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Apple Tells Sony to Take a Walk
How much vertical integration is needed in consumer products to make them a superior consumer product. Just like the Palm Pilot before it, the iPod is the definitive consumer hit of the 21st century, but it is characterized by a highly integrated experience from design all the way through the store experience and the brand experience. Corporations at large have been notoriously bad at creating experiences when they have succeeded at the corporate level.
Compare and contrast products such as Burberry, Hermes, BMW, Apple, Ikea, Sony and others. Although they are great consumer products, they are not enterprise products and do not seek to create an enterprise experience. For example BMW has successfully created a brand around success and drivability. (This does not translate to a Ford Mondeo or Chevy Impala, both of which are fleet vehicles.) The brand experience permeates from advertising to the buying experience. For those who have been lucky enough to purchase through a BMW dealer, you will understand that it is very different from buying from a Chevrolet dealer. Both BMW and Lexus understand this and make it a necessary condition for selling a BMW vehicle. And yes, they provide free lattes and muffins and some of them do look like Starbucks stores. (BMW dealers prefer the white and stainless look like my BMW in Wellington and BMW Sydney in Potts Points as well as BMW Toronto, while Land Rover/Jaguar like the wood trim.)
Back to the Sony Walkman, as I mentioned before, the Walkman needs the music to be pre-packaged and available. Because of the Phillips Compact Cassette this was possible at the time in large numbers. In fact, it would be reasonable to state that both Sony and the music industry benefited greatly with the Walkman and created a new level of economics with the music industry. Now it is a fact that this level of integration, the cassette and the portable player were a necessary prerequisite for the existence of the market. This is because, although it was possible to copy music to a tape deck and many of us did, we also acquired recorded music in bulk quickly and easily.
In June 1989, 10 years after the launch of the first model, the total number of Walkman units produced exceeded 50 million, and in 1992 it reached 100 million. In 1995, total production of Walkman units reached 150 million. Including a special 15th anniversary model, over 300 different Walkman models have been produced to date and Sony remains the market leader. [Source Sony Corporation.]In contrast, Apple’s iPod sold 67.9 million iPods in its various flavors in its first 4.25 years and looks set to reach 100 million iPods in about 6 years, beating Sony by about 7 years
Sony has also invested a lot of time in the brand experience. The name Walkman was both clever and multilingual. They managed to clearly create the brand around the Walkman that expressed youth and freedom. Being able to listen to your music when and where you need it has become a necessity today and is a fact we take for granted today.
Walkman as a verb or generic noun
As much as Google doesn’t like the term “Google” as a verb to “search”, it’s not up to them but the consumer to decide which brands are verbs. They should be complimented because it is a valued position in the market that symbolizes a position in the market that is like no other. The Walkman along with the iPod, the Hoover and Xerox are all brands that have reached this position. Walkman became the de facto name for a portable music player until Apple replaced it with the iPod. Although it is still difficult for older people to replace the Walkman, for young people the Walkman is just another music player.
However, Sony was able to create the “Walkman” brand as a type of device, making it nearly impossible for anyone else to compete for consumer mindshare. I challenge anyone to come up with an alternative portable CD or tape player. I’d argue that Apple has nailed it so far and we’re looking to see if the term “Zune” creates anything down the road or if it’s just another wanabee brand.
Vertical integration must include the brand experience
So the second element is that the brand experience is an essential part of the vertical integration strategy which leads us closer to the argument that a platform will not work in the consumer space and that is because they value the experience beyond the device and maybe they buy the device to subscribe to all the values that the brand provides.
What if Microsoft called it MSN Player instead of Zune?
Our natural reaction is that it won’t work to buy why?. I would hazard a guess that it is because there is already a prior brand experience that consumers will turn to the music player and you don’t want to convey those brand values because they are not the experience you want to convey. The MSN network is what we call the ghetto portal. Unlike Google and Yahoo, which have great search and great media partners, MSN is a collection of content with a few apps around it. If it disappeared tomorrow no one would care too much because it’s a copy of Yahoo that does it 10 times better. That’s not to say that Windows Live won’t improve that experience (the fact that they have to do Windows Live shows that MSN is going to back out and cause death) but Windows Live is trying to extend the brand into the portal space.
Does the OS vertical integration argument extend to music players?
Again, the ability to experience digital music consistently from purchase to listening was an important part of the success of iTunes/iPod. The main failing of the Sony Digital Walkman is that it didn’t integrate cleanly with music downloads. Sonic Stage software is cumbersome and difficult to use. It required a level of skill in transferring music to the player that was beyond most consumers, and its restrictions on playback were frankly counterproductive. The reason for this is the limitations that Sony set for itself when launching the digital product, it was actually its own worst enemy.
As Microsoft dropped Playsforsure partners, they too admitted that the iTunes/iPod integration was a prerequisite to compete. They didn’t say that a few years ago when they were courting partners for this system, they thought that a platform approach where we would hand over the software and DRM to the manufacturers would work.
So to paraphrase, what was the strength of the Sony Walkman, pre-recorded and packaged music and a strong brand experience was indeed their downfall. Because Sony didn’t make it as simple and convenient as possible to use their product, they failed to raise the iPod bar and gave the market to Apple and the iTunes/iPod combination. Sony because of their success in the CD/cassette player market believed they could control the consumer experience and how they could use their music. They also had the limitation of owning a major record company (Sony Columbia) which worked hard at the corporate level to cripple the digital Walkman and ultimately left the way open for Apple to take the lead.
Before we get to whether Windows will affect the Zune ecosystem, we need to understand why the Playsforsure ecosystem failed and whether Microsoft learned any lessons from it.
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