Cashing in on Convergence: Apple is a Winner

As the music industry struggles with CD sales, file sharing, etc., one company has seemed to overcome all obstacles to keep its sales in the black. Who could it be?

Surprise surprise, Apple has managed to create such a successful product, it actually does a lot of the work in selling the rest of Apple’s products. I, of course, am referring to the iPod.

While the iPod is nothing new, it has gone under significant improvements and in many different directions, offering something for everyone. There is now the Classic, Nano, Video, Shuffle, and the latest addition to the family: Touch, which might as well be an iPhone. Apple’s major marketing campaign began with and is being held up by the iPod. Why? Because there’s an iPod for everyone.

With prices as low as $59 for the cheapest one, almost anyone can afford to own one. But that’s not the point I’m trying to make. iPods are making it so easy for Apple to converge all of their devices together. All of them are compatible with each other, as well as Microsoft software. iPods can even be integrated with your shoes. iPods are everywhere! Their convergence with all of Apple’s other products makes things seem so simple.

And iPods, as well as the iTunes music store, are helping convert PC users to Apple. According to Arik Hesseldahl of BusinessWeek,

Perhaps the iPod’s biggest benefit to Apple these days is in helping it sell Macintosh computers. People who use PCs with Microsoft’s (MSFT) Windows operating system tend to be more likely to switch to Macs after they use one of Apple’s music players, a phenomenon that has been called the iPod Halo Effect.

So while other companies in the music business are trying to stay afloat in this tough economy, Apple can sit back and let its iPod lead the way. Thanks to convergence, Apple has made itself stand out not only for its roles as a music giant and computer empire; it has secured its safety during this recession.

The (Mis)behavior of Music Consumers

p2p-governance_id3929961_size480It’s unlikely to hear of music consumers who have never downloaded at least one song illegally. Whether through P2P networks such as the old Napster or Kazaa, through bit-torrent programs, or from some random website hosting download-able mp3s.

However, there are those few who are still loyal to the bands they hear. But even so, there is still free music out there, online. And it is legal. Streaming music has become highly popular over the last decade. With almost any song available for free on-demand, how can one resist listening?

In a tough economy, people must choose their luxuries carefully. And when free alternatives present themselves, especially those of the legal variety, people are bound to respond, and in a big way. Consumers have jumped on the streaming music bandwagon like it’s their job, myself included. Websites such as MySpace and the newly created Grooveshark are just a couple of the countless websites that offer free online streaming of millions of songs. Why do they offer this? Consumer traffic. While they don’t make money from music sales, they receive ad revenues from companies trying to benefit from all the traffic the websites generate.

The response: making subscription services more appealing. Not just to the music listener, but to the site hosting the music as well. According to Anthony Bruno of Billboard,

…expect to see the music industry increase its efforts to make paid services more compelling than free ones. The high rates charged today for ad-supported music are designed to make it less compelling for the service provider.

As for illegally downloading music, the debate is still heated on whether it hurts the music industry or not. While the RIAA estimated a loss of 4.2 billion dollars a year in music sales due to piracy, Chia-chen Wang et al. state,

…file sharing does not have a significant effect on music sales from an economical perspective… more than half the people who have listened to pirated music would buy licensed CDs. Therefore, downloading serves as a means of sampling before purchase.

I’ll let you be the judge…

Digital-to-go: Savior of the Entertainment Industry?

Can one really throw out entertainment as an “unnecessary expense”? I doubt it, but in this time of economic hardship in America, many are having to cut back on movie nights, buying the latest CD from some popular artist, and other luxury entertainment sources.

So with all of this cutting back, how can the entertainment industry of America survive? In this difficult economic time in America, companies are working harder than ever to promote their products, trying to stay above the red line. Due to the recession, however, entertainment companies have less and less freedom to spend money left and right on advertising.

One of the most obvious solutions the industry has come up with is utilizing the digital world. While this is certainly not a new development, its usage has skyrocketed from entertainment companies, specifically the access of mobile technology – the ability to always be connected, anywhere in the world. As Digital Stores CEO Russel Coultart stated in a recent Music Week article,

“The artists that understand it’s about being everywhere are the ones who are going to succeed…”

Take music for example. On almost any phone commercial today, the company will advertise the phone, but as an addition to both show off the phone and a particular hit song, the company will have the phone play that song and show it for several seconds. With the rise of mp3 players (thank you Apple), music now has the capability to be with us all the time, anywhere. Advertising music with a phone or other mobile device slips in perfectly to the convenience of mobile technology. Just check out this commercial for the new Droid smart phone from Verizon.