BoSacks Speaks Out: Why Understanding The Death of iTunes is Important
to Magazines
This article has nothing directly to do with the magazine business, But
I suggest that you read it for the following concept:
Professor Christensen calls low-end disruption. At first, a disruptive
product fails to deliver a superior offering to the incumbent technology
in one or more characteristics of the job-to-be-done. But consumers
switch nonetheless because the disruptor has a systemic advantage in at
least one of these characteristics.
That my friends explains the on-going success of reading on digital
devices, where as we all know print is as yet a superior reading
experience. We are indeed at the mercy of this systemic advantage and
the disruptive factor.
As my friend Dr Joe Webb wrote in his recent book, Disrupting The
Future, Disrupting the future is the definition of innovation. There
will be many innovations yet to come – that is human nature. But they
are only disruptive to the businesses who lack curiosity and adaptability.
“When the Dodgers left, it was not only a loss of a team, it was the
disruption of a social pattern. A total destruction of a culture.” – Joe
Flaherty (American Actor, Writer, Film Director and Producer, b.1940)
by Maxwell Wessel
iTunes as we know it is over. It is walking, talking, and continuing to
pretend it’s alive, but Spotify, Europe’s outrageously successful
streaming music product, has just shown us the future.
Though you might not even be aware of the competitor that is attacking
the music titan of the past decade, that iTunes business model is about
to be blown up completely and swiftly. And it could even be thought of
as fitting; iTunes accomplished the exact same thing during its
early-2000s attack on the bricks-and-mortar retail music industry. Apple
set the stage to decimate Tower Records and Sam Goody before either had
a clue their industry was about to revolt. But innovation theory can
provide a crystal ball; theory could have predicted iTunes’ success and
it’s currently predicting Spotify’s success.
To appreciate the truth of this claim, it’s vital to understand one of
Clayton Christensen’s theories on marketing and product development:
Jobs-to-be-done. Jobs-to-be-done suggests that in order to predict how
to develop, compare, and position our products, we should be driven by a
fundamental understanding of what that product is hired to do. For
example, every day I hire a Coke to be a wake-me-up mid-afternoon break
in my workday. To get the Coke, I walk from my building to a store next
door and pay $1.25. I could substitute a free cup of coffee from my own
office, which would provide my much-needed caffeine at no cost. But
because the job is to break up the afternoon, I value both the caffeine
in the product and the distance I walk to pick up the product. I am
happy to pay for the Coke because it completes the job I hire a mid-day
beverage to complete. To disrupt the purchase of my afternoon Coke, a
product would has to be fundamentally advantaged in one of the two areas
I value for that product; caffeine and time away from my desk.
When it comes to the music industry, I used to hire Tower Records to
deliver my music. For that job, I valued Tower’s music selection, the
store’s convenient locations, the fact that its music was compatible
with my Discman, and the low prices. When I compared Tower to other
options to fulfill that job, it was pretty well positioned.
Enter iTunes. After iTunes was introduced, its online model beat Tower
in selection, convenience, and price. As an online storefront it had a
fundamental advantage. It was in your home, had no shelf space limiting
its inventory, and could beat Tower on price because of its lower fixed
costs. The only thing that might have kept Tower treading water at first
was its ability to be compatible with Discmen, which we
know now disappeared quickly. With a basic grasp of technology
innovation trends, Tower should have known as much and immediately begun
running around with its hair on fire.
Now, a decade later, enter Spotify (at least, enter the U.S. market).
Based on the job of delivering music, Spotify completes the job of
delivering music in much the same way as iTunes does. Spotify is
conveniently located, has a wonderful selection, is compatible with my
computer, smartphone, and tablet (which are in turn compatible with my
stereo and car), and is backward-compatible to play music from my
existing iTunes library.
It’s easy to read the above statement and seem doubtful. Even if Spotify
competes in a similar fashion, that doesn’t mean it’s better than
iTunes. Indeed, Spotify’s 12 million tracks don’t compare with those
available on iTunes. And though Spotify is compatible with a handful of
important devices, iTunes proliferates. But this is the nature of what
Professor Christensen calls low-end disruption. At first,
a disruptive product fails to deliver a superior offering to the
incumbent technology in one or more characteristics of the
job-to-be-done. But consumers switch nonetheless because the disruptor
has a systemic advantage in at least one of these characteristics.
We gave up minicomputer performance for the cost advantage of PCs, we
gave up plasma television contrast for the slimness of the LCD, and we
gave up the personality of written letters for the speed of emails.
Spotify holds a systemic advantage over iTunes in one particular job
characteristic of delivering music: relative pricing. While iTunes and
Spotify both deliver music over the net, Spotify’s position as a radio
service lets it price far below the level of iTunes. For $10 a month, I
can gain access to unlimited music as long as I am listening through a
Spotify music player. I don’t even have to be connected to the net.
Because Spotify pays record labels only a small royalty by audio stream,
it has aligned its business model around this low pricing. It’s business
model innovation.
Though Spotify did not pioneer this disruptive innovation, it is the
first time mainstream media is exposing the American public to it. And
we know it’s disruption because it is a business model, fundamentally
advantaged in one of the characteristics we value in completing the
job-to-be-done. Over time this model will displace iTunes. We’ve seen
the future, because that’s what disruptive theory lets us do.
