04:07 AM

Analysis: iPad Is an iDRM Storefront For Apple Ambitions To Dominate All Digital Media Sales

Foremski's Take: My first impression of Apple iPad is that its low price of $499 is due to the fact that it's basically a storefront for Apple's iTunes and iBooks online store.

It looks like there is no Adobe Flash video support, or Microsoft Silverlight video support, which means no Hulu, no BBC iPlayer, no Netflix Direct. You won't be able to stream video from anyone but Apple.

Belt-and braces DRM...

By using the iPhone OS and its own proprietary hardware, Apple has managed to build a solid belt-and-braces digital rights management (DRM) system, that is the platform itself.

Applications and media designed to run well on the iPad will be optimized to run on the Apple iPhone OS and also, on its proprietary hardware, the A4 microprocessor.

This provides an extra level of DRM support making it more difficult to pirate apps and media onto other platforms.

Buy all media through the Apple funnel...

Apple says iPad "comes with iTunes and iBook" stores. Apple is setting itself up as the funnel for all other media.

Media creators, after Apple approval, will be able to sell their content: tunes, movies, TV shows, books, podcasts, newspapers, apps, etc through its online store, delivered to Apple devices such as iPad, iPhone, optimized to run the media at its best.

Apple takes a cut of the revenue...

By building a proprietary, closed platform, with its own hardware and software, Apple is able to capture a larger part of the value stream from selling media.

The benefit to customers are:

- cheaper devices subsidized by media sales
- A very good customer experience because the media and platform are co-optimized for each other.
- Easy access and purchase of media through WiFi to iTunes or 3G (AT&T data plans.)

Issue for media publishers...

The issue for creators is that Apple is the only way to get media and apps onto the iPad and iPhone. You have to go through Apple.

Will they try to weaken Apple's position by making their media available on other platforms? Yes. But Apple knows the customers will decide and it has a very strategic customer base of early adopters.


Although Apple has a tiny share of the overall computer and phone market, its customers form a large share of the early adopter market. This is a well-heeled group with lots of money to spend on media -- more than any other comparable demographic.

From the early adopters comes the development of mass markets. The iPhone went from an elitist toy to a mass market phone in less than 2 years, in many countries -- a trend that will get larger after exclusive carrier contracts expire.

From e-media to i-media...

Apple is making a bold bid to tie up a dominant share of the future media e-commerce market -- the sale of digital books, movies, newspapers, etc.

Its proprietary hardware and software strengthen its DRM; media creators want strong DRM, which will attract them to Apple. And it's iTunes store distributes the media for them and collects payment.

In this way, through its closed and tightly controlled systems, Apple can provide a high quality experience to users, and provide media and apps creators with a highly efficient commerce platform.

This is how Apple will dominate the sales of all future forms of digital media.

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UPDATE: Nicholas Carr seems to agree. He has written "Hello iPad, Goodbye PC"

Towards the end of his article, he writes:

"Today, Jobs's ambitions are grander than ever. His overriding goal is to establish his company as the major conduit, and toll collector, between the media cloud and the networked computer.

Jobs doesn't just want to produce glamorous gizmos. He wants to be the impresario of all media."

Please see:

The Mysterious Apple A4 Chip - Where's MSFT's and GOOG's Chip?