Steve’s misleading statistics

In his article “Thoughts on Music” Steve Jobs argues that people are not really locked into the iPod.

Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.

Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.

Yes, hard to believe, until you realize that Steve is using misleading statistics. There may be 90 million iPods sold, but not all of them are currently in use. Furthermore, it’s the number of iTunes Store customers and average sales per customer that’s relevant, and Apple has never disclosed these figures.

Many iPod owners have never bought anything from the iTunes Store. Some have bought hundreds of songs. Some have bought thousands. At the 2004 Macworld Expo, Steve revealed that one customer had bought $29,500 worth of music.

If you’ve only bought 10 songs, the lock-in is obviously not very strong. However, if you’ve bought 100 songs ($99), 10 TV-shows ($19.90) and 5 movies ($49.95), you’ll think twice about upgrading to a non-Apple portable player or set-top box. In effect, it’s the customers who would be the most valuable to an Apple competitor that get locked in. The kind of customers who would spend $300 on a set-top box.

9 thoughts on “Steve’s misleading statistics”

  1. Getting rid of DRM will eventually screw M$ and Vista. Remember, Gates didn’t say get rid of it. He said it is broken or could be better.

    Of course, getting rid of DRM will also eliminate the subscription model for the other music stores. Ouch.

    He is a sly one, that Jobs. Gotta love it.

  2. Subscription services could still exist using DRM. Consumers realize they aren’t buying the music but are renting it. Some will still consider it a way better deal to have all of the music they can ever consume for $9.95/mo, knowing they will loose it all if they stop paying.

    Steve just thinks he should be able to sell music without DRM. I don’t mind DRM if I’m renting media, it’s when I’m purchasing it that it pisses me off. I expect rented stuff to be somehow crippled.

  3. How does other vendor’s DRM work?
    Can they play on multiple players?
    Can they play on multiple music software?

    I do not see how DRM free music would work. All music would be free to download once and re distribute thorugh other means. All songs would would reach consumer’s hand mostly via non legal music store.

    Maybe I am missing something, i have no idea why DRM free content would work at all. How can apple make money? how can music companies make money? How can artist make money?

  4. Just to be an anecdotal point of reference: I am on my 2nd iPod (went from a Mini to a 30G video iPod last year) and I did so because I like the features of the iPod. I have not purchased a single item from iTunes that made it onto my iPod (free video clips I downloaded to the iBook and watched and that was it)

    I have had MP3 players since the Rio. The iPod has the ease of use and (important to me) tracking of when I last played a song so I can manage to listen to my 16 gig collection of MP3 files [all burned from CD I own and some SXSW free torrents] as if it was my own private radio station.

    If I were shopping for another MP3 player, I wouldn’t spend much time doing research on the latest gear–I’d just go and get another iPod. I hate saying that because I sound like a kool-aid drinking fanboy, but that’s not the case. The device does what I want and so why change? I wonder how much my kind of lock in is worth to Jobs compared to the ITMS customer?

  5. Of course, getting rid of DRM will also eliminate the subscription model for the other music stores. Ouch.

    Why ouch. I would subscribe for quite a while if I could build a library. I may even continue to subscribe when they continue to add new material and classic back catalog. (like I keep going back to blockbuster and buying discount movies). Right now I am not a subscriber because the cost is too high and the value is too low.

    Cable subscribers have VCRs and Tivos. Nobody crys fowl. Why can’t this model work for an online subscription library?

    Because this model is forbidden, I am not a subscriber.

  6. Can’t say I’ve ever heard someone say, “Man I’d really rather buy a Zune, but all my music is in iTunes”. Anyone that’s used iTunes knows they could burn a few CDs and then import the music anywhere else they way it … if they wanted … but they don’t.

  7. To Bruce who commented on Feb 8th at 9:24am. You said “Maybe I am missing something, i have no idea why DRM free content would work at all. How can apple make money? how can music companies make money? How can artist make money?”

    You seem to haev missed the fact that the music companies their profits money today by selling DRM free music. There are called “CD’s”. Ever heard of them?

    This DRM thing is nonsense. All the music industry has done is suceeded in growing a generation of people who have no habit of buying music online. They need to quit the nonsense and sell unlocked music. People do actually have and interest in supporting artists and muscians whose music they like.

    Well that would be the secondary problem, wouldnt it? These companies would need to set up a sytem of artist contracts that the public actually believes compensates the artists fairly, since that is the emotional hook which would keep them paying and make DRM more or less irreelevant.

    Which is basically counter to how these guys operate. So now we see that DRM is not a solution, it is a cructch these record companies are leaning on because they got caught out in the jump between CD’s and Mp3s.

    But developing relationships and faith with the public is what the industry needs, because no matter what, the genie is out the bottle. Every CD ever published (i.e. their entire backlist), is available, worldwide, DRM free – forever. So why waste time slapping DRM on tiny amounts of current music? It is utterly senseless.

  8. How would DRM free music work. Simple… look at emusic as that is the seconds bigest online store in UK yet only sells MP3s.

    Subscription can also stay and simple to pay artists. Each month do the following.

    1) Work out proffits to be shared to artists from subscription after costs etc.
    2) Work out number of tracks downloaded by users.
    3) Build a list are artists downloaded and the % of total downloads.

    I am all sure you can see where this goes. Artists get their fair share of the cash each month based on how often people download them.

    Fair, simple and easy.

    I would pay a FAIR subscription rate per month for a service I could download unlimited MP3s per month knowing the artists I download are rewarded. The record labels know people will subscribe because there is always new content to add from new artsists and also old stuff now deleted etc.

    The RIAA and its mobsters are just trying to milk the old model for as long as they can. They KNOW they have to change but when then do they become less useful as MySpace and the like can start to take over. Who needs the likes of Sony BMG to publish their music when in that sort of distribution model.

  9. “Mobsters” is the right word for it, Warren. They’re obsessed with controlling the means of distribution, “nobody else distributes music in my town” etc.

    As far as lock-ins go, I’m sure plenty of consumers don’t know how to even copy back their DRM-free music from the iPod (Apple certainly doesn’t acknowledge it as a supported feature, and some people I’m sure don’t know about the 3rd-party utilities that exist). Hell, they might not even know how to get the data from CDs they’ve ripped out of iTunes, or that it’s even possible. it’s hard for us technologically minded people to conceive of sometimes, but there are people in this world who think that they have to reboot their computer every time their Yahoo! Mail login session expires because “it stopped working and rebooting is the only way I know how to fix it” (I just encountered that this morning). The point is there might be a lot more psychological lock-in in addition to the DRM-related technical lock-ins.

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