May 5, 2003 7:45 AM PDT

iTunes store: More than 1 million sold

Apple Computer's new online music service sold more than 1 million songs during its first week of operation, the company said Monday.

The early sales success suggests that people will pay for music downloads if given the chance, analysts say. "It clearly shows there was some pent-up demand in the Mac community for a legal way to buy and download digital music," Jupiter Research analyst Michael Gartenberg said.

On Tuesday, Apple plans to add 3,200 new tracks to the music store, including Michelle Branch's album "The Spirit Room" and the catalog of music from Alanis Morissette.

The first version of the iTunes Music Store, which is available only for Macs, offers a vast catalog of music from the five major record labels. Singles sell for 99 cents each, and many albums go for $9.99.

Apple noted that half the songs were purchased as part of albums. Record labels have long raised concerns that online sales of single tracks would further sap already sagging album sales.

NPD Techworld analyst Stephen Baker said he's not surprised album sales are so strong. "When people move to a new format, one of the first things they want to do is get albums from their favorite artists, like the Eagles or Nirvana, in the new format."

Apple also has placed mechanisms in the service that encourage album sales. For example, the Eagles song "Hotel California" is available for purchase on an album, but the iTunes Music Store does not offer the original version of the song as a single.

More than half of the 200,000 songs available through the iTunes store were purchased at least once, according to Apple. The company also revealed that Mac users had downloaded more than 1 million copies of iTunes 4, which was launched concurrently with the new music service on April 28.

Apple also reported that retail shoppers picked up 20,000 new iPod music players over the weekend. New, slimmer models went on sale Friday. Apple has received 110,000 new iPod orders since the new music players were unveiled, also on April 28.

Early adopters gave generally high marks to the iTunes Music Store, but Apple may have to work out some kinks before releasing a Windows version of the service later this year.

"In the short time the store has been open, I've purchased 60 tracks," said George Creedle, a Los Angeles, Calif.-based television editor. "Spending time on the iTunes Music Store is more rewarding than (on file-trading sites) because I can screen more new music. And with the instant full-quality previews, I want to spend more time experimenting."

Michael Arnold, a video and multimedia producer from Broomfield, Colo., praised the music service's convenience and ease of purchasing. The self-described "big Apple fan" said he had purchased one album and about 50 singles.

But Arnold complained about problems with different audio levels between songs. "I'm really surprised they came out with the iTunes 4 Store with the audio level problem," he said.

Some Mac users also complained about the sound quality of the Advanced Audio Coding (AAC) format used to encode songs. But Arnold noted that most problems can be solved by turning off the Sound Enhancer feature in the iTunes 4 "preferences" control.

"While the Apple music store is not perfect, it does lead the way in providing users the ability to purchase music and not rent it, without a burdensome digital rights management layer," Gartenberg said.

Some competing operations like Pressplay claim more available music than the iTunes Music Store--300,000 versus 200,000 files--but songs are available only in Microsoft's proprietary Windows Media Audio format. Strict digital rights management controls restrict uses, and the services generally require an additional monthly subscription fee. Apple, by contrast, used a fairly light hand with digital rights management.

Several iTunes Music Store customers also said the service has renewed their interest in buying music.

"I don't buy as many CDs as I used to, but I'll probably buy more music now that I can do it all from my desktop," Arnold said. "I'll gladly pay 99 (cents) for a clean file from a master. Hey, even 45s used to be about a buck."

This kind of response could be instrumental in helping to determine why CD sales continue to decline. Major record labels contend file trading is to blame, but other factors could affect sales. During the late 1980s and early 1990s, the music industry benefited from the conversion to CD technology from vinyl records as consumers switched formats.

"I'm likely to spend more on music with Apple than I ever did during the heyday of CDs and with a greater satisfaction since every track is one I want," Creedle said.

During the first half of 2002, recorded music sales dropped about 7 percent year over year, according to the Recording Industry Association of America. The RIAA largely blamed declines on online file trading of digital music.

Baker isn't convinced file trading has contributed as much to lower record sales as music labels contend. He sees the final conversion of vinyl to CD to be a huge factor in slower sales.

"The music labels mined that vein for a long time, but now that vein is pretty much tapped out," he said. If anything, he added, online sales of music might help revive sales as consumers make the conversion from CDs to digital formats.

 

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