Fortune: ‘Poor Microsoft on the outside of Apple’s closed iPod+iTunes system looking in’

“Steve Jobs has had much to celebrate lately. But the Apple CEO was particularly happy in February when he announced that the iTunes Music Store had sold its billionth song, to a teenager in Michigan who had bought a copy of Coldplay’s ‘Speed of Sound.’ That milestone is all the more impressive when you remember that Apple has numerous competitors in the digital music world. Yahoo Music Unlimited and the legal incarnation of Napster are gunning for iTunes customers. Sony and Samsung are trying to create iPod slayers,” Devin Leonard writes for Fortune. “And the field is only getting more crowded. By summer, Amazon may launch a digital music service with a branded MP3 player, possibly made by Samsung. It is already being referred to in the industry as the aPod. Amazon won’t discuss its plans, but sources tell FORTUNE that Amazon is targeting people over 40 years old–it refers to them as ‘the NPR crowd’ –who aren’t as likely to own iPods as MySpace users.”

“Yet Apple’s challengers all face the same problem: Jobs’ company will no doubt dominate the digital music market for years to come. That’s because Apple has learned its lesson about closed systems,” Leonard writes. “With the iPod, Jobs created a closed system with mass appeal. Fulcrum Global Partners estimates that iPods now account for 73% of the 30 million MP3 players currently in use in the U.S… Jobs cut a deal with the Big Five record companies in 2003 that locked up his device. The music companies wanted to sell songs on iTunes, but they were afraid of Internet piracy. So Jobs promised to wrap their songs in Apple’s FairPlay–the only copy-protection software that is iPod-compatible… That satisfied fearful music companies, but it means none of the songs sold by those services can be played on the wildly popular iPod. Instead, users of the services had to rely on inferior devices made by companies like Samsung and SanDisk that supported Microsoft’s Windows Media format.”

“The situation has been a disaster for Apple’s competitors. iTunes holds a commanding lead over its rivals, selling more than 75% of all digital songs, according to NPD. The second-place digital music store, eMusic [9%], can’t sell any major label hits because it refuses to copy protect them,” Leonard writes. “Poor Microsoft. Nearly every music service and MP3 player maker other than Apple supports Windows Media and its copy-protection software. But not enough music lovers want to use them. It’s a far cry from what happened in the desktop wars. It’s no fun when you’re outside of the closed system looking in.”

Full article here.

[Thanks to MacDailyNews Reader “Jim” for the heads up.]

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Related article:
Apple’s vs. Microsoft’s music DRM: whose solution supports more users? – August 17, 2005

56 Comments

  1. Not so fast. Microsoft’s Origami runs a version of Windows XP that’s capable of running iTunes along with compatibility with the iTMS.

    Not that I think the Origami is going to be a hit or compete directly with the iPod, but that’s because of the size and cost factors.

    It’s conceivable that there could be an Origami-lite that could be size and cost competitive to the iPod and be compatible with iTunes/iTMS.

  2. And what is so cool about the iPod’s market share dominating with the best product (unlike Windows dominating with the worst product) is that if the playing field levels off and the iPod starts to lose market share,
    then all Apple has to do is release a firmware update to
    allow the iPod to play their competions music files and
    add a choice to either or both buy your song or subscribe your music.
    That would drive a stake in any major competitive change in the industry and Apple is in place and ready for that,
    not to mention future upgrades to iTunes in the area of movies, etc. and a possible true video iPod. The ball just keeps rolling. Dominance is ok if you have the most intuitive and best quality product. Personally, I would like to see the iPod go down and remain at about 70% market share so they would be a little more price competitive and I could get a nano at $99 instead of $150. Wishful thinking

  3. Origami may indeed run iTunes but for how long ?

    A tablet computer with a big screen, running an entire Windows OS will consume a significant amount of power. A dedicated chip in an iPod will use very little power.

    Running iTunes may sound like a good feature, but running out of power isn’t going to be popular.

  4. ” width=”19″ height=”19″ alt=”gulp” style=”border:0;” /> Holy… “Frobots” has something there! I was about to have a knee-jerk “troll” response, but he’s right. If you make a small tablet computer capable of running iTunes, you have all the functionality of an iPod! I never thought of that.

    Of course, what we’ve seen of the Origami looks like an oversized Sega Game Gear, is big and ugly, and has horrible crummy battery life. But if someone pared down a device to just enough functionality to run iTunes, they might have a product…

  5. Speaking of DRM, here’s something that I recently ran across with iTunes that annoyed me.

    I was checking out some music recently and I noticed that a song I wanted to buy had a really cute video. So I figured, hey, I’ll buy the video rather than the song. Same thing, right?

