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. I see MDN is rattled by Salkevers comments it had to have its little swipe about iPod mini. Get real MDN, the digital high-street will be no different than the physical one – this is not the same as the OS wars. Music will come in many shapes and sizes and you can expect more than one big player. Sony, Virgin and others will no doubt share the pie with Apple before long.

  2. “Zalon envisions….” reads the article…. So, this bloke is sprooking (sp?) on a service which that isn’t coming to market for a least 6 months, with sketchy details on how it will work, how users will convert WMA format…. I could go on….

    Time will tell I guess.

  3. Guys, Branson isn’t some big-mouth like Blum or Gorog. He actually is very good at marketing things. He’s a bit like the Jobs of the UK (although I wouldn’t say he’s got much in the vision department). The guy has his own modest RDF, and it should be expected that the media hang on his every word for a while. I also wouldn’t count him out for competition, at least in the UK.

    As for this “WMA works on everything” crap, if MS do ever manage to get WMA pushed through as the dominant standard, then Branson will be asking how far to bend over when Billyboy needs a power surge. I’m amazed at all these companies desperate to be shafted by MS in the future by locking themselves into M$’ format. They all know how M$ does business but they still make the same mistakes!
    I suppose at the moment they’re all just hoping that a) someone creates an iPod killer SOON or b) that Apple supports WMA SOON. Sure, the iPod won’t be on top forever, but all these guys need something real SOON, or they’re gonna be out of business. Meanwhile, Apple just needs to keep an eye on the market and adapt to any shifts. This isn’t the complacent Apple of old that squanders ten year leads and hands over the family silver to arse-holes.

  4. > “Apple racked up 100,000 pre-orders and iPod mini is currently sold out in many locations worldwide.”

    This is no surprise, as Apple hasn’t started to sell them anywhere outside the U.S.

  5. Russell,

    When all of these people have iPods, and the iPods only work with iTMS, why would they be using the incompatible Virgin (or any other) service?

    Enlighten me, please.

  6. Most of the Virgin Mega Stores have big iPod POS displays, so it will be interesting to see if they’re going to stop stocking them when they launch their own service.

    Hopefully Apple can at least get a UK iTMS in place before Branson launches his

  7. Russell,

    Please tell me where MDN stated, “iTMS/iPod are the market leaders, and are the best, and therefore are unstoppable,” in their comments. One of us can’t read the English language.

  8. I just don’t understand people call WMA a standard… A standard made by Microsoft? Who is stupid enough to think Microsoft is developping standard? I tought people were smarter. But in fact they’re dummer… Hi five with my mac!

  9. “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). “

    funny thing is if you re-rip wma as an mp3, then it is compatible with an ipod.

  10. Virgin does LOTS of things, has LOTS of UK recognition and — tho’ Salkever has all the WRONG reasons — is a force to be feared.

    Sure Branson goofs, but when he succeeds, he’s one heck of a market force. Here’s some of what my beloved Mac and iTunes and Apple have to worry about: Airlines and trains and bored passengers, his own branded radio stations, and Virgin already makes/markets their own MP3/WMA players, cell phones, etc. Target sells their phones! Sure some of this may be currently restricted to the UK, but take a look at Virgin’s web-site for a small idea of their corporate reach. I agree with Russell. Wouldn’t take much for Virgin to make a purchase of a tune a card-swipe away on the video stuff already in place on their highly-rated transportation, with ‘captive audiences’. Ask anyone who does alot of transAtlantic business travel — Virgin is one of the airlines of choice.

    I think Virgin’s entry into downloadable music could be a wonderful a-la-HP moment for Apple. How about letting those two creative but ever-so-slightly egotistical fellows (SJ and RB) sit down together and work out a sexy co-marketed Virgin-Tunes and Virgin-Pod?

  11. I interpreted his comment about music anytime, anywhere to infer that they were going to be doing a streaming/subscription model. In this case it doesn’t matter what the backend format is. It is, however, a little disheartening to hear yet another company executive spew what now appears to be the Microsoft line about the iPod and iTMS being proprietary and locking the user in. I wonder if there was an official e-mail from Gates or Ballmer instructing people exactly what to say.

    I would like to see Apple come out with a few more allies in the battle – it’s starting to look a little one-sided.

  12. Brits love Mac’s. They also like Ives. iPod should be a no brainer for them. Not sure if Branson is hip enough to know that. I think his research team screwed up on this one.

  13. Elements of this article lacks credibility ie.:

    Virgin will “allow customers to rip purchased songs into the popular MP3 format without any accompanying digital-rights management limitations” If this is true–which I doubt, It will only artists who signed with Virgin. No other label is in any way likely to agree to that arangement.

  14. It doesn’t matter if Virgin manages to sell a decent amount of songs. Thats not the point. Remember what Steve Jobs said, that the store itself doesn’t make that much money. The money comes from the iPod sales. Thats why Napster is facing such a huge loss. They are selling individual downloads, but don’t have enough subscribers. There is no mp3 player, that is WMA supported, that makes me want to buy one. The iPod however makes me want to buy it and actually go buy stuff from iTunes. I don’t have an iPod, but I’m still using iTunes. Virgin is counting on their song store to boost their retail sales, but I highly doubt that will happen. Why buy a CD for $20 bux with only 3 good songs, when they can just go to their online tunes store and buy that 1 song for .99 cents?

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