Tag Archives: web music gadgets mac apple

Content goes from king to the new loss leader

By now it’s fairly well-known that selling digital music downloads is a tough business with thin margins.  However, across both online as well as brick-and-mortar retailing, music and video is being used more universally as a loss leader and it’s not clear what this trends means for content in general.  For example:

  • for Apple, digital downloads are not something they make a lot of money on, however, it enables their hardware universe (iPhone, iPod, Apple TV).
  • for Amazon, many people have suggested that digital downloads is a traditional retailing loss leader.  It drives people to their page, where Amazon hopes to sell them something above and beyond the digital download.
  • for wal-mart, CDs and DVDs have been used for a long time as a loss leader.

The New York Times is reporting that Apple’s new deal to sell movie downloads (as opposed to their rental business) is not a great deal for Apple from a dollar perspective.  So, Apple appears to be using the same model here as they did with the iPod.  Effectively they are relegating the movie downloads to a loss leader in the hopes of selling more Apple TVs.

So is content no longer king?