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Apples Two Step: Reversing Positions in Triplicate

seesawFirst it was iPhone pricing.  Tuesday,  iTunes pricing.  Wednesday, it’s third party applications for the iPhone.  For the third time in less than as many months, Apple is reversing course.  For a company as sure footed as Apple, that’s borderline bizarre.   Even with a stock price through the roof and products selling like hot cakes, it’s something to stop and scratch your head about.   Makes you wonder what’s going on in Cupertino. One of those things that makes you go “hmm?”

The first adjustment came last month when Apple cut the pricing on the iPhone.  They then waffled over whether to compensate early adopters who paid a substantially higher price.  Initially the company line was: that’s the way it goes with technology.   A few days later, remembering the maxim that the customer is always right, they recanted and instead offered to issue cash credits.

The second, and the most benign, of Apple’s three adjustments happened Tuesday.  As part of regularly scheduled Tuesday iTunes announcements, Apple announced they were cutting the pricing on iTunes Plus music. Now, the premium priced songs which are sold without copyright protections (so called DRM-Free music) will be priced at 99c a song; the same price as the rest of the library.   

While these songs account for less than one quarter of the total iTunes library, and only come from licensor EMI,  the move will brings the fee structure in line with Amazon’s recently launched music store.   Amazon is selling an exclusively DRM-Free catalog for 88cents to 99cents a song.    (Amazon has rights to sell music from EMI, Universal Music and independent labels without copyright protections.  Sony BMG and Warner Brothers are not participating.  Apple, in contrast has a vaster library but some limitations.  They only can sell DRM-Free music from EMI. The rest of the iTunes library, which does include Sony and Warner Bros.  is encrypted and, consequently,  purchased songs can only play on iPods and not other MP3 Players.)

In announcing the price cut, Apple spokeswoman Natalie Kerris said the cut was not a response to competition.  Understandably, no retailer wants to acknowledge a price war:   But if it looks like a duck and quacks like a duck?  Whatever you call it, chances are it’s a duck.  This is a duck.

Wednesday, Apple spun around for the third time.  On their website, they announced that moving forward, despite past statements to the contrary, they will now allow third party applications to work on the iPhone and iPod Touch.  Prior to this change Apple had been iron fisted in controlling the devices and blocking outside applications.   Apple even went so far as to lock out some developers and iPhone users when they issued a software update on September 27 that disabled official programs.  The update also reportedly disabled some phones that had been “unlocked” by their owners for use on other carrier networks besides Apple partner AT&T.

The new plan calls for an authorized Software Developer Kit to be released it February.  This will give coders the tools to create applications that will work on both the iPhone and TouchPod (iPod Touch).  The time delay until February will allow Apple time to insure security protocols are in place to prevent viruses and malicious code from damaging the devices or cell networks (an issue Apple previously cited as a major reason for keeping the phone closed).

The changes should have no impact on Apple’s partnership with AT&T nor the exclusivity of their relationship.  There are no plans to sell unlocked phones in the US.  Though, those seeking unlocked phones will likely soon be able to get them from France.  There, French laws prohibit bundling of cell phones and operator agreements.  Under agreement with local distributor Orange,  unlocked phones must be sold, even if at a premium price (est. $500-$600). It’s likely some of these phones will move around the world in after-market sales.

Jobs said, “We are excited about creating a vibrant third-party developer community around the iPhone and enabling hundreds of new applications for our users.”

It was not clear from the rest of his statements if the move was brought about as either i. a means of increasing demand for the phone; or ii.  a response to growing customer angst over Apple’s increasingly proprietary world (e.g. iTunes songs that only play on iPods, phones limited to single carrier choices and blocked from owner modifications etc.) ; or iii. Some combination of factors.  Spokeswoman Natalie Kerris didn’t have any comments on the “why.”

Whatever the motivation for the choice, phone owners will no doubt be pleased at the change.  Apple watchers, on the other hand, well, they may rightly be scratching their heads.  They’ve got to wonder how Apple got itself into a position where they had to change their positions in the first place.   Every company makes mistakes and adapts but Apple’s a company that’s done very well in recent years because they’ve understood and listened to their customers needs and then given them what they’ve asked for.   But recently?  Three changes? Not delays on product delivery, but changes of policy? That almost seems like they’re not paying as careful attention to the customer’s position as they used to.  They’re reacting instead of being right from the start.  For Apple, that’s surprising if it’s true. 

Related Content:
The Paradox of DRM
The New iPod Lineup
Led Zeppelin to iTunes
Amazon MP3 Store Live
DRM and the Shrinking List of Music Retailers


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