In the article, he compares Apple’s vertical model of integrate to providing digital experiences, as exemplified in the iPod system, which integrates online store, player and computer software, with Microsoft’s horizontal one, seen in its Plays For Sure music system. In the latter users have a wide choice of MP3 players from different manufacturers and a wide choice of online music stores, with Microsoft’s PC-based Windows Media Player and Microsoft’s digital rights management (DRM) in between.
The trend towards vertical integration is growing, even though it limits consumer choice. So “is it worth trading some choice for simplicity and a better end-to-end experience?” asks Schofield.
Although vertical integration “can give suppliers so much control that they can manipulate prices”, it is now making a comeback “because consumers are facing the problems businesses faced before [in the eighties]: integrating a wide array of products that they barely understand.” At the moment, better consumer experiences – not price/performance advances – are becoming the determining factor in buying decisions.
Schofield argues that “as these markets grow and mature”, the horizontal model will eventually prevail: “If we’re going have 10,000 manufacturers, we can’t have 10,000 different processors or operating systems, and we don’t want 10,000 different DRMs. Common standards have to emerge.”