Wednesday, October 12, 2011

iTunes and A.R.Rahman; iPad and Ayn Rand:Lesson's in Capitalism

Growing up in Tanjore in the 80's and early 90's one of the pastimes in our family was to procure cassettes (yes, those tapes) of Tamil film songs. Often time we would make a list of just the songs we wanted and take it to a shop where they would look up their repository of collection and say which ones we could get. For like Rs50 we could get our own collection of songs. Sometimes the collection would have a theme like "Songs with Moon" (Nila Paadalgal), al the songs would be centered with moon as analogy for the theme. Copyrights were unheard of. Mostly Ilayaraja songs. Ilayaraja reigned supreme in 80's Tamil film music. This practice was common all over Tamil Nadu. Street corner tea shops would have cassettes like that and blare the latest hit songs early morning. Ilayaraja commanded a princely sum for scoring the music but earned literally zero from all these sales. He would not even have known that such a thing is possible. Hollywood Screen Writers get, I read, a dollar from the sales of each DVD in addition to their fee for writing screen play. Imagine the accrued earnings for a block buster movie.

Today A.R.Rahman earns in crores, sums which Ilayaraja would not have dreamt of. When the soundtrack of Rajini's last mega blockbuster movie, scored by Rahman, was released it burned the charts on iTunes. From the day he scored for 'Roja" in 1992 Rahman has come a long way. Now he signs contracts with recording companies like Sony at unheard of sums. Sony, no doubt, factors sales from iTunes and I'd guess Rahman's lawyers, if they are good, put in clauses for royalties from online sales. The Rajini movie is now almost a year old but even today if I bought the song revenue is shared between Apple and the record label and I am sure the music composer gets a share too.

Steve Jobs took capitalism to areas where only crony capitalism existed. An invention in America, product made in China (with South Korean and Taiwan parts), enables an obscure Indian musician to earn money through a Japanese recording label. Yes today too infringements of copyrights like I narrated would certainly take place in India but Rahman's avenues to earn money have expanded making him a global brand. If this is not progress I'd love to know what is. Seminars on economics can be woven around this.

As a bibliophile I watch with sadness as book store chains disappear. Today I read that the last remaining book store chain (Barnes and Noble) faces a possible bankruptcy. Apple's iBook (an app originally created for iPad) and's Kindle are the key drivers. Tennyson in his 'Idyll's of the King' wrote beautifully, "the old order changeth yielding place to new...lest one good custom should corrupt the world". Yes, a good custom left undisturbed for long will corrupt. Book selling and reading is undergoing an epochal change. I've a dog eared copy of Ayn Rand's epic "Atlas Shrugged" bought for $7. I've read the 1000 page tome several times. Yesterday 'Atlas Shrugged' was released for iPad as an app complete with rare videos of Ayn Rand's speeches, graphic laden biographical time lines, trivia quiz, multimedia presentations etc. This book published in 1954 is being repackaged and republished for the 21st century 50 years later. Cost $14. Worth every penny. 9How I wish some Tamil Classic was rendered thus but....OK why go there). Children's books are the best. Those books come with read along option with each word being read out and highlighted as they are read out.

As with iTunes store it was the app store that unleashed a torrent, not just of creativity, but very importantly of capitalism. With the core principles of free market such as copyrights, revenue sharing, ratings, comments and more app store democratized capitalism to an extent unseen in centuries. Today a college student sitting in a dorm can 'create' something, sell it and call it his 'earning'.

Steve Jobs never made anything cheap. He did not donate anything to anybody. Microsoft and Intel partner together in donating computers (of course with Windows and Intel chips) to schools. Microsoft products are far cheaper than Apple products. Microsoft and Intel really ushered in the PC era though affordable PC's. While reams of newsprint hail Jobs' business acumen in churning out products that sold at premium and sold in blockbuster numbers what is generally glossed over is a big business failure of Jobs. Jobs refused to unbundle his software (Mac OS) and the hardware. Bill Gates, very shrewdly, did the opposite and created the PC era with IBM.

