Apple StoreA report from Strategy Analytics’ newly launched Digital Media Strategies service, in conjunction with its Wireless Media Strategies service, concludes that EMI’s decision to drop Digital Rights Management (DRM), positions Apple to sell into the rapidly expanding base of converged mobile phone/music player devices, the majority of which support the Apple favored AAC encoding standard.

This report, “EMI Drops DRM with iTunes: Digital Music Market Impact,” notes that while 16% of new mobile phone handsets coming onto the market in the last quarter of 2006 supported Microsoft’s WMA encoding, over 60% supported the AAC encoding standard. Without DRM attached to the music, Apple is able to leverage its industry-leading iTunes Store to sell music to any AAC compatible device.

“Previously, Apple has been perceived as a company that only uses iTunes-like services in order to drive sales of its hardware products,” comments Martin Olausson, Director of the Strategy Analytics Digital Media Strategies (DMS) service, in the press release.

MacDailyNews Take: Perceived by whom? Anyone who perceived Apple in such a way lacked the most basic understanding of the digital media device and online content markets. “Under 3% of the music on the average iPod is purchased from the iTunes store,” Apple CEO Steve Jobs, February 6, 2007. Clearly, Apple’s iTunes Store has not driven iPod sales to date. After people finish ripping their CD libraries and start purchasing content primarily from iTunes Store rather than from physical CD sellers, then the iTunes Store may begin to significantly drive hardware sales.

Olausson continues, “This move by EMI offers Apple the chance to position iTunes into the wider content delivery market, and to sell content not only for its own devices but for all connected devices – both in the online and wireless domains.”

“The combined multi-trillion dollar industries of telecommunications, media and entertainment are making huge bets on the transition to digital content delivery,” adds Phil Taylor, Director of Strategy Analytics Wireless Media Strategies (WMS) service, in the press release. “Any company that can position itself to dominate part of that emerging delivery chain will likely reap the benefits for decades to come.”

Full report (for paid subscribers only) here.

Related articles:
Apple’s DRM-free EMI deal ‘a master stroke that should cement Apple’s dominance’ – April 03, 2007
In Apple’s DRM-free EMI music deal, the big loser may be Microsoft – April 03, 2007
Apple’s DRM-free iTunes play trumps Microsoft’s huge bet on DRM – April 02, 2007
Apple: Higher quality 256 kbps AAC DRM-free music on iTunes Store coming in May – April 02, 2007
Study reports the obvious: most music on iPods not from iTunes Store – September 17, 2006