Inside the Gates

Wired magazine reports that 80 percent of Microsoft employees with a portable music player have an iPod. Apple's iPod is definitely inside the tornado (half of the 10 million iPods sold to date were sold in the last quarter of 2004) and if this story is true Apple is well on its way to becoming a music industry gorilla. Buy stock. Now. Google on the other hand appears to be no more than a market king*. If you own stock sell. Now. If the Lilliputians of the US Justice Department and European Commission weren't still swarming furiously over Microsoft Google's position would be even more tenuous. The music industry appears to have left its future firmly in Apple's hands. This is probably a good thing for music consumers. Steve Jobs certainly seems savvy enough to understand the long tail phenomenon, and Apple will likely have enough clout in a couple of years to start pushing the floor on single song prices** down quite a bit.

---

* Geoffrey Moore's book The_Gorilla_Game defined technology market kings as market leading companies with at least 2x the market share of their nearest competitor and with advantages of economies of scale, favorable distribution terms, enhanced access to customers and partners, and favorable customer relations. Kings lack the architectural control and high switching costs which protect the market share of technology gorillas. You can read a summary of the book here. ** Record companies and copyright holders still collect between 65 and 75 cents per song for music sold online--which leaves little flexibility for Apple, Rhapsody, Napster, Walmart and other digital music services to cut their prices below 90-99 cents per song.