The iTunes Store needs all the competition it can get

While John Gruber’s post on the new Amazon MP3 download service is filled with interesting facts and dead-on observations, his math regarding the profitability of music sold via the iTunes Store is a bit suspect as he dismisses the significant “costs” associated with servicing the downloads, i.e., “acquisition costs” and marketing expenses. Moreover, the point being made by others is not that Apple makes no money (sorry for the double-negative) from selling music — rather it’s more about dogs and wagging tails. Even if you use Gruber’s inflated numbers for what Apple “gets” from selling digital music, it’s a rounding-error compared to what it “gets” from selling the hardware used to organize and play that music. And, more importantly, the profit margins on those hardware products dwarf the thin margins of selling music downloads. iPods, et al, are brilliant golden eggs — the iTunes Store is goose feed.

Again, I agree with Gruber’s observations about Amazon’s missed-opportunity by launching their MP3 service ten-years too late. However, I can’t help but believe the numbers-crunchers at Amazon helped to delay the launch by continually pointing out just how lame the margins are on selling music downloads.

Admittedly, I’m no fan of the iTunes Store. As much as folks who read this blog may consider me an Apple fan-boy, the Apple iTunes Store does not benefit from any halo-effect of my admiration for certain other Apple products. Indeed, I hate the Apple iTunes store and its ridiculous authorization and DRM approaches. You can blame it on the record industry all you want, but the iTunes Store’s implementation of DRM makes a mockery of Apple’s typically savvy approach to pleasing the customer with ease-of-use elegance. Unfortunately, iTunes Store is filled with “gotcha” tricks that seem designed to make the customer feel like an idiot, or, worse, a victim.

I’m sure I’ll get plenty of drive-by shots on this post from people who haven’t read this blog over the years and know of my regular suggestions to anyone who uses the iTunes Store to immediately burn a CD of music purchased there and to strip-out the DRM as quickly as possible. Yet, I’ve also learned that real-people in the real-world have no idea how to do that (including members of my own family who have had to re-purchase certain iTunes purchases recently). If you want to know how absurd the iTunes Store is, tell an Apple Store “guru” that your hard drive has died on your Mac and the only place you have your purchased music backed up is on your iPod. He’ll say, “I can’t officially tell you this (wink-wink), but there are ways to do that” if you search on Google.

I’ll stop ranting there. I’ll still use iTunes (the desktop software) and I believe there are certain free things on the iTunes Store — iTunes U, for example — that are modern marvels. But there’s no magic — and a lot of potential agony — in purchasing music via the iTunes Store.

Bring on all the competitors possible.

Sidenote: I regularly back-up all music to an external hard drive and have burned all music (6,000+ tunes) to DVDs.

Update: An impressively-instantaneous e-mail response to this post suggests I should check out for storing and accessing my music collection. I haven’t checked it out, but not having such a feature incorporated in the iTunes Store is one of my core-problems with it: It should provide me “access” to my purchased music…forever.

Update II: Those witty Amazon MP3 folks are selling an 89¢ DRM-less version of the Feist tune, 1234, to help kick-off the new store. The tune is the #1 download of the day. You’ve heard the tune because it’s the one played endlessly on the new iPod nano commercials. For ten cents more, you can purchase a DRM-ladened version on the iTunes Store. For the record, I think the song sounds like Shania Twain trying to go alternative, and failing.