a profitable little business, but I doubt it rivals the iTunes store, nor will it ever.  Because of DRM it’s a music rental business, and rental revenue is always less purchase revenue.  Also their customer base is smaller than the Apple juggernaut.

The Samsung player business is also probably viable as long as they control costs and don’t try to take on iPods, but it’s not an iPod revenue line on their balance sheet.

The thing is, this isn’t a winner take all environment.  If Steve Jobs decided that music subscriptions were gaining traction they could be in that business in a second.  After all, Apple AAC format is in fact a DRM-protected (digital rights management) format, just like Windows Media format.  Apple is hated less than Microsoft, but the underlying issues of control are true for both formats.

Of course both formats compete with free distribution from the file sharing networks, and MP3, but those come with tradeoffs as well.