By: Robin Bloor, Chief Research Officer, Bloor Research
Published: 9th June 2005
Copyright Bloor Research © 2005
Apple dominates the digital music market and, one could argue, it does so because it invented it, or to be more accurate, reinvented it. Technically, it was Napster that invented the digital distribution of music and Kazaa that later dominated it, once Napster had been felled by legal action. Neither of these companies enabled a commercial market for digital music, they just created a popular mechanism for copyright theft.
When the music industry failed to stop Kazaa by legal action, many commentators wondered whether the music industry was doomed to death by digital theft. Why would anyone ever pay for music over the Internet when it was so easy to steal it?
In April 2003, Apple began to provide the answer to that question, when it launched the iTunes store and sold a million songs in its first week of operation. Of course, music theft didn't suddenly stop dead in its stolen tracksit continued to continue, but Apple had demonstrated that a well designed Internet music store could be cool, convenient and financially viable. It may even turn out to be profitable. At the last count iTunes had sold upwards of 400 million tracks or, to look at it another way, about 18 tracks to everyone who bought an iPod.
More importantly, from Apple's perspective, the iTunes store has become a promotional phenomenon in the music business. It can claim credit for the success of a number of groups, such as Rogue Wave and Postal Service, and is now regarded by some as more influential in the music business than MTV. This is why U2 partnered with Apple to launch its How To Dismantle An Atomic Bomb, album. Vertigo, one of the tracks from the album, became the soundtrack for an iPod advert and a special red and black U2-endorsed iPod went on sale.
The iTunes store is not yet providing music video downloads, but there can be little doubt that it will in time. Apple is on the verge of achieving something quite awesome – superseding the Sony Walkman with the iPod and, quite possibly, superseding MTV with iTunes. And, in case you've forgotten, Apple is really a computer company.
Luckily for Apple, success in the music business is breeding success in the computer business. It's what Wall Street is referring to as the halo effect. According to a survey by Morgan Stanley (published in March) iPod users are converting from Windows to the Mac at the remarkable rate of 19% - just under one in five. That's a hell of a halo, given that iPods are selling in the millions. It probably has a great deal to do with the seemingly seamless integration between the iTunes, iMac and iPod, which really is impressive, and it may also be connected with the fact that there is a cheap entry level Mac (the Mac mini), which doesn't cost a whole lot more than a high-end iPod.
In any event, the Apple renaissance, that Apple fans have been praying for for so long, is clearly happening. But will Apple know how to ride the wave this time around?
Posted: 9th June 2005 | By Sean :
Apple iTunes is here at the right time, with the iPod popular and broadband widespread . Its success is largely to do with its relationship with the iPod manufacturer. It's not the first store of its kind - emusic.com has been running since the late nineties and was running when Napster was at its peak. Napster helped create today's digital music market: it demonstrated a demand way beyond what record labels expected. Without Napster showing there were people out there who would download music, record companies would have been much slower in reaching licensing agreements with the likes of iTunes.
Posted: 9th June 2005 | By Don Vito :
I heard quick time is going to have a apple store just like itunes so you can buy music videos and stuff
Posted: 9th June 2005 | By anonymous :
Well, it's one thing to point out the Halo Effect, but I suspect there's gonna be an Obsorne effect as well since Steve Jobs announced the Intel Chip. Will the people today hold off purchasing a mac till the intel version comes out? Apple iTunes and the iPod is gonna be the only thing that's gonna hold Apple above water for the next year andhalf. (besides other softwares)
Posted: 9th June 2005 | By anonymous :
For the record, iTunes is providing music videos in a section of the store aptly named "Music Videos". However, in all fairness, they are not (yet?) intentended to be taken offline: users can only view them through iTunes.
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