Without the hype or interest that usually precedes these things, Virgin announced their intention to enter the digital music business and take on the Apple jugernaught.

Hahaha. Who would have ever thought Apple would be described as a jugernaught?

Truth be told, there are a lot of people looking at the whole iPod thing and scratching their head, wondering how scrappy little Apple could have found such a big, juicy leftover on the technology table.

Richard Branson and his merry band, however, are not about to cede that market to Steve Jobs and the team at Apple. In fact, the Business Week story attached to this journal entry is quite interesting on a number of accounts. Read it for yourself and then let me know if you agree with these predictions:

1.) The cost of digital music – and more importantly, digital music players – is about to come down. Dramatically. Welcome to commoditization, Apple. The lucrative iPod market is about to come under seige from a very hip competitor who is trying to go after Apple’s Achilles heel (so to speak). By adopting the WMA standard (Windows media) and ignoring the iPod, Virgin seems to be ready to focus on a hand-held device they already have in distribution: the mobile telephone.

The result will be instant access to millions of customers and in order to achieve similar saturation levels, Apple will have to sell iPods by the bushel basket. Expect the prices for the regular iPod and mini version to fall dramatically. The same will hold true for digital music. I think you’ll see prices fall from $.99 to $.05 or lower in the next eighteen months.

2.) Apple will underestimate Virgin and commit the “original sin” of marketing – not recognizing your competitor’s capabilities by understanding their brand in a world context. Does Steve Jobs realize he’s going up against a guy who got naked inside a giant, inflatable phone in London in order to introduce his mobile telephone service to the UK? What’s Jobs done for us, lately (besides finding Nemo)? By the way, thanks for Nemo, Steve.

3.) Apple fantatics will do what Apple fanatics do best – go into denial. Rather than competing, Apple and its loyal minority will insist on their product’s superiority, their business model’s loftier goals, blah, blah, blah. Meanwhile the rest of us will get our Virign music players for free when we sign up for their cell phone service and we’ll be downloading hits at a fraction of the price and, more importantly, we’ll be able to congregate at Virgin megastores for special events, etc. Apple, of course, jettisoned its retail locations long ago.

4.) Finally, things will get really hairy for a while when one more player tries to intervene in this marketing allegory. Wal-Mart. Yeah, that’s right. Old-man Walton’s retail operation is the USA’s number one seller of CD’s and seem to be interested in this whole “online-electric-music-thingy” as they say down in Arkansas. The major problem Wal-Mart faces here, however, is that online music seems to be antithetical to the Wal-Mart brand.

First off, it’s hip and trendy. Have you been in a Wal-Mart lately? Hip and trendy don’t even come close to describing the experience. Second, online music does not need what Wal-Mart has to provide in terms of value: low-cost distribution. After all, if what’s being sold here is an electronic file that can be delivered anywhere, instantly and at no cost – not even Wal-Mart can compete with that.

But don’t count that little, yellow, smiley-face dude out. If Wal-Mart has shown anything, it has shown a unique ignorance of its own irrelevance. Kind of like Jethro Bodine in Beverly Hills, Wal-Mart has insisted on remaining in the online space and may, eventually, carve out its own niche in the online music space.

Then again, I suspect the online music demand for Slim Whitman and Boxcar Willey isn’t going to detract Mr. Branson or Mr. Jobs from their assaults on each other’s domains.

Later.

BW Online | March 10, 2004 | Virgin May Show Apple a Thing or Two

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