I was shocked when the head of Warner Music Group said recently that the music company should get a cut of iPod revenue. That seemed like blatant greed.
Then Apple turns around and wants a share of iPod accessory sales. Is ‘Greed is Good’ the right attitude these days?
What’s the argument? Edgar Bronfman, Jr. of Warner Music Group: “‘We’re selling our songs through iPods, but we don’t have a share of iPods’ revenue.”
They want a share of the iPod’s revenue in addition to a share of the revenue from selling CDs, and music from the iTunes Music Store. Is that ‘greed?’
Wait. There’s more Bronfman: “We have to keep thinking about how to monetize our content for our shareholders where we’ve been creating value for so many other streams.”
So, Warner Music, and by implication, other music labels, have been creating value for ‘other streams’ like the iPod, and they want a cut of the iPod pie, right? Is that greed?
More Bronfman: There’s “opportunity for penetration on existing platforms like mobile, where, despite drastic changes we’ve seen in digital, we have yet to sell a single song.”
Suddenly, the lines of marketing become very blurry. The content makers for mobile devices now want a share of the revenue from those devices (iPods, cell phones, etc.) because they provide the content for those devices.
Should General Motors, Toyota, and Mercedes pay a share of their sales to Texaco, Shell, and other pretoleum companies because gasoline is used to power motor vehicles?
Should Kraft get a share of the revenue from Wonder Bread because peanut butter and jelly is used to power sandwiches?
If this is greed, where does it end?
It ends where the market won’t take it any more (market defined as product makers and buyers of products). Guess what? Apple now wants a 10-percent ‘docking fee’ to manufacturers who want to connect their devices to an iPod’s port. A ‘port fee.’
Take Bose, for example. Bose, among others, make accessory devices that connect to the iPod’s port. You’ve seen others. Chargers, speaker systems, auto connectors, and the like. Apple wants a 10-percent ‘cut’ for the ‘privilege’ of connecting those devices to the iPod.
One Bose executive said, “This is a massive licence fee which will not sit comfortable with many partners. Bose is not happy as the proposed fee is excessive by any standards.”
The music industry (via Bronfman) gets roundly criticized for being greedy when they suggest a cut of iPod revenue, yet Apple is off the hook when they want a cut of iPod accessory sales.
Is this greed? Is it also a double-standard? Yes, I’m convinced there’s a bit of both, but for good reasons. Shareholder value, and ‘who knows what tomorrow may bring.’
The ‘shareholder value’ issue is simple. Executives are required to increase the value of a company’s stock. That usually means (not always, though) increasing revenue and profits. It’s a requirement.
The ‘who knows what tomorrow may bring’ issue should be obvious, too. A company like Apple needs a large war chest of money, influence, products, patents, and the like, to avoid reducing the ‘shareholder value’ of a company.
In other words, ‘greed is good.’ Microsoft just settled a few lawsuits with Real Networks for about $750-million in cash. They settled with Sun Microsystems for billions more.
That’s money that is now fuel for Apple’s competition (Sun’s a stretch, but Real is real). It’s hard ball. It’s a war. It’s battle after battle that wins wars. Apple needs revenue and profits to sustain their efforts (and shareholder value) in these ‘wars.’
Apple is sitting on record sales for Macs and iPods. Apple has a record amount of cash in the bank. Apple is reporting record sales and profits. Naturally, others want a slice or two of the Apple pie.
Conversely, Apple may want a few slices of, uh, want to share in the profits being generated by other manufacturers from Apple’s hard work, investment, and marketing efforts. It’s only natural, right?
Gordon Gekko said it best when talking about the fortunes of Teldar Paper in the movie Wall Street:
“The point is, ladies and gentlemen, that greed—for lack of a better word—is good.
Greed is right.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms—greed for life, for money, for love, knowledge—has marked the upward surge of mankind.”
When the record labels want a slice of Apple’s iPod sales, is that greed or good business? When Apple wants a slice of iPod accessory maker’s sales, is that greed or good business?
A little of both. Apple needs to be a little of the former to be the latter. Why?
Microsoft. They’re a major Apple competitor. Apple has $8-billion in the bank. Microsoft has $38-billion. If it’s a war, Apple needs all the ammunition they can get.