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Old 11-10-2003, 02:26 PM   #1 (permalink)
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itunes = times invention of the year

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When Steve Jobs holds forth in public, it's usually to a mob of fawning Apple-ites—the true believers who still develop software and accessories for Apple products. Not so last month at the Moscone Center in San Francisco. This crowd was more mack daddy than Macworld. Bono, Mick Jagger and Dr. Dre made video appearances. Grateful Dead drummer Mickey Hart was in the audience. Sarah McLachlan sang her latest hits live. What was pulling these musical supernovas into Jobs' magnetic field? A software product that just might save their free-falling industry: the iTunes Music Store.

It's a disarmingly simple concept: sell songs in digital format for less than a buck and let buyers play them whenever and wherever they like—as long as it's on an Apple iPod. Jobs had proved the idea back in April when he launched the Music Store for Mac users, who represent only 3% of the computer world but promptly gobbled up a million tracks in the first week of business. By October he was ready to set the Music Store aloft in the 97% of the world that uses Windows PCs, and the prospect of converting millions of music pirates into credit-card wielding music buyers was enough to make even the most jaded rock stars take notice. How did Jobs do this trick? In a word: simplicity—the transparent ease of use that is the hallmark of Apple's entire product line, including the Music Store. "I'm a complete computer dummy," McLachlan told Time after the event. "If I can use this, anyone can."

And, it seems, just about anyone is. Three days after the Moscone event, PC owners had downloaded a million copies of the software and paid for a million songs (adding to the 14 million music downloads already made by Mac users). In a year when record labels hit a sour note by suing students, grandparents and 12-year-old file sharers, Jobs had effectively brokered a peace agreement: he had shown the music industry how to win friends and make money on the very Internet that was being used to steal their songs.

Other inventions this year may have more altruistic intentions (like Dean Kamen's water purifier) or be more visible on street corners (like those ubiquitous camera cell phones). But for finally finding a middle ground between the foot-dragging record labels and the free-for-all digital pirates and for creating a bandwagon onto which its competitors immediately jumped, Apple's iTunes Music Store is Time's Coolest Invention of 2003.

Long before the Music Store came on the scene, frantic record-industry executives had been searching for some way to combat their nemesis: Napster, the original file-sharing service, but to no avail. Their first online ventures, MusicNet and PressPlay, were disasters, largely because the labels didn't trust their users—or one another. High subscription fees and poor selections turned off would-be customers; most skulked off to the underground services, such as Kazaa and Limewire, which had sprung up after Napster's demise.

Enter Jobs. Back in April, Apple's ceo revealed that he had spent the previous year negotiating an unprecedented deal with all five major labels and thousands of independents. His iTunes software, which had previously been nothing more than a place to store and play digital music on a Mac, would become a gateway to the Music Store, where you could easily find and save music to your hard drive, CD or iPod music player—no subscription necessary, just 99¢ per song, or $9.99 for an album. Competitors tried to match that price but couldn't come up with a service as free of restrictions. They said Jobs had been given a sweet deal by the labels because Apple, with its miniscule share of the computer market, was never going to be a real distribution threat. "The Mac world is a walled garden," said BuyMusic.com vice president Liz Brooks. "The PC environment is like the Wild West."

Then came iTunes for Windows, and suddenly there was a new sheriff in town. Not content with creating a music store for PC users that was a perfect clone of its Mac counterpart, including all of the 400,000 songs Apple now has the rights to resell, Jobs added a couple of cool new features, the best of which was a monthly allowance you can set up for your kids to govern their online purchases—a godsend for any parent trying to curb an offspring's downloading habit.

Jobs has one more reason not to be concerned about the competition. "The dirty little secret of all this is there's no way to make money on these stores," he says. For every 99¢ Apple gets from your credit card, 65¢ goes straight to the music label. Another quarter or so gets eaten up by distribution costs. At most, Jobs is left with a dime per track, so even $500 million in annual sales would add up to a paltry $50 million profit. Why even bother? "Because we're selling iPods," Jobs says, grinning.

That may make iTunes the most benign-looking Trojan Horse in software history. The Windows crowd can get iTunes free, and it offers almost all the same functionality as the paid versions of MusicMatch and Real One, two PC-based rivals. But iTunes is the only music application that will work with the enormously popular iPod, and it has features—like its powerful search function—that are unrivaled. "Once people are locked into using iTunes, the game's over," says Charles Wolf, an analyst at the New York CityÐ based Needham & Co. investment bank. "They could sell an extra 2 million iPods because of this." And the margins on these devices make the Music Store's arithmetic look like child's play. Each $499 iPod returns as much as $175 in profit, Wolf says.

