Jerkoff Jobs: iCame, iSaw, iCaved

Let me get this straight: Steve Jobs insists that songs on iTunes cost 99 cents and television episodes cost $1.99 because consumers crave simple pricing.

Except, of course, when it comes to Apple’s own products.

On Thursday, I was at the massive Apple temple just off Central Park. From a pricing perspective, it was chaos — a very lucrative form of chaos. The day before, Mr. Jobs had dropped the price of the iPhone, introduced the iPod Touch, re-priced the original iPod, and introduced a new Nano with video capability.

The tables contained both new and old versions of the devices, but the signs listed the old prices.

“These signs are wrong,” said Bryan, a clerk in sort of general-announcement mode near the mob at the iPhone table late in the afternoon. “The price just dropped $200, and you should get ’em while the getting’s good.”

There were wrinkles created by all the dynamic pricing. Customers who paid $599 when the iPhone came out two months ago saw their status drop from early adopter to, well, sucker, after Mr. Jobs cut the price of the device by a third. After Mr. Jobs was crucified for playing it too cute on the so-called “Jesus phone,” he issued a non-apology apology and a $100 store credit to help those early buyers salvage some dignity.

A pricing error? Absolutely. And when you think about it, the media companies Mr. Jobs is fighting with want the opportunity to make the same mistake.

Earlier this summer, the Universal Music Group, owned by Vivendi, said it would not renew its contract with iTunes because it wanted more flexibility in setting prices. Last week, NBC Universal and Apple issued dueling press announcements, with Apple saying it would not carry television shows from the coming NBC season because the network wanted double the $1.99 price and NBC saying that was not true.

“Apple is not telling the truth. We never asked to double the wholesale price of our shows," said Cory Shields, a spokesman for NBC Universal. “Our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.”

Content creators are supposed to hold all the cards, but in this shootout the advantage rests with Apple so far. With a ubiquitous installed base — iTunes has been downloaded 600 million times and there are more than 100 million iPods out there — Apple has the biggest media application on earth. Networks and music companies have some bullets, but Mr. Jobs owns the gun.

Paul Saffo, a Silicon Valley forecaster who has seen a few revolutions come and go, is not someone who feels the need to own an iPhone, but he thinks Apple is just reaping long-earned rewards.

“They won this before the first iPod was sold,” he said. “They figured it out. And now he is getting monopoly rent.”

I’m less sure of that. When Mr. Jobs iTouched the shark this week with the pricing fiasco, he proved that he’s not infallible — despite what you might hear. And his continued insistence on controlling every aspect of the user experience, including the price point, has real risks.

You could speculate that Apple slashed the price on the iPhone to gain additional leverage in peddling songs and episodes of “Heroes,” but the company is in the tchotchke business, not the media business. ITunes, for all its ubiquity, is not a big profit center. Mr. Jobs wants to be the king of all media as a way of making sure that there is a cheap, rich source of software — music, television shows and movies — to animate his devices and drive further sales.

His arguments against variable pricing (flat rates draw new customers and lessen the appeal of piracy) may have worked a couple years ago, but they are starting to sound a little self-serving. The Web, after all, can easily enable infinitely customized pricing. eBay proved that people will not only track prices closely, but act in their own consuming self-interest.

And as someone who travels a great deal, the opportunity to watch episodes of “The Office” on my iPod seems worth a great deal more than $1.99, and I would pay accordingly. (Speaking of which, the iPod I have, with 80GB of storage and a spinning hard drive, not only dropped in price this week, but was rechristened the iPod Classic. That makes my formerly cool gizmo sound like the tech equivalent of a geezer rock song by Aerosmith. Gee thanks, Steve!)

http://www.nytimes.com/2007/09/10/business/media/10carr.html?
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