New Markets

If innovation is the lifeblood of capitalism, then new markets are the pools that innovators wish to swim in. Today, the business world is aflutter with news out of Apple and Amazon regarding, what else, their relatively new devices. News those already plugged in have known for some time now.

The Wall Street Journal ran an article profiling Apple's new market: App Store. For those not in the know, imagine the App Store as the iTunes of software applications. Where iTunes was the location where you bought music for your iPod, App Store (which also happens to operate through iTunes and on the devices themselves) is the location where you buy software applications for the iPhone and iTouch.

Since the first release of the iPhone and its close cousin, the iTouch, I have been telling anyone that would listen that the iPhone is not a cell phone that plays music. Rather the iPhone is a computer that also makes phone calls. Once you come around to this point of view you really see the potential of the device as a whole new computing platform. Which brings us back to the App Store.

All new platforms create vibrant, profitable markets - if they are successful. According to the numbers detailed in the WSJ article Apple is making somewhere on the order of one million dollars per day. That figure is just their take: 30% of App Store sales. The remainder is apportioned to the application developer. This new market, which did not exist before the release of the new iPhone 3G on July 11, 2008 has delivered a new avenue of earnings potential for thousands of independent software vendors around the globe.

This symbiotic relationship between Apple and its developers, although not a perfect marriage, is good enough to attract new developers in droves which, in turn, makes the iPhone platform more appealing to new customers. This then translates to a larger market for Apple's higher margin offerings: The Mac (both desktop and laptop). All this exemplifies the vaunted Halo Effect.

Also today, Citibank released an analyst research report which talks up Amazon's own consumer device, the Kindle (most of this data comes right from Amazons most recent quarterly report). This device has been likened to the iPod of books. And quite frankly, it is. The Kindle allows you to download books and other reading material as easily as you can music via iTunes. I expect great things from Kindle. Just as the original iPod, released in 2001 was not universally adored and even ridiculed by some, the Kindle will undergo many revisions over the years to come making the device as user friendly and ubiquitous as the iPod is today.

The ease of use and space saving nature of electronic media distribution is very compeling to those that either do not currently participate in the print based market place or limit their exposure for any number of reasons. I firmly believe that instead of cannibalizing the established print market, Kindle, and other devices that will no doubt follow, will only act to grow the pie.

Just as Google validated the nacent online advertising market pioneered by their pregenetors creating a well established, thriving, marketplace so too will Apple's App Store and Amazons Kindle do the same in their respective areas. Content creators would do well to recognize these early forays into a new market and take advantage of them lest they be left behind with the likes of the RIAA and MPAA.