Apple's currently US-only iTunes Music Service is an important element of the music industry's fight against piracy, marking a sea-change in its approach to the Internet.
The service offers 200,000 tracks at 99 cents per track. It sold four tracks per second in the first 18 hours of its existence. Apple has received wide public support from media across the world for its service, with many describing it as a turning point for online music distribution.
The iTunes Music Store has a host of advantages to help Apple in its attempt to popularize the service at the expense of illegal file-sharing networks, such as KaZaA.
Discussing the widespread use of illegal file-sharing networks, analyst Phil Leigh told Macworld: "Typically there are about five or six million people using peer-to-peer file sharing networks on any given day."
About three billion files are traded each month, posing a massive challenge to the music industry in its attempt to market fee-based services.
Just give me the music
Leigh believes public tastes are changing. "People still use the networks but the grin is gone," he said. "They just want the music. Our research indicates that peer-to-peer users have little patience for the increasingly annoying experience they get on KaZaA. The experience has degraded substantially owing to an abundance of pop-up ads, spyware, decoy files, unpredictable reliability, software crashes and viruses."
KPMG media analyst Calum Chace told Macworld: "Apple is competing against free services, which is never going to be easy. Its approach to developing its service has helped the music industry find a way to harness the Internet. I think Apple is helping take the music industry further."
Hilary Rosen, CEO of The Recording Industry Association of America (RIAA), has said Apple's service "has the potential of doing for online music distribution what Sony's Walkman did for tape".
Apple's product-line marketing manager for music distribution and software Chris Bell told MacCentral: "Market research shows that people who have tried the file-sharing or subscription services are willing to pay for something that's of high-quality and greater reliability.
"We believe, as do our partners at the five major record labels, that if we have a compelling enough product that people are going to gravitate towards it."
Pirates hit by pester-power
The music business is also exercising a strategy of making the illegal services harder to use, says Leigh: "The RIAA has developed software robots that can identify users who are sharing files of copyrighted content. When the bots detect copyright infringing activity, they will send an Instant Message to the computer providing the upload. This will tell users they are transferring copyrighted material without permission and therefore breaking the law.
"The RIAA will send 1-2 million such messages each week. Not only will these be annoying, but they will make those who receive them aware their activity is not as clandestine as they thought. Individual file traders are identified. This may be frightening enough to encourage them to curtail or cease the practice."
This follows two landmark US court rulings in the majors' battle with the pirates last week. In one, the court ruled that ISPs should hand over the names of customers illegally downloading files. In the second, the courts declared that file-trading companies could not be held responsible for illegal trading taking place across their networks – that the majors must take the battle to the end user.
Unconfirmed reports claim the labels have flooded the networks with decoy files that transfer very slowly. An example of such a strategy is when Madonna flooded the networks with a message which posed as one of the star's songs, asking downloaders: "What the f*** do you think you are doing?" Her site was later hacked, with the culprit leaving the following message on her home page: "This is what the f*** I think I'm doing."
Apple's legal service offers an elegant, hassle-free alternative. Leigh said: "If legitimate services come to market that provide a deep catalogue at reasonable prices, and with liberal rules for transferring content to portable players or burning to CD, we believe many current peer to peer users will use them to avoid the annoyances that characterize the illegal networks.
"We believe Apple's recently-launched service provides a legitimate alternative to the peer-to-peer networks that might compete effectively."
Apple - a 'perfect fit'
But there's no room for complacency, says Leigh: "Over time, it will be hard for Apple to hold a monopoly on such licensing terms, and that means more of the existing legitimate services may well be able to compete effectively."
Chace sees another possibility to help Apple popularize its service at the expense of the pirates: "I see the price per track falling over time."
Jupiter Media analyst Mark Mulligan told Macworld: "Music fans want a one-stop-shop for online music content. They do not want to have to shop around from label to label. In principle Apple's service is a perfect fit: using proven consumer expertise and product design to develop a service where the focus is on providing a compelling consumer proposition."
Along with its strategy to make illegal services cumbersome to use, the music industry has other arrows in its quiver, said Chace: "I see opportunities for cross-promotions, which the pirates can't match. Gig tickets, merchandise and other memorabilia can be offered as an inducement to encourage users to utilize legal outlets," he said.
Music business open to online
The exercise should help drive the development of a new approach to digital content marketing, says Chace: "We'll need more research into paid and free services. The music industry has come late to this, but Apple is an excellent testing ground."
Macworld sources have confirmed Apple's intentions to launch a European service, but what hurdles will the company face negotiating with the music labels on a local basis?
Chace said: "Music is a global business, but the US is the biggest single market."
A music industry source observed: "Most of the majors are ruled from the US. Now Apple has a service running in the US with help from the majors there, I don't anticipate that it will face huge problems extending the service. It will have to talk with certain key music people."
Let's work together
He added: "The majors are impressed by Apple's new service. In the business it's being seen as a major step forward."
EMI last week shocked industry watchers when it announced its plans to make 140,000 of its tracks available online through a network of online vendors.
The industry now understands that it needs to find tech-savvy partners to work with to harness the Internet as a digital distribution tool.
"We have the rights. We have the music. We need the real experts to come and make a distribution system that works."