Making a Bundle Out of iTunes

I suspected that this was some sort of an elaborate troll, but no, this chap at PC inciter actually wants to break up Apple's monopoly over the iTunes store, the iPhone, and the iPod.

What monopoly, you may ask, and indeed, I did.  Apple has a monopoly over these things only in the trivial sense that P&G has a monopoly over Charmin, and I have a monopoly over the chocolate cake I baked last night.  Neither "monopoly" is withholding a critical good from people, or forcing them to pay an extortionate price for same.  If you don't want to buy your music from iTunes, you can trot right over and buy MP3s from Amazon.  And they'll play just as well on a Zune.

But, you say, you'd like to buy music from iTunes and play it on a Zune?  Well, I'd like to get takeout from Ray's Pizza and enjoy it in the stunning ambience of Cafe des Artistes.  If the waiter refuses to let me do so, is that a monopoly?

No, that's what we call "bundling".  Most people hate bundling.  That's because most people are under the impression that they would pay less if things were unbundled.  Sometimes this is true.  But if you forced Cafe des Artistes to "unbundle" the location from the food, that doesn't mean I'd be able to enjoy a cut rate meal in a beautiful location.  They'd just charge me $100 for the seat.

Similarly, people who want their cable unbundled because they only want to pay for a few channels are under the delusion that they could save huge bucks by cutting off the Golf Channel.  But cable companies don't save any money when you drop the Golf Channel, because they stream all the channels down the coax at once.  Indeed, it may cost them money; the Golf Channel now has fewer potential viewers, and hence falling ad revenues, and they have to hassle around with custom packages for every customer, which is labor intensive, and thus extremely expensive (and also more likely to break).  If we forced cable companies to unbundle, odds are you'd pay at least as much as you now do in order to watch the channels you do like, because those are also the channels everyone else likes:  HBO, Discovery, Bravo, Showtime, ESPN, TNT, USA.  If you've ever stopped on a random channel to watch a movie you didn't know you liked, you've been a beneficiary of bundling.

Like cable, iTunes is mostly fixed cost, which means that unbundling would make their profit fall much faster than their revenue.  So I doubt unbundling would save much money; rather, either the cost of iPhones or iTunes would rise.  Yes, there are competitors to both iPhones and iTunes.  But the very reason Coursey wants them unbundled is that most people consider them best in class.  Forced unbundling would help a narrow range of consumers who want to use a Zune with iTunes so much that they don't mind paying extra for songs.  But it's not clear that anyone else would be better off.