Apple Takes on the Entertainment and Media Industries

Apple (AAPL) is hardly new to industrial controversy. But the current strategy to expand dominion over all media and take a cut of sales while driving even more demand for iPhones, iPads, and iPods is running into resistance. Some televisions networks are pushing back because they fear what might happen if CEO Steve Jobs gets control over their pricing and business practices. And yet, is Jobs a voracious control freak? The prophet of the future? Maybe the answer is a little of both.

Some of the networks are reluctant to allow 99 cent rentals of programming that now goes for two to three times as much on iTunes and through other venues.

"Steve Jobs' thing is if we lower the price point we'll sell more stuff," said one media executive close to the talks

Another said: "This is a plan that is designed to sell iPads, iPods and iPhones. It is not a plan that is designed to appropriately value content."

Still, analysts believe other media companies might feel pressured to strike deals if the 99-cent rental proves popular with consumers. That's what happened with the music industry when Jobs first launched the iTunes music store; music execs felt backed into a corner, so they agreed only to champion other models and distributors (ie, Amazon) later on.

Now, as Jobs expands, the only network owner going blissfully with Apple is likely to be Disney (DIS), which has little to no power to resist because Jobs is the single largest shareholder of the company. He gained his stake and seat on the board when he sold Pixar to the Mouse King.

All that happened a year before the iPhone came out. Clearly leverage in the entertainment arena was his intent all along and he had his own interests at heart. However, when he says that everyone will sell more, is he right? I think so.

The real problem that the networks -- and music labels and book and magazine publishers -- face is that the world is moving away from them. The industry is moving to a model where individual creators of content can sell their wares to the public without the intercession and blessing of the entertainment and media conglomerates.

For these creators, the change may be a case of swapping one set of distribution points -â€" Apple, Google (GOOG), Microsoft (MSFT), and others -â€" for a different one. Why should a GE (GE) or Viacom (VIA) necessarily have the control? How long have they dictated terms and remuneration to everyone who actually produces the work?

In other words, who actually is the media? It's a time of change, and when you talk about disruptive business models, you have to take a step up and look at the entire system. To think only about how to preserve the old is to ignore just how fundamental the shaking has been, and how much stronger it will get.


Statue image: user mzacha, site standard license. Photo editing: Erik Sherman.