Like a tidal wave, iTunes is changing the music-buying landscape forever. With Apple now a dominant force, should its competitors give up hope, or focus on delivering services for life after the wave?
With a stunning global slice of the fast-growing digital music download market, iTunes has trail-blazed the path toward legitimate online media services.
It's a mammoth transformation. EMI CEO Alain Levy recently confirmed that his company expects digital sales to account for 25 per cent of all company revenue by 2011, and prevailing industry wisdom says all the labels expect the same.
Apple competitors, particularly Microsoft, hope to dethrone Apple from its dominance of the download market. In Microsoft's case, it hopes to emulate the iPod economy with the (available in beige) Zune music player. But competitors are emulating Apple, they aren't innovating enough, and music is an inherently innovative force.
Peer-to-peer services like Napster were the first wave of change. Their almost instantaneous success showed all concerned that consumers want to be able to get music where, when and how they want. They opened the barriers.
Ever since Napster, the music industry has been playing catch-up. It still is - and probably will do forever now, as music's new digital business plan demands that content be made available in multiple formats for multiple devices - music where, when and how consumers want.
iTunes is the big daddy now- but there's a new breed of competitor lurking right behind it. Unlike Microsoft, these innovative competitors aren't interested in market dominance for the sake of it, they don't want to see iTunes dethroned - iTunes is a gateway to attract consumers to more sophisticated services.
There's a few such services that come to mind. I'd like to know of more, if anyone has any ideas?
With the advent of movie downloads, broadband penetration is clearly at a point when some services can consider selling CD-quality music online. I predict that new operators, like Rough Trade Digital, and existing firms, such as Wippit, will be most likely to deliver such services. Downloads will be more expensive, but these services will attract a loyal base of music fans who want high-quality sound. Musicians will love them as well - many music makers feel frustrated that digital downloads are so compressed - after all, they dedicate their careers to making the best-sounding music they can.
You can also expect services that offer streaming solutions all around the home. These will bypass the PC, instead they will rely on hardware devices that integrate with existing stereo equipment, and will offer users the chance to download music straight to their main music server when they hear a tune online, on the radio, or on request. You can expect firms like Slim Devices to play in this space.
A third growing sector is the provision of music downloads that carry no digital rights management (DRM). These are alreadty available, but as consumers grow more intelligent about download services, they will turn to such services, like eMusic, to fulfil their music needs. Music fans just want the music, and they want to be able to use that music in 20 years time, even if the technology company behind the DRM goes bust.
Services like these will be the third wave of digital music sales. Apple will retain its market advantage, and will be the dominant force for casual music downloads - but its success has grown (and will continue to grow) the online market. iTunes will always be plenty good enough for many users.
But for the most demanding music fan (naturally, they are already iPod users), these third wave services will be where music's at.
It's unlikely that any of these new digital music incarnations will ever achieve Apple's success in music - but as that company has often said over its PC market share, what's wrong with a premium brand that has a loyal (though small) slice of the market?
Third wave companies will be sustainable, will offer services people want, will attract the support of an increasingly enlightened music industry, and will be succesful.
That's assuming Microsoft's PC marketshare and billion-dollar slush fund don't skew the natural development of the music market.