Europe goes bananas over Apple

Stan Beer
Monday, 26 June 2006 20:58

Opinion and Analysis

As a casual non-European observer, where technology is concerned, one would have to be a little bit frightened about what is taking place on the Continent right now. With the rest of Europe looking on approvingly, France and the Scandinavian triumvirate of Sweden, Denmark and Norway are attempting to censure Apple for tying one piece of its intellectual property to another piece of its intellectual property.

Blind Freddie can see that Apple's wildly successful business model works because of a number of factors, two of the main ones being that iTunes is a wonderful concept and the iPod is a lovely product. However, there is a third factor which is equally important. The relationship between iTunes and iPod is symbiotic. Any attempt to severe the connection between the two facets of Apple's business is just not on.

Apple does not make money out of iTunes. That's an accepted fact. Apple makes loads of money out of iPods. However, aside from their aesthetic appeal, iPods differentiate themselves from the rest of the portable music market by their tight plug and play integration with the iTunes site. The success of the the very profitable iPod business enables Apple to run its tightly integrated iTunes business at a very  low profit margin. Some may call that dodgy cross-subsidisation which requires the stern intervention of Euro regulators. However, many consumers would disagree.

Apple iTunes and iPod are not really two separate products. They are two sides to the same coin. Without each other, they are just me too products. There are other music download sites and MP3 players. However, together, iTunes and iPod become a revolutionary music delivery solution that has not only captured a dominant share of both global and European music listening markets but has actually been a counterforce to the pirate music movement.

If the Scandinavians and French get their way, their misguided attempt to open up the music download market will without a doubt force Apple to pack its bags rather than sabotage its own business model. If that happens, the pirate music scene will more readily proliferate throughout Europe.

Realising that Apple iTunes leaving France would be a bad thing, the French have attempted to save face by providing a loophole to their proposed oppressive regulatory regime. Under the amended regulations, Apple can restrict itunes tracks to the iPod platform provided they get permission from record labels or artists.

This is yet another exercise in stupidity. Apple has fought hard to keep prices of music from record companies at an affordable level for consumers so that they'll buy products from Apple rather than resort to piracy. Now France proposes to hand back to the recording companies just the leverage they need to force Apple to raise prices."

It seems that in their zeal to enforce their own peculiar brand of socialism in the consumer space, European governments feel that they must curb the excesses of evil US capitalist technology companies like Apple, which won its market share fairly in a highly competitive market, despite being very late on the scene. It seems that Apple's major crimes are being innovative, producing superior products and, above all, being American. These are heinous crimes indeed in a part of the world where the 35 hour working week, six weeks annual paid holidays and a reputation for technological mediocrity have become the norm.