Apple: Selling the razors, giving away the blades The New York Times compares Apple's strategy of selling base products (the iPod) at a high margin and repeat-buy accessory products (iTunes-downloaded songs) at a low-margin, to Microsoft's reverse strategy with the xBox and its respective licensed games. "Common Silicon Valley wisdom has hewed for decades to the business adage that to establish a successful business in consumer products, you must be willing to lose money on the razors and look for profits from selling the blades. A notable example has been Microsoft's money-losing Xbox video game business. By hemorrhaging money on each video game console (razor) sold and hoping someday to make it up on game software (razor blades), Microsoft's home and entertainment division reported losses of almost $1 billion last year. Now, along comes Mr. Jobs, the chief executive of Apple Computer, who once again is standing the common wisdom on its head..." More.
More discussion on the artist vs. label download debate The Washington Post uses Tom Petty's wrangling with record companies ovr the issue of downloading as the basis for an article called " Music Fans Find Online Jukebox Half-Empty". "Contracts between musicians and labels signed before about 1998 do not include language spelling out how the parties should be paid for Internet music sales, or the digital rights, so contracts must be renegotiated, which often takes months. Best-selling musicians who have more control over their songs can hold out for more money from their labels before agreeing to sell their songs on the Internet. Many musicians have trepidations about the Internet because they think of it as the place where their songs get stolen." More.