Challenge #3 - Content

You might suggest that the problem of content is just another variation on the theme of partnerships (Challenge #1). But I think it's a special case. There is such a lot of content of all types (music, spoken, musicvideo, movie, tv show, other video, etc) and with such diverse and unique international requirements that partnerships cannot alone cover this area adequately. As the availability of digital content explodes, Apple will end up as a bit-provider of such content if it keeps a locked-in approach to providing it.

Sure, today, the iTunes + iTMS combination provides a level of ease-of-use that is still unparalleled. But once a user goes somewhere else for some content, and then somewhere else, then that combination becomes less important. The function of iTunes has to become the organiser of all forms of content and as a portal to that content. It's traditional value of syncing to portable players is still vital (even more so), but if it is exclusive to the iTMS then it will be marginalised. Apple has always maintained the purpose of the iTMS is to sell iPods, not to make money. I hope the success of the iTMS doesn't blind them into changing that mindset. You can likely do one thing very well (portable players), and maybe two things quite well (desktop content management with portable player integration). But don't stretch it too far.

I'm not saying Apple should get out of the content business, but it cannot be the single gateway. Perhaps this is where Google's strategy is better. But Apple could trump that easily. An approach similar to Amazon would be a good starting point (but probably not ultimately sufficient). Amazon provides a storefront for many other mainstream companies as well as the Amazon marketplace for smaller companies - even competing with itself. I think this model could work well for Apple too. And indeed, this could be another way in which the companies could work together.

Another important factor on content is that Apple is eventually going to have to relinquish control of the Fairplay DRM. As far as I know, it is the only mainstream company to have a DRM that is applicable to content using open standard formats (ie MPEG-4). Microsoft's DRM is applied only to Windows Media formatted material - a proprietary format. Sony's Connect is similarly limited. I think Google's DRM is proprietary and since I think they are using Flash, that's another closed standard. Real's format is also proprietary (for the most part). Apple's adherence to standards publicly available from the MPEG forum (eg AAC, MPEG-4 AVC/H.264) give it a significant advantage if it is prepared to open the DRM up. The MPEG forum has it's own DRM in the works (Part 21 I believe). I don't know if this has any commonality with Fairplay. Apple could leverage the fact that all it's music formats use industry standards if it was to place Fairplay with an independent body to manage it. Apple needs to do this from a position of strength - not weakness. The timing may not be right today, but the test of whether Apple has learned lessons from the past is that it does this at the right time.

While I have considered that a common proprietary DRM could emerge, I can only see this coming from a collective of music/content labels or a collective of software companies. The collusion neccessary to do this would almost certainly fall foul of competition authorities around the globe (and I'm sure is a contributing factor to why it hasn't happened). If Apple takes the lead with Fairplay, it could be a real weapon to fight the WMA/WMV formats that otherwise will come to dominate as Microsoft's strategy unfolds.

For all these challenges - partnerships, communication and content, Apple must select carefully, choose its timing, and then put everything in to them to make them a success. Otherwise, the history books will record how Apple blew not just one great opportunity but two.