Applying Starbucks to the NPD report on Music

The NPD group released research that Apple users are twice as likely to pay for downloaded music as their PC counterparts. Apple Insider quoted Russ Crupnick, who is a VP and entertainment industry analyst ""There's still a cultural divide between Apple consumers and the rest of the computing world, and that's especially apparent when it comes to the way they interact with music. Mac users are not only more active in digital music, they are also more likely to buy CDs, which helps debunk the myth that digital music consumers stop buying music in CD format."

One wonders why the difference. I think the answer is pretty simple. One might call it the Starbucks rule. Starbucks has helped in the coffee business to create a new market which allows individual consumers to design their own coffee - it does not take much to figure out how to get a "venti non-fat, peppermint, hot chocolate, no-whip" or anyone of the thousand other combinations available at Starbucks. And the menu changes enough to allow consumers the opportunity to experiment. But the key concept is ease of use. Once you begin to use Starbucks, you tend to keep coming back - uniform quality and ease of use are the reasons.

Ditto for iTunes. There are lots of choices and it is easy to understand, especially in the pricing. One of the odd things that the music barons have not yet understood is that there is a logic to the pricing mechanism for iTunes. That is part of its allure. But then with the performance of the RIAA and its supporters it is not surprising that they have not yet thought carefully enough about their business.

Here is a thought experiment. In the current House bill reauthorizing the Higher Education Act, the RIAA has caused an amendment to be introduced which would withdraw federal student aid from colleges who have students who download music illegally. The proposal would single out colleges when other network providers have successfully argued that their responsibility does not extend to what the individual consumer does on the net. But think for a moment if every college gave every student a $25 iTunes card at the start of their educational career. Would that be enough to hook them on honest downloads, just as a Starbucks card gets them to come back to the same coffee provider?