EMI provides Apple with opportunity to fortify digital content distribution dominance

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


  1. Just think about all the money wasted by other stores in windows media related technology and stores, maybe if they’d done what apple did and gone aac and used their own drm, controlled their own destiny, they’d be in better shape. Probably not.

  2. “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.”

    Well, since Apple themselves said that the store was created to drive iPod sales, I perceived it.

  3. “…Just think about all the money wasted by other stores in windows media related technology…..”

    Yeah … as in “Plays for Sure” !

    It’s almost comical how many dorks fell for that BS, huh ?

  4. But all the misperception was ultimately based around the disinformation that had even media production professionals believing that:

    1) WMA was some kind of real technical standard (it came to literally by default, but not because it was anything special, or because it was pigeon-holing users any less than AAC with DRM was.)
    2) That all GUI platforms were going to conform with WMA within a few years.

    The more we see the armor of MS crack, the more we see just how badly we’ve all been taken for the ride of our lives.

  5. Sometines….”Plays for Sure”….maybe!

    Great strategy to drive your media content.

    Still makes me laugh when I hear that phrase. ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

  6. sosumi: “bad take MDN, very arrogant…”

    No, say it isn’t so! Not MDN! They are never arrogant little asses, whose only claim to “fame” is that they coalesce about 50% of the Mac news and anything they perceive to show MS’ downfall from their position of dominance (which I do indeed believe is just as I also believed IBM was falling from it’s likewise position in the early ’80s despite seemingly EVERYONE disagreeing with me… at the time.).

    Seriously, who actually reads MDN’s take for anything other than a case study of “what no to write as a journalist” or “how to hide your identity and still be a total prick in public” or “how to VERY BADLY design a website which is plastered with ads (reminds me how much I love PithHelmet).

  7. Bad take, indeed. Apple has always been about adding extra value to their hardware any way they can. They’ve said so many times. They make little to no profit on the OS, iLife, the free training sessions in their shops and, indeed, music off iTunes (4c a track profit there, I understand).

    I like this site for the all-in-one round up of Apple news but it’s awfully mean spirited, derogative and supercilious, ocassionally while being wrong at the same time, like today.

    It is also something of a breeding ground for the same. There was on article by a blogger recently that MDN tore strips off for getting something wrong and then told people to email him to correct it. On a whim, I did so, explaining the problem quite matter of factly. I got an email back thanking me for being the only one who didn’t email a tirade of insults.

    Mac fanboys have a bad enough rep in some places, don’t you think?

    Just saying.

  8. I agree with others that MDN has the wrong take on this article. Apple has clearly stated that Itunes has not been much of a money maker (in the past) and was designed to enhance hardware sales.

    Itunes is about to make a very fundamental charecter change without making any change to it’s structure. Itunes is becoming the “portal” for Music, TV & Movies for your:


    I am NOT one of those that thinks that Microsoft is a bunch of brain dead ninnys. But they’ve been trying to capture the multimedia, the home entertainment and the PDA market for years. They must feel like they’re standing in the middle of a frozen lake watching the ice crack all around them! they’re about to watch their WMA standard become obsolete, their many year efforts to transfer computer content overwhelmed in days by Apple’s Apple TV and to watch their efforts at capturing the PDA market simply made irrelevant by the new iphone.

  9. Pardon, MDN, but Apple does use “iTunes-like services” to sell iPods. Those services are not limited to just actual media sales, but extend to the overall integration of iTunes as a library/jukebox, a hub for iPod sync, a source of media for wireless distribution via the Airport Express (and now Apple TV), and the ability to easily acquire cover art, browse music and mingle with other music fans.

    Apple created a lifestyle with iTunes. The iPod is a key physical component of that lifestyle and benefits greatly from the association.

  10. I don’t think Apple wants customers to buy non-Apple devices and buy content from the iTunes Store. Apple wants customers to buy iPods (and iPhones). Therefore, I don’t expect Apple to market the iTunes Store as a place where mobile phone users can buy AAC-based music (unless that phone happens to be an iPhone of course). I don’t expect Apple to give iTunes direct synching with non-Apple devices (other than the ones that already have it like the Motorola phones).

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