Monday, October 10, 2011
Steve Jobs made quite an impact on the world, rethinking the way people use technology and introducing beautifully designed, innovative products. Because this is a contracts blog, I want to discuss the interesting way his company, Apple, uses contracts in its business. Before iTunes, most music was sold to consumers on CDs. Apple is not the first or only company to license rather than sell digital music, but it is the most popular. Because of the enormous popularity of the iPod and iTunes, Apple made it acceptable to license rather than sell music - a concept that at one time seemed strange and somewhat outrageous. The way Apple uses contracts is closely tied to the nature of its innovative products and services (which meld the tangible and the digital), the way they are delivered to the customer, and Apple’s business model. Apple markets itself as more than a purveyor of technology products. Its customers don’t buy a product, they enter into a relationship. Apple reminds customers that they have a relationship, not a one time transaction, and they remind them via contracts. Apple has its customers click each time they purchase a song and each time they download an updated version of iTunes. It's mass consumer relational contracting. (Other companies may do this, too, but I can't think of one offhand that does it the way Apple does). Apple also closes the gap between offline and online contracting. When I bought my iPad not long ago, after I had paid for it, the salesperson (aka the “Genius”) had me click “I agree” to the terms of an agreement on my new iPad before he would hand it over. It made me wonder, will we see more rolling clickwraps? Will clickwraps replace paper contracts in the mass consumer setting? As products become more digital than tangible, will we see more licenses and fewer sales? (I think the answer is yes). As products incorporate more software than hardware, will they no longer be considered “goods”? What types of innovative contracting forms might we expect to confront in the future?