Steve Jobs never subscribed to anything 'free'. Freeware was anathema to him. However iTunes serves as a platform for Ivy League universities that disburse classes free. MIT's 'Open Course ware" is very popular. MIT posts classes by its professors online through iTunesU (iTunes University). I once downloaded a physics lecture on Snell's law and practically relearnt everything that my teachers pathetically failed to teach at school and college. If colleges, in Tamil Nadu, just had internet connections and students only watched these lectures they would learnt twice as much as they learn from those who roam in the colleges calling themselves as lecturers.

That Steve Jobs is mourned so much today is not only because he produced entertainment products that millions use. Users, especially of iPhone and iPad are not just passive users. The iPhone and iPadiPad in turn become an extended identity of the owner. One can never say that of Microsoft office or a Bose audio system. Ayn Rand's biggest agony about industrialists and innovators was that they lacked the philosophical framework to appreciate what they were achieving. Likewise Apple users, mostly unknown to themselves, take part in a quintessential free market ecosystem that is the bedrock of capitalism.

The ultimate principle of capitalism is 'individualism'. The individual is the building block of capitalism. One commentator highlighted how Jobs and his products enabled individualism on a scale that no innovator or product had achieved before. Ayn Rand's in her novella  'Anthem' depicts a collectivist society where the word "I" is banished and its usage is punishable by death. Apple products are all prefixed with 'i', iPad, iMac, iPhone, iPod. 

Time magazine's "Person of the year" in 2006 was "YOU". The cover featured a Mylar strip in the place of a computer (an iMac) screen reflecting the person who is reading it. In an age of twitter, Facebook, blogs where every person expresses himself Steve Jobs and his 'i's just fit in. He cashed on an era of individualism by making his users feel that  the products they use are an extended identity.

The Apple product we bought is not a one time money-earner for Apple. The product serves as a channel for continued revenue. A PC sold by HP is one time money-earner. An iPad continues to earn money for Apple beyond the initial sales. Everytime we buy a song or an app a share of the cost goes to Apple as much as it goes to the creator of the app or the record label of the song. Let me be clear, I've the deepest admiration for business strategies that are innovative in creating revenue streams for companies. Anybody can choose never to buy an Apple product or having bought they can choose not to spend on apps etc and use it without paying one cent more to Apple.

There is a dark lining though amidst this sunny aspect of capitalism that is enveloping millions. Sociologists often talk about 'digital divide'. 'Digital divide' refers to the gulf between those who have access to internet and digital technologies and those who do not. My daughter plays piano on the iPad, listens to wide array of music, watches excellent shows, plays with innovative apps that teach physics and math. She loves to construct bird houses within a budget and test them for sturdiness. This learning experience is possible only because I could afford a pricey digital product. Some rich counties in USA are using iPads in classrooms. A kid from lesser fortunate circumstance would miss out on this. This is deepening the digital divide.

Before the critics of free market pounce on that let me caution do not take it for granted that nobody else would come along with a cheaper and better product. When Steve Jobs signed a exclusive arrangement with AT&T for iPhone AT&T's chief competitor Verizon used all their innovativeness to stanch the migration of its customers. Jobs could hold that exclusive deal for only 4 years. AT&T network was plagued by heavy data usage of iPhone customers. Finally as iPhone subscription reached a saturation point with AT&T Jobs then expanded the availability to Verizon in early 2011. The latest iPhone is available on Sprint too thus increasing the iPhone carriers to 3. Another big factor in expanding the availability is the success of Android phones.

Customers unsatisfied by the monopolistic attitudes of Jobs went to Android. Android, developed by Google, is sold to phone makers. Google, after a short disastrous stint, got out of the business of making phones. So its the classic DOS vs Mac OS fight retold as Android Vs iPhone. Android app store is more liberal unlike the control freak Apple in approving apps. Android phones now surpass iPhone sales. As Jobs said 'this is life in the technology lane'. So there might come a competitor to obliterate iPad soon enough and THAT's the charm of free market.

While Steve Jobs is being mourned by all and sundry there is little awareness of how he furthered the cause of capitalism and I wish Ayn Rand wrote his obituary. From Adam Smith to Ayn Rand with Edmund Burke, Friedrich Hayek, Milton Friedman in between praise Jobs for his signal service to capitalism and free markets.

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