Why iTunes is in jeopardy

For quite a long time, iTunes has sat atop the music downloading business with nary a competitor to knock it off its pedestal. Because of this, the company has been able to capitalize on the success of its iPod and basically corner the music market.

And while most of us were perfectly fine with that, the music business wasn't. With Warner finding fault in everything Apple does and Universal practically wishing iTunes would explode so it wouldn't need to worry about it anymore, we've run into a situation where the desire for music is there, but record labels are unwilling to provide us with what we want.

And just when things looked like they couldn't get any worse, Amazon stepped in and dropped a bombshell on this industry that we still don't know the full effect of. With the flip of a switch, Amazon offers up 2.9 million DRM-free MP3s and as of today, features songs from four out of the big 5 record labels (Sony has yet to join).

Even better, Amazon's service is slightly cheaper than Apple's, as most songs come in at the $0.89 price point. And in the end, it's not just that Apple loses out or Amazon wins, the real result of Amazon's rise is that iTunes is being pushed into a tenuous situation.

And I'm loving every minute of it.

For some reason, there's a subset of fools who believe iTunes will always be the leader in the music downloading business. These people try to hold on to a lackluster argument that claims just because iTunes is the leader today, it will surely be a leader in the next few years. Huh? Why?

By and large, Apple's success on iTunes has been due to the success of the iPod. And while there is no sign of the iPod dying off anytime soon, there is a chance that the coupling of iTunes and the iPod may not last forever.

The way I see it, Apple may need to ensure that only iTunes music works with the iPod if it wants to stop any and all competitors. But will Apple find a way to make sure only iTunes music works with the iPod? Of course not. Consider this: Universal Music Group -- the world's largest record label -- is only selling DRM-free music on services other than iTunes and as it stands right now, only EMI is willing to give Steve Jobs the DRM-free tunes he has wanted for some time. Beyond that, what about the anti-competitive issues that will surely arise?

And while the record labels can't flat out remove all music from the iTunes catalog, they can win battles with Apple by leveraging Amazon and its DRM-free service. And as more songs become available through Amazon's store and more people become aware of the fact that those songs can be used on any device they want and they can do practically anything with the music, how long will it be before Apple is left out in the cold?

Think about it: you can currently buy songs at a cheaper price on Amazon and still add those to your iPod. Even better, the quality is superb and Amazon's service has become even more user-friendly over the past few months. Compare that to Apple's seemingly poor bargaining chip with record labels and a shift in the market may be upon us.

Is iTunes heading to its slow and agonizing death? Not yet. But as Amazon's service grows and people realize they can do much more with those songs than iTunes', how long will it be before Amazon becomes the downloading service of choice?

I don't care what you say, the record labels still wield significant control in this industry and if they want Steve Jobs to lose, not even his mystical powers can save iTunes. Trust me, even he knows that.

[MacPinchi]

If you'll recall, iTunes has offered DRM-Free music under the "iTunes Plus" heading, for $1.39/track. Problem is, none of the record companies want to cede pricing control of their precious "product" to Apple, so none of them have made any content available, save EMI.

So follow me here: The record labels could've made more money per track (maybe as much as $0.50 more, but we don't know the terms of the split with either iTunes or with Amazon) by selling DRM-free music through iTunes. But because they despise the fact that Jobs and Apple were successful in creating a channel that minimized the record companies' influence, they've done everything in their power to find a way to unseat the reigning king.

Including freezing out iTunes and selling DRM-free music at Amazon for cheaper than non-DRM music on iTunes. Can you say, "loss leader"?

So tell me... once iTunes is gone, do you think you'll still be able to get DRM-free music from Amazon for $0.89/track? Not a friggin' chance in hell, buddy. This is all about eliminating the competition, Mafiasoft-style, so you can have the entire market to yourself.

I won't buy any music at Amazon, and if you're smart, you won't either. If you do, you're hastening the demise of the one champion who has helped keep the megalomaniac record label suits in check. Once Apple is gone, the suits are free to jack up the price to whatever they see fit.

Then I guess we'll all have to go back to the torrents. :-)

[onlyauser]

Be assured that these issues will change the entire music landscape with or without iTunes. It makes no difference at all.

Money will follow the path of least resistance and those with money know this. We consumers are not included on the strategy session these powers hold.

One thing is certain and true. We are all actually clueless regarding what form the music industry will take in the future. They will find a way to stay in your wallets GUARNTEED!

