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Think different: Apple to become a media giant?
Good thing, bad thing? The jury's still out...

By silicon.com

Published: Monday 14 April 2003

Apple is reported to be in talks with French media giant Vivendi Universal over a $6bn purchase of Universal Music, the biggest record label in the world.

To say 'we didn't see that coming' would be an understatement. It seemed clear to most industry watchers that Apple needed to do something - but few would have suggested a purchase, or departure from its core business, of this magnitude.

If Microsoft or Yahoo! had made a similar bid (and there's nothing to say they won't) you would certainly be able to get a clearer sense of the business logic behind the move. Music is content. More importantly it is what such companies would class as premium content.

The emphasis in recent years for content providers has been on the potential to increase revenues not by increasing users but by increasing average revenue per user (ARPU).

But Apple is not a content provider, though that may not be much of a stumbling block.

While free download services such as KaZaA still exist, content providers and consumers have differing opinions on the viability of subscription services. It may take a company like Apple to change people's perceptions.

And while music fans refuse to pay their hard-earned into the coffers of huge multinationals, Apple, in many ways similar to Napster, may have the independent community feel and hardcore user base to make the first credible inroads into the market. Similarly home users are already accustomed to the idea of Mac as media hub.

The success of Apple's iPod portable music player over the past couple of years has been the one stand-out success for the ailing company, placing it firmly in the thinking of digital music lovers. Also, any purchase of Universal would bring with it part-ownership of the Pressplay service, helping to bridge the divide between hardware manufacturer and content provider.

It's also worth remembering that Sony started as a company making the end user appliances, such as stereos, before getting into the provision of content for those appliances. It went from hardware to software.

The electronics giant invented the Walkman nine years before it bought US record label CBS. 'And now look at them!' would probably be the most fitting phrase to use at this juncture.

So could this be the making of Apple? The initial reaction from investors was a resounding 'no' as the company's share price fell on the news.

But with time this may be an idea which shareholders in both firms warm to.

The music industry has been left behind in recent times, being either ill-prepared or unprepared to implement change. Music has moved on and an understanding of digital media is vital - and Apple is resplendent in associations with the media world.

But this isn't just about building a new business. It's about revitalising two old ones.

To use a phrase normally best avoided there are certainly strong 'synergies' and increasingly so as Apple innovates in the portable music and home entertainment fields.

But perhaps the biggest truth of all among these mixed messages is that Apple had to do something. It seems that it has. Now we wait to see what it means.