Commentary: Breaking the digital music logjam

By Josh Bernoff, Principal Analyst

Once again, Steve Jobs has shown the rest of the technology industry what direction it should be going in.

Apple has launched its iTunes Music Store, featuring 99 cent downloads, and iMac users now can download Apple's iTunes 4, which includes the store. Why will this groundbreaking service succeed? Because, one, it charges a cheap price per song instead of requiring a subscription; two, it allows users to burn tracks onto CDs and copy them onto Apple's iPod portable players; and three, it includes a wide selection of 200,000 tracks from all five major music labels.

This is finally a path for the music industry out of the hole created by free file-sharing services. While a recent court ruling reinforced the legality of Kazaa and Grokster, labels continue to thwart free downloads by inserting "spoofed" songs--fake tracks masquerading as the music consumers are seeking. Services like Apple's will attract consumers unwilling to put up with the questionable software installations and audio quality of free services.

It's good for Apple, too. The company's new service rounds out its music products and hip image to young digital music lovers. While Apple will make money from selling music, the real benefit is in selling iMacs as new users come of age.

		Related story Apple's music: Evolution, not revolution The iTunes Music Store owes a debt to rival services and to now-defunct music companies that blazed this digital trail.

Look for similar services to arise on Windows. While Windows-based music services like MusicNet all require subscriptions, it's in the best interest of labels to allow 99-cent download services on PCs, not just iMacs. While Apple will create a PC version of its service by year-end, we expect retailers like Best Buy and portals like MSN to create their own pay-as-you-go download services on Windows.

As with so many innovations before, Apple won't reap most of the benefits here. Apple brought us the graphical user interface, handheld PDAs and wireless networking long before they became mainstream PC features. The iTunes Music Store will raise the bar for digital music under Windows and change the industry, but it won't get Apple out of its 5 percent ghetto in the PC business--at least, not until Steve Jobs' next innovation comes along.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.