By David Sims
[email protected]
The news as of the first coffee this morning, and the music
is Prince’s “Let’s Go Crazy,” proudly downloaded from iTunes just this morning:
The only really truly important fact you need to know in this whole iPod-iTunes flap in France is
the following, from Piper Jaffray senior analyst Gene Munster:
“We estimate that approximately 20 percent of iPod and
iTunes sales occur outside of the U.S. The
French market alone is likely less
than 2 percent of iPod and iTunes business.”
France’s lower house of parliament has passed a law
requiring not only Apple, but all those who sell downloadable music in the
country, to provide compatibility – all downloadable music must be playable on
all devices, be they Apple, Sony, whatever.
On the one hand this looks fair, but seeing as how Apple has
over 80 percent of the market it’s obviously targeted to knock down Apple’s
market share. It’s an extraordinarily badly-written law, as almost all laws
trying to impose wishful thinking on market forces are, so much so that even
Apple’s competitors in the market are wary of it.
So is Apple going to trash their exclusivity for the sake of
two percent of their market? First CoffeeSM doesn’t think so,
friends. Bet on Apple to simply pull out of France and create a thriving black
market for iTunes in France, rather than comply with the law and create a
thriving black market for French iPods in the rest of the world.
Not to say I’m surprised by what France is doing. A country
which has always idealized farming and treated business with disdain and
lightly-concealed suspicion, which has long ago given up on market innovation,
will try to legislate the heck out of those who are still capable of it.
“These clauses, which we hope will be taken up by other
countries, notably at the European level, should prevent the emergence of a
monopoly in the supply of online culture,” Richard Cazenave and Bernard
Carayon, National Assembly deputies from the ruling UMP party, said in a
statement.
Right. Substitute the word “wine” for “online culture” in
the above quote and see how “principled” these politicians get. In other words,
we are incapable of producing online culture that people prefer to Apple’s, so
we’ll just force them to give us what they’ve accomplished.
Must be nice, having your own country where you get to write
your own laws. And don’t think the French are opposed to de facto monopolies, they run plenty of them in Africa themselves,
they’re just opposed to ones they don’t run – try buying a beer in Francophone
Africa that doesn’t put money in the Castel Group’s pocket.
Apple itself notes, probably correctly, that “The French
implementation of the EU Copyright Directive will result in state-sponsored
piracy. If this happens, legal music sales will plummet just when legitimate
alternatives to piracy are winning over customers. IPod sales will likely
increase as users freely load their iPods with ‘interoperable’ music which
cannot be adequately protected.”
If there is a case to be made for the law, it’s made as well
as it’s going to be by online commentator Leander
Kahney, who raises some of the right questions – “Why should the French
government help competitors like Microsoft or Sony to get a foothold in a
market they have proven incapable of competing in?” – and offers something of
an answer by arguing that it’s not good for one company to dominate online
entertainment the way Microsoft’s dominated desktop computing.
Unfortunately Kahney then loses the plot and spends a great
deal of time detailing what a great job Apple’s doing breaking the Microsoft
monopoly, meandering in and out of this musing and that and doesn’t really
address the French law question again before slapping himself awake near the
end of the column with “ Apple will become more and more powerful as the
gatekeeper to this content. And it will behave like every other big, powerful
global corporation – as a predatory monopoly.”
And Kahney fails to recognize the difference between
Microsoft’s monopoly and Apple – what Microsoft monopolizes you can’t get
anywhere else, and you can’t get around it. Apple does not monopolize music, it
creates no music, it simply offers a way to purchase and listen to it. You can
easily get around it by downloading it to your computer and changing the format
to whatever you want.
But this subjective conjecture about Apple-as-monopoly is as
good as the anti-Apple types get. BusinessWeek
more trenchantly observes that “The French have done it again. In an attempt to
update copyright laws for the 21st century, lawmakers in France have thrown a
giant spanner in the works of the nascent online digital music business,” and
could “torpedo an industry that is on just now getting off the ground after
years of inaction and a massive wave of illegal sharing of unprotected digital
music.”
This is partly because France itself is eye-openingly naïve
when it comes to business issues, especially high-tech. Having someone else pay
for your defense for the past sixty years so you can subsidize aromatherapists
and set exotic restrictions on your wine industry will do that for you.
Recently the French have taken to the streets in protest – no, not to burn
cars, that was the previous protest, this latest protest was against a law
saying employers could fire under-26 year old employees in the first two years.
That’s right. The way things stand now if you have a job at
a company in France you’re pretty well set for life. It’s hard as heck to fire someone, you have
to do a really bad job instead of the acceptably moderately lazy job which’ll
allow you to keep your paycheck until you retire, at which point the state will
take over funding you. Great system if you already have a job, terrible system
if you’re a young person looking for one.
Because what happens is that employers simply avoid hiring
people in the first place, since once you hire ‘em you’re stuck with ‘em,
friends. They get by with minimum staffs, which means there’s very little
innovation or risk, which means they depend on countries which do innovate
thanks to flexible employment laws (America and… uh… let’s see, there’s…),
which means they’re left to grumble in their wine during their lunch hour and a
half about how those furriners are running their economy and didja see that
there’s a sale on iPods at Carrefour? Let’s go, call in sick the rest of the
day, who cares? We won’t get fired.
Hence youth unemployment is over 20 percent because
companies, quite sensibly, refuse to hire anyone they don’t urgently need and
think they’ll urgently need for the next 20 years. So the French government suggested a change
to France’s employment law to allow companies to hire young people with the
understanding that they could be let go in the first two years if need be. In
other words, how America got to be the unchallenged world leader in innovation
and growth, not only in technology but movies and music and any other industry
which requires creativity, innovation and risk.
Because even with liberal firing laws American unemployment
is under five percent, and nearly double that in the coddled economies of
Europe, France included. Think there’s a cause and effect here, folks? Think
high-tech companies take risks here because they can? Steve Jobs never would
have gotten Apple off the ground in France, but the fact that he had the option
of firing people if things didn’t work out allowed him to ultimately provide
thousands upon thousands more jobs in the end.
You’d have thought the French government was proposing a ban
on wine, cheese and pointlessly obnoxious griping about America the way the
French took to the streets, burning cars, tires and whatever else, attacking
policemen and shutting down Paris streets. The government still hasn’t exactly
caved in but are unfolding the white flag.
In such an environment unrealistic laws are inevitable. Face
it, Apple built a better mousetrap – the fact that they’re the market leaders
and not monopolists Microsoft should tell you something, that an outside vendor
can beat the monopoly provider. For this, cracking the Microsoft monopoly, they
get punished?
If the law passes the upper house in May as it’s expected to
do, and Apple simply shutters its French operation as it’s expected to do, what
would the result be, aside from the thriving black market that develops whether
Apple leaves or knuckles under?
One hopes a result is more European innovation in high-tech.
It isn’t that Europeans, even the French, are incapable of market-winning
innovation – the guillotine, brie, even the heavily-government subsidized Airbus
is a step in the right direction – it’s just that they haven’t had to. If that
changed, well, who knows what they’re capable of?
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"You’d have thought the French government was proposing a ban on wine, cheese and pointlessly obnoxious griping about America"
And I'd been led to believe Americans don't get irony...
How is Apple going to shutter their operation in France if they can't fire anyone? I think the French government is wayyyyyy ahead of everyone on this.