France gives Apple le finger

Stan Beer
Saturday, 01 July 2006 14:23

Opinion and Analysis

For those who did not understand the reference to Euro pirates in our previous story "Euro pirates still on collision course with Apple" the term related to Apple Computer's description of new French legislation as state-sponsored piracy. In a nutshell, the laws are designed to force Apple to open up its iTunes downloads shop to all portable hardware devices- not just Apple's iPods. For Apple, this is indeed akin to state sanctioned legalised piracy.

In an online marketplace, where music file sharing had become commonplace and which was so anarchic that it threatened to derail the entire recorded music industry, Apple almost single-handedly developed the legal music downloads market and put everything back on track. Consumers may not like paying for music but unfortunately for them their favourite bands have to eat. Apple, to its credit, understood the issue and created the 99c single track download. However, Apple's business model has always been to make money selling hardware and, thus, the iPod has been an indispensable part of its online music store business.

Another trademark of the Apple business model has been to create high quality plug and play proprietary technology aimed squarely at a well defined market segment which is locked into its technology. Thus, the iPod and iTunes partnership is an inextricably intertwined product set. For Apple, iTunes has no value without iPod. Despite any suggestions to the contrary, the reason iTunes exists is because of iPod - and vice versa.

The iTunes and iPod partnership has been a spectacular success. Within a few short years, it has not only revived Apple's fortunes as a company but it has cause d Apple to become the dominant market player in the music download market. About 80% market share is the figure estimated for the US, while in Europe the figure is estimated to be around the 60% mark.

For some reason, Apple's dominance, even though it was won fairly in a highly competitive market, makes European regulators nervous. First the Scandinavians and now the French want to force Apple to open up its iTunes store to portable music players other than iPod. In other words, they're telling Apple that it can no longer keep its own proprietary technology if it wants to do business in their countries. For some reason, the governments of these countries believe they have the right to commandeer technology that was paid for and developed in the laboratories of a publicly owned enterprise in the US. Is it any wonder, that Apple refers to these countries' efforts as state-sponsored piracy?