Real CEO Likens Apple's iPod Business To Soviet Model

by , 2:30 PM EDT, April 21st, 2004

Real CEO Rob Glaser is continuing with his public comments about Apple. Last week, the New York Times reported that Mr. Glaser was seeking an alliance with Apple against Microsoft and the Windows Media Player platform, an offer which Real then publicly said Apple CEO Steve Jobs had rejected. Perhaps in reaction to that rejection, Mr. Glaser called Apple's iPod/iTunes Music Store business model "kind of a Soviet model." From a ZDNet article:

"It's kind of a Soviet model," said Glaser, referring to Apple's closed environment in a remark that drew laughter from the audience at the annual National Association of Broadcasters conference here. "Taking secure music off the PC is a morass of incompatibility. This is not going to fly in the mainstream market."

[...]

The company had approached Apple CEO Steve Jobs with a proposal to create a technical alliance that would allow customers of RealNetworks' music service to play songs on the iPod, to no avail. That could now force RealNetworks into a deeper relationship with archenemy Microsoft, which has won support for its technology on dozens of players and plans a major upgrade later this summer.

Glaser also advised Hollywood to avoid being too cautious in licensing its movies to Internet services, a mistake that could lead to a repeat of the music industry's run-in with online piracy at the hands of Napster and other peer-to-peer applications. Although legal film-download services are available today, they are hampered by limitations, including strict viewing rules for downloaded files, weak access to the latest films, and skimpy film libraries online.

There's more information in the full article at ZDNet.

The Mac Observer Spin:

A Soviet model? That's a tad silly, to be sure. While it is possible that Apple could lose market share and momentum with its music player and music download store by tying one to the other, it's hardly a Soviet business model. Indeed, it's much more of a capitalist's wet dream to lock in customers, but that's just arguing semantics.

The real question is whether or not Apple stands to gain more in the long term by locking in its customers than it could gain from licensing out the controlling technology, FairPlay. Clearly Apple hasn't had any difficulty with customers rebelling at being locked in. So far, that is most likely because competing services to Apple's iTMS have little to offer, while none of the competing music players can match the iPod.

Our position on this has been, and continues to be, that Apple can continue with its business model as long as it can stay ahead of the competition. Should a competing service and/or music player be able to gain any significant advantage over Apple in the market place, iPod and iTMS alike will be Macintoshed, history repeating itself in a sort of bad dream infinite loop.

ZDNet Article