BusinessWeek: Virgin Digital ‘a digital-music challenger to be feared’ by Apple

“iPod and iTunes are digital music’s top act, but the hip Richard Branson’s marketing muscle makes him a challenger to be feared,” Alex Salkever writes for BusinessWeek. “The honeymoon was nice while it lasted — Apple’s digital-music honeymoon, that is. On May 8, Brit billionaire Richard Branson jumped into the game with an announcement that his Virgin constellation of airlines, cell-phone networks, and media stores would soon add a digital-music business to the portfolio.”

[MacDailyNews note: we believe Salkever meant March 8th, not May 8th above – unless he’s got his time machine working again.]

“I don’t know the particulars of the reaction at Apple headquarters in Cupertino, Calif. But if I were Steve Jobs, I wouldn’t take this threat lightly. Virgin is the first potential challenger with branding moxie that can match even Apple’s. The group, which posted revenues of $7 billion in 2003, also has far better natural distribution channels for digital music than Apple. The upshot? Steve, get ready to face the A-team,” Salkever writes.

[MacDailyNews note: Salkever is the same writer who described Apple’s iPod mini thusly, “Far less capacity in a slightly smaller device for nearly the same cost? Sorry, Steve, this tune is off-key.” Apple racked up 100,000 pre-orders and iPod mini is currently sold out in many locations worldwide.]

Salkever continues, “Branson, chairman of the British conglomerate, is a master marketer. He has brought hip and fun to stodgy fields such as airlines (preflight massage, anyone?) and mobile-phone service (who else offers personalized daily predictions from cartoon character Sponge Bob Squarepants?). True, he flopped with the introduction of a soft drink, Virgin Cola. But overall, Branson and his irreverent marketers have had a golden touch, particularly when it comes to reaching younger demographics.”

“…Virgin Digital will use Microsoft’s WMA music standard and has no plans to build Apple-compatible software. In other words, Apple users are out of luck. Plus, Virgin Digital will allow customers to rip purchased songs into the popular MP3 format without any accompanying digital-rights management limitations,” Salkever writes. “Jobs & Co. should take note and start looking for new distribution partners to prepare for battle with one of the few companies that can rival them on the hipness scale. It’s time for Apple to start dancing a little faster if it wants to hang on to its crown as the king of digital music.”

Full article here.

MacDailyNews Take: Microsoft’s WMA is not a “standard.” The closest we have to a “standard” in legit online music downloads is the market-dominating format: AAC/Fairplay from Apple’s iTunes Music Store. “Apple users are out of luck?” First of all, we use Macs, not a company called Apple. If Salkever means Mac users are out of luck, we guess we’re just going to have to be content with the best music player, iPod and/or iPod mini, and the best online music store, iTunes Music Store. Mac users will survive on those bits of luck just fine, thanks.

Related MacDailyNews articles:
Virgin to launch jukebox software, online music store by August – March 08, 2004
Virgin Digital President predicts Apple iTunes Music Store demise – March 08, 2004

51 Comments

  1. No offense, but Virgin as a brand in the US is not widely recognized – certainly not like Apple. Maybe in the UK or somewhere, but not in the good ol’ US of A. Sorry, Richard.

  2. Pardon me if I’m not mistaken, but I think I’m not the only one who is tired of the consistent MDN response to every article about the iTMS and its alternatives is “iTMS/iPod are the market leaders, and are the best, and therefore are unstoppable.” Again, Mac users are guilty of being overly biased. Let’s analyze this situation, because it does actually seem to be the most dangerous.

    Sure iTMS is currently the market leader by a long-shot, but remember that just because one is the market leader now doesn’t mean that it always will be. Case in point, remember that Apple commands a single-digit market share, despite having what we all consider to be a superior operating system and what was once a commanding lead in sales.

    Virgin is a corporation with close ties to the music industry, and thus more likely than Apple to benefit from any new developments. The article claims that people will be able to rip the DRM-laced format into MP3, an advantage many, I’m sure, will take advantage of (I would myself). Also, while Virgin may not seem like the company here that iit is in the UK, it still does have a huge amount of money running behind it, and it does have a large number of Virgin stores, cell phones, and airplanes that provide a huge amount of advertising for the company.

    In the meantime, just because iTMS is the leader right now doesn’t mean it’s the best and that it is flawless. Although you disrepute the idea that AAC is a “closed format”, do recall that it is ONLY playable on the iPod (and maybe a small selection of other devices, but I do not have the details about these). Every other music store works with every other device. Despite Microsoft DRM being theoretically “closed” as well, it is open for use by other groups.

    So the catch; If Apple doesn’t shape up, it will bite them in the end. iPod sales cannot continue forever, and people will get past the fad. Then what happens is Apple being a closed system with no support for rising alternatives. (Historical example: Apple has a single-digit market share of the PC market). So as awesome as my iPod is, and even though I have purchased more than 150 songs from iTMS, I’m hoping that sooner or later they begin to realize that market control doesn’t last forever…

  3. How do we know for sure it will allow MP3 downloads with no DRM? What will the software be like? If the user experience stinks no one will be buying from Virgin. That’s the real key to the iTunes Music Store, GREAT SOFTWARE! It’s easy and fun to use and the iPod compliments this. So unless Virgin can build great software to extend the user experience, it will fail just like Napster and BuyMusic.

  4. iTunes, iTMS and iPod are outstanding computer hardware and software products, made by one of the sharpest and most innovative outfits in the business. Isn’t it just a little bit presumptous for a company known for “marketing”, not engineering, to think it’s just going to sweep in and make something as good? I mean, hey, more power to you, but how about a little humility?

