March 29, 2005
Goombah for Windows is here!
Here's what our current press release has to say:
Goombah 0.6 (http://goombah.com) is a software product that provides online music recommendations. Using distributed computing to analyze iTunes music libraries, Goombah finds each users "nearest neighbors" in musical taste. No ratings are required. iTunes music libraries are displayed to neighbors for their perusal, and used to generate highly precise music recommendations. Users can easily connect to online retailers where they can sample and purchase recommended music.
This release of Goombah includes the Windows version of the product; substantial performance improvements; as well as several features and UI enhancements to the Mac and Windows beta versions. Most notable is a slider for users to control their music discovery - from conservative to adventurous.
Actually the slider was there before, but it was buried in the Preference panel. Now it's front and center on the window containing the recommendations.
Needless to say, this is a Big Deal for us. There are a lot more Windows users than Mac windows out there, and the more users we have, the better the recommendations will be and the more dynamic the experience will be.
Sorry I haven't been posting more to this blog, but I've been very immersed in business and technical tasks.
And speaking of business, expect a major (for us anyway!) announcement on the business front in the next few days.
March 25, 2005
iTunes affiliates profits
When customers buy songs from Apple's iTunes music store, they pay 99¢ a tune. But Apple only gets about 4¢ of that, after paying the record company and others, says researcher Strategy Analytics [BusinessWeek, by way of MacInTouch]
While Apple says:
As an iTunes Affiliate, you can.... Earn 5% commission on all qualifying revenue generated by links to iTunes on your website and in email (terms apply). [Apple]
Those numbers don't seem to add up to a lot of profit for Apple on music sales through affiliates.
If the 4% mentioned in the BusinessWeek article is net profit, and if the 96% overhead is largely made up of fixed costs, then even if they give affiliates 5%, they could make a profit for each affiliate sales because the fixed-overhead-per-sale goes down if there are more sales. But a lot of their costs are not fixed. The fee paid to the labels isn't fixed, and the bandwidth and hardware requirements aren't fixed. And customer support isn't fixed. The main thing that's fixed would have to be the software development costs.
If 80% of the costs were per-sale-costs, it seems they'd just about break even, unless I'm making some error.
I'd be slightly surprised if less than 80% of the costs are per-sale costs.
Seems like they are making very little if any profit on affiliate sales.
Actually, it's consistent overall with Apple's claims that they don't expect iTunes to make them money in itself; they say their profits are in the way the music store drives iPod sales (and mac sales through the "halo effect").
March 05, 2005
"Blink your eyelids periodically to lubricate your eyes."
-- An actual tip from page 16 of the HP "Environmental, Health & Safety Handbook for Employees". [Hat tip to Bukys's Not So Familiar Quotations Page]
March 04, 2005
Goombah version 0.521 is now available. Highly recommended for all users as it fixes a bug that can stop nearest neighbor searching.
March 01, 2005
More subscription debate
Gary Robinson is back, with more math this time, and he sticks with Napster’s argument: it costs $10,000, give or take a few pennies, to fill up an iPod, and you would need to subscribe to Napster for 55 years to spend that much money on music, in the meantime listening to far more than 10,000 songs. Of course, he thinks Apple is using iTMS to keep customers from switching away from their brand, which seems a tad far-fetched for a product with as commanding a mind share as the iPod, but the numbers are worth considering.
John Gruber, naturally, disagrees. He thinks that even bothering to compare a subscription model service without any bundled hardware to a piece of hardware with an optional music store shows how desperate Napster, and Real before them, are for product recognition. He adds, and here I concur whole-heartedly, that he thinks most iPod owners spend much less than $100 per year at iTMS, which puts them under the $180 mark for a year of Napster service as well. I don’t often acquire new music, because I’m without extensive disposable income, but when I do, I have been known to buy CDs. With Napster, it would be highly cost-ineffective to acquire CDs, except in the event that I rejected the possibility of giving up some music.
First of all, many people feel that Apple's "commanding" mind share is highly vulnerable to competitors. (I am one of them.) It is not at all far-fetched that Apple would use a lock-in strategy to try and get a stronger hold on that lead. It would be very surprising for them not to do so, given their current strengths and vulnerabilities. Prudent businesspeople who have navigated their products to a strong leadership position due not assume it will automatically continue forever; rather they do everything they can to make use of every advantage of their position to make it even stronger and more difficult for competitors to assail. That strategy has worked well for Microsoft, and Jobs hopes to achieve something similar for Apple in the music space.
Secondly, the assertion that most iPod users spend less than $100 a year on music may or may not be true (though I think it probably is), but that is only an argument against Napster To Go's current pricing scheme, not subscriptions in general. See my earlier post on price flexibility for more on that. An argument against subscriptions based on price is a straw dog. The price issue will go away. Mark my words.
Lastly, as bandwidth, storage space, and compression technology increase still further, eliminating or minimizing sound quality differences, and as there is more of a digital equivalent to liner notes and lyric sheets, you will stop buying CD's altogether. The convenience of downloading (together with the cost savings associated with elimination of distribution and manufacturing expenses) will make CD's go the way of vinyl.
When I discuss subscriptions, I am discussing the long term.
Subscriptions are the Celestial Jukebox that everyone has dreamed of for so long. A couple of years ago, I don't think there was anyone who didn't love that idea. Now that there are the raw beginnings of subscription services to look at, people confuse the current extremely immature embodiments with what will come. That is a mistake. Subscriptions will win out.
Steve Jobs himself said that when the Celestial Jukebox is a reality "we'll be there." (Sorry, that quote is from memory of an interview -- I can't supply a link.) He has a vision of what's coming. And he's right. But now is not the time for Apple to "be there."