How come every TV manufacturer is losing money making TVs due to price competition?
Because they are designing and selling undifferentiated commodity products and leaving themselves nothing to compete on
but price. Every once in awhile, when a company comes along that really endeavors to understand the consumer's needs....sometimes before the consumer herself even understands them (vision vs. market research)...and deliver products that meet those needs, that awaken awareness of those needs, success follows. And those companies do not have to compete on price alone, at ever-shrinking margins. They have something else to sell.
BTW, Apple took care of itself before it took care of even the consumer. They have incredible margins in their hardware.
See above. They took care of the consumer. Their whole business model is about the consumer. That's why they have the margins, not vice versa. If it was the other way around, they would have failed by now. Instead, they have succeeded remarkably, even while swimming upstream in mature categories.
In cell phones, their margin is 2X of the nearest competitor.
See above again.
What Apple did was sharply reduce the profit in selling music. They decided it didn't need to be a big business for them since they were making money hand over fist on hardware.
Well, maybe. They have a pretty strong record of successfully charging a premium for their slavishly customer-focused approach, of which iTunes is a pretty good example. But here they suddenly decided they just didn't need to make much? I'm not buying it. It seems much more likely they decided that they
couldn't make much, given that, at the time, the margins in the music download industry were...0%. Even then, they managed to charge what is arguably plenty...
As an album-oriented buyer, given that the electronic product requires no mass production, distribution or bricks and mortar retail, $9.99 seems a bit on the high side to me when I can walk into Best Buy and get a hard copy, complete with case, art, etc, for just a couple of bucks more. But I know the argument - Apple deconstructed the album, so now people just buy the two songs they want, instead of the whole disc, spending $2 instead of $14. There are two ways to see that fact -- I see that they (Apple) did what they always seem to do -- they gave the consumer a new model that worked for them better than the old one ever had. The way I see it, the record companies were forcing on people a model that
never worked, that made customers buy $12 worth of stuff they didn't want to get the $2 worth they were looking for. And I'll bet all those people buying a couple of tunes off of each album see it that way too.
We just have a very different idea of what happened, Amir. I see a typical latter-day Apple business model -- come up with something really cool and new for customers, turn a whole category on it's ear, and lots of business follows. You just see a mercinary pricing model that took money from the poor record industry.
Well, the labels got hit coming and going. Piracy took away their profits and so did Apple by reducing competition for their content and un-bundling the CD. Not saying they deserve to make money per se as there is no entitlement here. But you have to agree, it is an odd situation where music interest remains as high as it has ever been but the industry that serves it is in dire straits but one of the major companies getting us there, can't figure out how it could make more money from it!
It's not odd at all. If Madrona's business model was to force customers to buy an unwanted, mediocre $14k surround sound system with every $1,000 TV, I would expect them to fail. It's the fact that the record industry made it this far with such a business model that is odd.
The answer for the labels is bone simple: Good product. Make albums people want to hear instead of $1 singles wrapped in $11 worth of mediocrity and the problem is solved. Quality. Artistry -- develop real talent instead of shallow pop tarts. Produce, like thousands of indie rock, folk, jazz, alt. country, acoustic and classical artists do, albums that people
do want instead of a disposable hit or two surrounded by filler they do
not want. Find, nurture and market actual talent - the kind of stuff that requires a bit more thought than a haircut and some percussion samples. The record industry's problem is of their own making and it is as old as the industry itself. Apple simply provided consumers with a way out of paying for 14 to get 1, and customers ran to it.
I'm afraid you'll get no sympathy for the majors from me, Amir. It is a hotbed of near-sighted parasites who have been feeding off of the blood of their betters for many decades. These guys protesting about being cheated out of margins? That's laughable. Their business is built on theft, and anything...seriously, just about
anything that weakens them will, in the long run, be good for the art.
Who would have thought that tables would be turned that we would be paying someone a huge mark up for the hardware but not "software (i.e. music) in this day and age? The $25 DVD player that I can buy would cost $100 in this model!
Apple's hardware margins
are good, but it has nothing to do with the price of music. iTunes works because it gives people the songs that they want for an only slightly high price; $1. Mutiply by 12 - 14 and you have the price of a CD. The pricing model is not low. The record industry's ability to sell the crap they produce is the problem.
They are the problem. They have been since they started out stealing from black artists in the 1930s and they are to this day. I will not miss them.
Tim
. Ipod was launched without a music service and studies at the time showed that something like just 5% of the music on them initially was owned by the customer. The cost to fill an iPod was thousands of dollars and clearly most customers with such full iPod did not own all of the music. When they launched music service, they forced the unbundling of the album into 99 cent tracks. As you know, large percentage of CDs have just one or good songs. Prior to this, the customer was forced to buy all the tracks to get the one or two. After Jobs era, they could just purchase those individual tracks. This was hugely pro consumer. But very much against the talent making maximum dollars.
