Sunday, December 30, 2007

Forbes.com completely misses the point about what killed the "CD Market"

I stumbled upon a completely nonsensical article in Forbes.com, a supposedly reputable business analysis site/magazine that shows just how ignorant business-people can be sometimes:

The iPod [ has ...] a proven record of disruption, with customers bypassing record stores to tap into illegal distribution networks, along with Apple's iTunes music store, to fill the up their devices.

The result: Sales of CDs fell more than 30% to 614.9 million units last year from a peak of 881.9 million in 2000, according to the Recording Industry Association.

It should be obvious to anybody that there are many root causes to the demise of the CD industry, but the iPod is not one of them, it simply did the best job of capitalizing on the opportunity. The real causes are:

  • The ability to store music in MP3's, a small (reasonably) high fidelity format that could be downloaded in a few minutes over the internet.
  • Napster, the first truly successful peer-to-peer music sharing network
  • The fact that the studios would release CD after CD with one good song, and 12 fillers, and charge $18 for the privilege
With these root causes, even without the iPod, CD sales would have fallen dramatically. Forbes is blind not to see this.

To place the demise in the hands of the iPod gives Apple far too much credit.

Forbes goes on to say that shortly Apple will do the same thing to movie rentals that they did to CD sales, and kill blockbuster. However, there are a few key differences:
  • Unlike music, movies take a long time to download, and take up a lot of hard drive space
  • Watching movies at home is moving towards High definition, and even when compressed, the files are huge. Lower video quality movies (the kind that look fine on an iPod) will be of less appeal to many consumers who own an HDTV
  • "Bandwith caps" on internet connections though the major internet providers are becoming pervasive, which may actually make it more expensive to download than to rent if you go over your cap.

Forbes goes on to claim that:
[The rental stores'] days might be numbered: The iPod has killed before. It will kill again.

I just have a hard time believing that this will be the case.

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