    Also, Salkever reports that the Virgin service will allow you to re-rip files as unprotected mp3s. Why and how are the record companies going to allow this? If they do, it will have to involve some reduction in quality.

  5. There’s a big difference–Virgin has to make its money selling tracks/subscriptions. Apple doesn’t; ideally it would, but Apple is not going to mind as long as the music store at least pays for itself. Why?

    Let’s assume Apple makes $50 per iPod mini as a conservative number–there usual margin would be more.

    100,000 iPod minis means $5,000,000 in pocket.

    Let’s assume Virgin can make 10 cents per songs, which is a stretch–so far nobody has made money selling downloads.

    Virgin would have to sell 50 million songs to equal the profits Apple made in the first *weekend* selling minis.

    Ouch.

  6. Let me see…

    I can have an iPod mini and all my music, anytime, anyplace.

    or

    I can have my music anytime, any place on any device. Are they expecting me to purchase all kinds of different devices and their associated subscription fees? Will that 99 cent song I bought be FREELY available on all these devices.

  7. I love what’s happening, all these johnny come lately’s are going to be fighting amongst themselves using WMA and not making a profit.

    While Apple will sit pretty, knowing that they all will fail.

    Cure Disease for Stanford University

  8. Russell – “The article claims that people will be able to rip the DRM-laced format into MP3, an advantage many, I’m sure, will take advantage of (I would myself). “

    Since when couldn’t you do this on iTunes? You can burn a CD with a song purchased at ITMS and then rip it as an MP3. You could ALWAYS do this.

    ” Plus, Virgin Digital will allow customers to rip purchased songs into the popular MP3 format without any accompanying digital-rights management limitations,” Salkever writes.

    He doesn’t go into detail here but usually ripping means taking a song off a CD which is what iTunes CAN ALREADY DO. Take an ITMS song in protected AAC, burn it to a CD, then rip it in MP3 format. I know because I have done it. The only disadvantages are that AAC and MP3 are both “lossy” formats and it is a pain to have to burn a CD and then rip it again. I seriously doubt that Virgin is going to allow direct conversion to MP3 (note: converting not ripping) and if this is the case then it will have no advantage over the Apple solution.

  9. Jack: you beat me on the same issues. It looks out there there are many idiots talking ’bout iTMS, iPod, and Macs and the closest they have been to these products are on magazines ads,

    Fact is pundits – and Russell apparently – must have never seen a Mac or iTMS or an iPod in action. Russell et al. might be tired to hear the *biased* comments of USERS of these products bragging about their superiority.

    I tell you what: WE, the users, are tired of FUD-tellers discussing about all the thing that WE with our products are supposedly not able to do – when we do those same things and MORE all the time and repeatedly with great ease.

    All combined music stores and players – ALL COMBINED – do a SUBSET of what is possible to do with iTMS and even more with an added iPod. Only thing lacking is playing WMS format. Know what: we do not want nor need to do that, thank you.

    The only one time where you are constrained to use AAC with DRM is at the act of buying the track. Done that you can do wathewer you want and in most formats with that track: freedom of use? IDIOTS, we have by the TONS!

    All comments by FUDDERS are about *limitation of iTMS and iPod* – and the Mac and its OS: they can’t be that idiots, can they?! Hence they do it on purpose and at one time it starts to be seriously annoying and strike a chord. Then people wander why Mac users become verbally aggressive…

  10. Russell – “The article claims that people will be able to rip the DRM-laced format into MP3, an advantage many, I’m sure, will take advantage of (I would myself).”

    The article talks to morons who have never seen a Mac or know first hand about anything Apple. The others simply say: “what a MORON”

  11. I said that in another thread, I’ll repeat it here: my iTMS tracks play on multiple iPods, in my hi-fi chain, in my and relative cars on their CD players and even on colleagues PCs while they – honest! – are waiting for their first Powerbook (I had to take advantage of it, hadn’t I?)

    Do that with ANY other products out there and using WMA without being flooded with idiotic pop-up windows from Micros**t asking you for more money!

  12. So Russell, in actual fact a song purchased at ITMS is not ONLY playable on an ipod. You can play it on up to three computers (Mac or Windows I believe) and burn it as many times as you like as long as you do a small change to the play list every ten burns in either MP3 or Audio CD format. After that you could rip it off the CD you have burned and share it to your hearts content with ANYONE as an MP3. Apple ITMS and iTunes (and iPod) are the undisputed “Best of Category” as WELL as being the market leaders. Apples DRM is the least restrictive out there and I doubt very much that Virgin is going to top it.

    The only advantage really that Virgin has is that they are old hands in the Music business while Apple is a relatively new player. They have more Bricks (buildings) that have traditionally have been used to distribute music. How they could leverage this to sell more online is not very apparent however. (buy a tune on line and get a discount on a real CD at a store maybe?) Pretty much Virgins only chance to seriously challenge Apple would be to come up with an iPod killer and pretty much everyone in the consumer electronics business would like to do this but NO ONE has come even CLOSE yet. And the companies that are trying and failing to develop an iPod killer are dedicated specialists in this field while Virgin is not.

    Good luck Virgin. You’re gonna need it.

    The only thing I would like to see Apple do at some point (not necessarily right now) would be to license out Fairplay DRM to lock in AAC/Fairplay as the de facto standard in digital music. The timing on this will be key, they don’t want to waste their wave of profit from having the best right now but should not let the wave subside too much before opening it up and locking it in. This will really deal a blow to M$ because they are counting on WMA as a key element in their Digital Media Center strategy.

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