Such calculation may also explain why iTunes doesn't support Windows Media Audio files—a Microsoft format that Bill Gates had hoped would become the music-industry standard. If iTunes becomes the player of choice for PC users, it would be a blow for Microsoft's grander audio ambitions—and may well unearth the hatchet that Jobs and Gates buried back in 1997.

For now, Jobs faces some smaller hurdles, like filling in a few significant gaps in the iTunes Music Store selection (the Beatles are the most glaring omission). Even so, Jobs continues to score points with consumers for making available songs so easy to find and so easy to download. The music industry, of course, is anything but simple. That's probably why Jobs, an inveterate challenge seeker, likes it. But can it grow his business? Stay tuned.

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Sure is some pretty good publicity for apple. Time almost portrays apple's success in the marketplace as a forgone conclusion. It is also interesting that Apple is using itunes to leverage sales of ipods so they can make real profit. I think I remember reading about Microsoft using a similar strategy with the xbox... Don't know if that was actually true though.
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Old 11-10-2003, 03:39 PM   #2 (permalink)
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Location: Auckland
its terrible, not worth it at all, the camera phone had a way bigger impact and i think should be no1.

as they say "Jobs had effectively brokered a peace agreement", well there should never have been one.

The RIAA is old, out of date and new systems are in the works to relpace it which are better for everybody. All this "peace" will do is delay this inevitable improvement to the world of music.

Also microsoft, as well as sony, and nintento are all selling their gaming machines at a loss at make profit on the games, its how it works.
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Old 11-10-2003, 03:54 PM   #3 (permalink)
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Location: shittown, CA
well it IS Times. And camera phones were not "invented" this year, but neither was iTunes....so yeah, it's Times being dumb again.
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Old 11-10-2003, 04:58 PM   #4 (permalink)
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I like AAC...just wish I could find an editor.
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Old 11-11-2003, 02:40 AM   #5 (permalink)
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Location: Sarasota
Quote:
Originally posted by juanvaldes
but neither was iTunes
In fairness, they're talking about the iTMS which was "invented" this year, not iTunes.

But I agree it's kind of dumb. I'm as big an Apple fanboi as they come and I like and use the iTMS, but this is embarrassing.
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Old 11-11-2003, 06:53 AM   #6 (permalink)
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Location: Perth, Australia
Well, it is a damn good idea. I mean, someone finally made a good use of legal MP3 files =). Camera phones have been around for years. I played with one when I was 8 years old =D. The iTMS has been turning a huge profit. It outsold Napster in it's opening week 5 to 1, and the blatant ripoff that was buymusic.com has died away.

But yeah, it is kinda unexpected. I wouldn't be too suprised if there was some...outside...government...influence...


***/me goes and checks the paranoia forum
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Old 11-11-2003, 01:28 PM   #7 (permalink)
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Location: Auckland
it only sold well because it got advertising

and it only got advertising because the RIAA got all the money. Apple doesnt make anything, its just a toy for the RIAA to make money when it shouldnt. Apple has become a play thing of the RIAA and is seeing next to no gains.

It made money on apples because they had no real alternative. and when it went Windows, it had the full backing of the RIAA with all the good press of success on the Apple. The acc system is not as good as many others, and the ipod is an overpriced player, ie heaps of profit on each one as stated above.

This means that if you get an ipod and get a few songs, you are subsidising the people who get thousands of songs.

Im sure there is something in here about the whole apple vs beatles thing in here, i can smell it.
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Old 11-11-2003, 03:48 PM   #8 (permalink)
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Location: Sarasota
It's no secret that the iTMS exists to sell iPods. Apple doesn't expect to make much, if any, profit off the music store.

But I disagree that Apple is in the RIAA's pocket. Apple is in business to make money for their shareholders as is any public company and that's what they're doing.

Personally, I like my iPod and I like the iTMS. I've spent maybe $70 there and my wife maybe another $20 since it went online last spring. That's as much as we spent on CD's last year and we haven't bought any CD's this year. It's an instant gratification thing for me. The quality is good enough for me, the selection works for me, the price is right for me, so I use it. I fully respect anyone who doesn't want to use it but will maintain my own attitude about it.
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Old 11-11-2003, 10:21 PM   #9 (permalink)
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Location: Lubbock Texas
i had it installed for about 2 days, i didnt like it much...
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