iWant my iMusic

March 4, 2003

Labels Think Apple Has Perfect Pitch

Top executives at the major record companies have finally found an online music service that makes them excited about the digital future — but it's only for Macs.

The new service was developed by Apple Computer Inc., sources said Monday, and offers users of Macintoshes and iPod portable music players many of the same capabilities that already are available from services previously endorsed by the labels. But the Apple offering won over music executives because it makes buying and downloading music as simple and non-technical as buying a book from Amazon.com.

A transparent way to browse and buy new music directly through iTunes? Excuse me while I wipe the drool off myself. This concept sounds perfect. A service that lets users browse and buy music transparently through their existing music library manager is the first digital music service that would be convenient and useful. An elegant and transparent interface is unprecedented in the digital music world.

However, the LA Times reports that Apple plans to sell AAC files with DRM, rather than open MP3. iTunes/iPod users would probably notice no difference, until they try to introduce a friend to the new music they just bought. Smaller, less known artists would be helped by a system that has some sort of "hey, listen to this" capability that connects word of mouth with a quick listen, which probably leads to more impulse buying.

This article mentions nothing about pricing, but I wonder how Apple expects to price songs. I would predict that demand for songs in this sort of system is highly elastic, depending on price. Price songs too high, and users become hestitant to buy, as they need to take time deciding whether or not this song is really worth buying. That is the major problem with MusicNet and Pressplay, since those services limit how much users can download per month. Of course, the price of the service needs to at least pay for the rights. I would expect Apple to subsidize the service somewhat, as it is a way to get people buying Macs and iPods. But this service could be very flexible with pricing. One way to achieve flexible pricing in through volume discounts: when a user downloads a certain number of songs in a time period, the next number of songs are cheaper. (e.g. first ten songs are $0.49 each, the next 20 are $0.25 each, the next 20 are $0.20 each, and after that $0.10 each.) Another way could be to bundle albums together at a lower price than buying songs individually.

I know I'll be trying this service out whenever Apple makes it available. I just wonder if I will continue to drop money into it, or keep buying CD's at Amazon and Tower. What would be wonderful if there was a way for third parties to hook in free music, like Etree or indie bands who want the exposure, into such a system.

Posted by Andrew Raff at March 4, 2003 11:54 AM
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