Apple's iPod and iTunes Music Store take space in today's spotlight, as analysts and commentators consider its next move.
Business Week's Alex Salkever thinks Apple could turn a tidy profit by spinning its digital music offerings out as a standalone business in an IPO (initial public offering), though such a move would perhaps reduce the efficiency of Apple's "whole widget approach" to technology and services.
Speaking last week, Apple CEO Steve Jobs said: "Apple is the only company in the world to be able to offer the best media player, iTunes; the market-leading digital music device, iPod; and the world's leading online music store, iTunes Music Store".
He added: "That's three best-of-breed devices working together – that's pretty good, and no one else in the world has this."
Meanwhile a Reuters report considers how Apple can solve a new problem: "How to remain the market favourite, not just the favourite underdog."
This report considers Microsoft's renewed push to ensure its own format (Windows Media) drives the new-born industry and its effect on Apple's industry lead. Sony's new digital music initiatives must also be considered.
Inside Digital Media analyst Phil Leigh warns Reuters: "The ultimate risk is that Apple gets marginalized, just like it did in the PC area."
Sony Connect spokesman Mack Araki told the Associated Press: "Apple did an excellent job in cultivating this new market. We believe we can expand the market to a much broader audience with a broader line of devices and an easy-to-use service."
Jobs is well-known to believe subscription based services will fail – mainly because content providers will not be happy to see all the music they have available made available to consumers for the price of one single CD. This would destroy the livelihoods of content creators and copyright owners, the argument implies.
Speaking last week, he said: "Here's the deal. Microsoft does not own the content, and the content owners do not think it's such a good idea. They do not want to license their content through a subscription model where it can be carried on portable players for maybe ten dollars a month. We speak to these people, and that's what they tell us."
"You can invent all the technology in the world, but it's no good if people don't use it," he said.
Despite the coming clash, today's Apple is a "force to be reckoned with" says Business Week. Industry pundits say the company now needs to maintain its innovation while protecting its market share – Apple's low-price iPod mini costs $249, while Sony offers Connect-compatible devices starting at just $69.
NPD Group analyst Ted Baker told Reuters: "How many people need $400 music players?" Baker believes Apple will have to consider iPod prices "before much longer" – though as it can sell almost every iPod it makes today, it would be "ridiculous" to reduce prices now.
Creative Strategies analyst TIm Bajarin thinks Apple will need to meet the increasing competition in the market on price within the next 12 months.
"I would argue that in the next 12 months, with increased competition, that will change,"
Salkever thinks Apple should quit while it's ahead: "For Apple, the best move right now is to spin out iPod and pocket the cash, because Wall Street's current euphoria marks the market's peak. Although Apple would be loath to admit it, digital music players are on the verge of commoditization," he writes.
He believes Apple's market dominance to be under threat, warning "Apple's own apparent assumption of this continued dominance appears more arrogant"
He predicts the debut of music software offering as much as iTunes, intensifying competition even further. If Apple spins out its digital music offerings now it could expect at least a billion dollars through the sale of a 40 per cent stake, he speculates.
"Then, Jobs could let someone else run the daily operations and the music side of things, including the store".
"Competing in the broader market is what Apple clearly intends to do with the iPod and digital music in general. But reaping a couple of billion dollars in the process would certainly help Apple return to what should be its focus: figuring out how to move beyond Macs to make killer consumer products that are relevant in a Windows-based world", Salkever concludes.
Jobs is optimistic, telling analysts last week that his company feels it has "a lot of momentum".
Jobs is also working with labels to convince them to digitize their back catalogue content, he said: "What is really, really exciting for us", Jobs explained, "is to get the labels to digitize this material and make it available for sale online".