    Well, I downloaded the video and decided I would burn it to a CD. No, I didn’t expect to get the video on the CD, but I expected to get the audio. Nope. No dice. iTunes wouldn’t let me burn the song to CD. Needless to say, it was Audio Hijack and an audio editor the rescue.

    Hello? Apple? It’s a Music Video. I should be able to burn Music to a CD.

    I’m reminded of the old saw, “A conservative is a liberal who gut mugged.” Well, an anti-DRM person is a pro-DRM person who got screwed.

  6. “sources tell FORTUNE that Amazon is targeting people over 40 years old–it refers to them as ‘the NPR crowd’ –who aren’t as likely to own iPods as MySpace users”

    Hey, I’m 48, but sorry Amazon, no sales. Getting older does not mean getting senile. And my age bracket has enough cash not to settle for inferior products.

  7. “$”
    “Poor Apple stock.. Dropping like a rock.”

    Yeah, in the last 12 months Apple stock went from $40 to …. what was it today….oh yeah, $65.

    Sure dropping like a rock. Pfffffft

    Learn how to invest.

    Bye

  8. Apple adding video has made it even harder for anyone else to break in. Even if you’re not interested in video today (2.5″ screen), the possibility that you might want it someday will push you to the iPod because you know the music you buy today will easily flow into it.

    And the content at iTMS for video also becomes a factor, because there isn’t really anyone else doing it, and there’s no indication that anyone else will aggregate it like Apple. And the convenience of a one-stop shop for music, video, and podcasts also becomes a factor.

    So the barriers to entry in the portable media player market just keeps rising with each passing week. The real threat will come from something completely different – maybe cell phones, but not unless one of the current cell carriers changes the paradigm.

  9. Hey, $ . . .

    “Poor Apple stock, dropping like a rock,” eh?

    I know you’re just trolling, but here are the FACTS about your statement, dumbass.

    One year ago APPL sold for $40 per share. Today its “falling” price is $65+, a growth of 60%. True, the stock is down from its high of $85 or so, but the downturn has occurred ONLY because demand for the new Mactels so far exceeds Apple’s ability to supply the units, that investors are bailing until next quarter. THEN let’s see how financially prescient you are.

    One more thing, Troll. One year ago MSFT’s stock was selling at $25 per share; today, $27. WOW! Ain’t that fantastic?! A whole 8% growth for the biggest, baddest MooFoo on the block. You should be SO proud.

    FYI: Don’t even BEGIN to look at the above figures on a 5-year basis for these two companies, OK? Your poor, addled brain couldn’t handle it!

  10. Thanks, Gotrocks. I just checked the Five-Year line for Apple and Microshaft for “$” (who probably can’t do the math himself).

    Apple’s stock over five years has INCREASED 500%, from $13 to $65!

    Microshaft’s stock in the same five year period has DECLINED over 22% from $35 to $27!

    Good grief! Where are you now, “$”?

  11. >The new Origami devices will play Apple’s FairPlay (inside iTunes). It’s not an iPod privilege among the portables anymore.

    Yeah, but where does that leave Donut boy and the prehistoric Gorog, Samsung and the rest?

  12. Jeff,
    You can rail against DRM all you want, but it is not going away. Your suggestion that record companies release music without DRM or allow Apple to drop Fairplay would completely undermine the legal download infrastructure that is slowly taking shape. Yes DRM can be a pain, and definitely limits what most of us would consider fair use. In my opinion however, the blame for this is shared by the millions who publicly share and download over WAN what they otherwise should purchase. There is plenty of blame to go around and the excess and greed of some in the recording business factors in. But that has always been a lame rationalization used by those who either don’t recognize or care that they are stealing and causing damage to a business that invests huge sums in a gamble that a hit record will provide a return on those investments. I know that many individuals honestly don’t know they are either breaking the law, nor do they have enough grasp of the economics to see corrosive nature of their actions on the mechanism that brings them the music they covet.

    I do agree, however, that there needs to be a single flavor of DRM. One that allows fair use yet protects against mass duplication to protect content producers. I don’t see any indication that the industry players (entertainment or technology) are going to come to agreement on the DRM. The market, so far, has voted with its pocket book, and Apple’s Fairplay is their clear choice. Since you can still buy CDs with no DRM, it is clear from the Billion songs sold at ITMS that plenty of people think Fairplay provides decent fair use.

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