Apple launched its then US-only iTunes Music Store two years ago today, on April 28, 2003.
The burgeoning online music industry arguably owes a debt to Apple's success in convincing the music industry to embrace new technology and digital download services.
Marking the second anniversary, Apple is widely-expected to open its online store in several new territories today. These are rumoured to include: Australia, Switzerland, Denmark, Sweden and Norway.
Online music sales are booming. Apple recently announced itself to have sold over 300 million songs online since the service's debut two years ago. The company had achieved 70 million sales as of April 28, 2004 - so sales are soaring.
Launching the service two years ago, Apple CEO Steve Jobs said: "Consumers don’t want to be treated like criminals and artists don't want their valuable work stolen. The iTunes Music Store offers a groundbreaking solution for both.”
Plot against the pirates
When Apple launched the service, music-hungry consumers customarily turned to unlawful peer-to-peer services to source songs:
The music business had made several lackluster attempts to deliver its own services, but these had largely failed.
On launch, the service offered a catalogue of 200,000 songs. Today the company claims the service to offer a deep and growing catalogue of over one million tracks, though local music fans and independent music labels complain that Apple doesn't yet invest sufficient effort making local and indie repertoire available.
Despite that, most analysts agree that Apple now commands approximately 70 per cent of the world's online music market.
Speaking on April 28 2004, Jobs said: "“iTunes has exceeded our wildest expectations during its first year, charting a new direction for the music industry."
For Windows and Mac
One critical element to success was Apple's decision to extend the service beyond the Mac.
On October 16 2003, Apple launched iTunes for Windows, introducing software Jobs often describes as "the best Windows software ever written".
Over one million copies of the software were downloaded within three and a half days. And sales saw a boost, too.
Jobs said: “iTunes users have purchased over one million songs in the first three and a half days since our launch last Thursday, which compares with one million songs in the first seven days when we introduced the original iTunes for Mac users last April."
UK service launch
Scant weeks later on June 15 Jobs visited London to speak at a special event commemorating the launch of iTunes in the UK, France and Germany.
Industry-watchers present at that event commented that Jobs seemed somewhat under-par. It later transpired that the Apple co-founder was then suffering from a rare form of pancreatic cancer which led to life-saving surgery. Jobs has now recovered.
Despite his illness, Jobs was clear about one thing. Apple isn't competing with other music services - it's competing with illegal file sharers. Illegal file sharing traffic accounts for many more songs than all legal services combined.
Jobs said: "Let's understand piracy first: I found you get really unreliable downloads. You have to try several times to get the song, and then you get it and find it was encoded by a ten year old with four seconds is missing at the end. You don't get to listen first, you don't get artwork, and it's stealing. We offer fast, reliable downloads from our vast server farms – we are very very good at this. It's not stealing, it's good Karma."
"This is how we have competed with piracy – we are offering a far better service," he explained.
iTunes sales curve steepens
On June 23, Apple announced that the three European stores had sold 800,000 songs in one week - 450,000 of these in the UK.
“In the UK alone, iTunes sold more than 450,000 songs in the last week - 16 times as many as OD2, its closest competitor," said Jobs.
Spurred by European enthusiasm, Apple later revealed the service to have sold over 100 million songs by July 12, 2004. The 100 millionth track was purchased by Kevin Britten, age 20, of Hays, Kansas on Sunday, July 11 and was “Somersault (Dangermouse remix)” by Zero 7.
Britten got a little more than he bargained for - Apple awarded the music lover with a 17-inch PowerBook, a 40GB iPod, and a gift certificate for 10,000 iTunes songs.
Jobs said: “As we cross this historic milestone, we want to thank our customers, the artists and the music labels who have embraced our dream for iTunes.
“iTunes quickly outpaced the competition and is far and away the world’s number one online music service.”
Live from London
In recognition of the buoyant UK music market, Apple recently launched a new iTunes initiative, called 'Live from London'. This monthly event intends hosting a live set from a band inside the company's London Apple retail store.
Live from London's debut performance came from Welsh band, Sterophonics. Five live tracks form that set are available now.
In October, Apple extended its service to shoppers in Austria, Belgium, Finland, Greece, Italy, Luxembourg, Netherlands, Portugal and Spain. Apple later launched iTunes Music Store in Canada in December 2004.
“We’re excited to bring the iTunes Music Store to even more music fans across Europe, and with this expansion we now reach customers in almost 70 percent of the global music market,” said Eddy Cue, Apple’s vice president of Applications.
U2 in iTunes tie-in
Apple also began engaging in new relationships with musicians to promote its store, its market-leading iPod and the musician's music itself. The move began with a high-profile campaign featuring Ireland's U2.
Apple featured the band in its marketing and advertising. Apple also released the special limited-edition U2 iPod and introduced a digital boxed set containing every track ever made by the band.
U2 lead singer Bono said: “With iPod and iTunes, Apple has created a crossroads of art, commerce and technology which feels good for both musicians and fans.”
“iPod and iTunes look like the future to me and it’s good for everybody involved in music,” said U2 guitarist, The Edge.
Music fans agreed. On December 16 - as iPods flew of shelves worldwide - Apple revealed itself to have sold over 200 million songs through its service. U2 were smiling too - the 200 millionth track was part of the 'Complete U2' digital boxed set, Apple claimed.
Driven by record iPod sales and consumer acceptance of Apple's service, the pace of digital sales continued to climb, with 250 million songs sold by January 24, 2004.
"When we launched the iTunes Music Store we were hoping to sell a million songs in the first six months - now we’re selling over a million songs every day - we’ve sold over a quarter billion songs in total," an exultant Jobs explained.
Thirty-three days later and sales had climbed another 20 per cent; Apple shifted approximately a million-and-a-half songs a day to reach 300 million sales by March 2, 2005.
If sales continue at that rate, Apple may today reveal it has sold 375 million songs since the service launched.
The dangers of success
However, Apple's success in digital music has its price.
As the company emerges as a clear market leader, global anti-trust and monopoly regulators expect the company to unilaterally set high standards and respect the laws - or they will be forced to act. Apple currently faces a pricing investigation by European regulators, for example.
Apple also faces stiff competition from a variety of different operators, principally, RealNetworks, Napster, Sony and multiple Windows-backed music services. But continues to lead the pack.
While the service arguably contributes little to Apple's bottom line because music labels insist on collecting a major percentage of the company's revenues per sale, iTunes is generating interest in Apple, its products - including the Mac mini and iPod.
Speaking in London last year, Jobs tried to explain why Apple does what it does: "One of the reasons we are doing this is because we love music too. It all comes down to artists - it's about the music. We love having exclusive content; we love working with the artists," he said.
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