[quidditchseeker]

I disagree. I think it's high time Apple has been knocked off it's high horse and gets some real competition. I love using Amazon and will continue to do so, even if the prices go up. I two mp3 players, a Zen V plus and a new Sony 618, both of which kicks iPods butt in everyway, I gave my 30GB video iPod away as they're not that great anyway and there are several better players out there and companies such as Microsoft, Creative Labs and Sony who listen to customers and added an FM tuner, the ability to use sites such as Napster, Yahoo music and Rhapsody, among other player features that customers are looking for.
If iTunes went under today I would cheer and several friends and I would throw a party. We're former pod heads who got wise and discovered better players and companies who care about the consumer who buys their product. I used to admire Steve Jobs, but he is just a greedy businessman who only wants to line his pockets and doesn't give a damn about the customers who made him who he is.

[varoon5]

Apple fanboy ^^

[MacPinchi]

No, just a realist.

[mfeldstein]

Um...

The music labels, who have been the ones demanding DRM all along, are now selling through Amazon, which is promoting DRM-free music. They--the ones who have been complaining loudly about how Apple is keeping prices too low and not allowing price variability--are also selling through a competitor at even lower prices that are still standardized. And that helps them how?

Sure, you can argue that Apple is the loser here. But it's hard to see how the record labels are the winners. All they are doing is hastening their demise.

[onlyauser]

Everything in the music business is on the verge of change.

Well, for the most part anyone that purchases DRM music is not really being as bright as they could be. Also, these music stores do not always offer very good value for your money. You can almost always find the actual CD used or new for less per song. I personally like albums but if your a song bird I guess a music service could be better for you.

About this or that being in jeopardy. EVERYTHING IS ALWAYS IN JEOPARDY...ALWAYS!

People are born to die and every step/second along that path we face some form of competition with, ourselves, our environment, other people and much more.

The same life cycles exists in everything. Some are just on different time schedules. One thing we can all be assured of is that EVERYTHING will change from what we are dealing with today.

There is one thing that may not be in for change any longer. If you are not already a rich lord expect to remain a peasant just a peasant in different circumstances.

[Zen-Masta]

Good article. I actually have experience with Amazon MP3. I bought a zune a couple of weeks ago and got a free $5 credit towards music downloads. I experienced a couple of hiccups downloading tracks but I google searched for customer service and got in touch with someone in tech support who spoke perfect English (here i'll save you the trouble 1-888-802-3083) and they allowed me to re-download my track. I still prefer buying physical cd's but with amazon beating everyone else at 89 cents each, I think it's fantastic. Also, the files you get from amazon are 256bits. If anyone remembers, when itunes announced DRM free and 256 bitrate, they increased by 30 cents a song.

[varase]

You've pretty much got to bump the bit rate by 50% going from AAC to MP3 to maintain to same audio quality.

Put another way, you can reduce your file size by about 33% by moving from MP3 to AAC.

When I was using MP3s, I'd record them at 192kbps vbr using the LAME encoder - when I switched to AAC I found I could live with 128kbps. This has implications on the capacity of your music player.

I still prefer CDs since I can encode whatever I like - and if my HDs and backups go south, I still have my music - but it's still important that when making a comparison, you compare Apples to ... well, um ... Apples.

[mhinnewyork]

For more on shopping at Amazon's music store, and doing it safely, see this
Defensively shopping at amazon.com
http://blogs.cnet.com/8301-13554_1-9789861-33.html

[bgavinw]

Your article makes a very fair point about the increasing competition that ITMS is facing from Amazon. All in all, though, I wonder how much Apple really cares. No one buys an iPod for the ITMS. The iPod will still be a superior player, people will just load it up with Amazon content instead of ITMS. Besides, the reason the companies are going to Amazon is just to f' with Apple, but it is ironic as someone else pointed out that Amazon lowers the price and removes DRM, which is the very thing Steve Jobs is allegedly fighting for. I have had multiple iPods and have NEVER bought music from ITMS, it's all been music ripped from CDs at 256k the way I want. I will now heavily consider buying music from Amazon since it is DRM-free, but I don't see how that hurts Apple -- they don't make much money off of songs (of course the volume helps them pad the bottom line, but i think it's less than 10 cents per song they make). Anyway, competition is always good, and it may marginalize the ITMS, but it won't hurt the iPod one bit.

[imdylbert]

The fact that nobody seems to be mentioning, is that the Amazon store, unless i'm missing info, is still a worse experience. It's a web page versus a dedicated app. That will always, always be a worse shopping experience than an application like iTunes. Yes it's better priced and has a bigger DRM free catalog. Big deal. I'm still not going to shop there. iTunes is more convenient.

[MattyDread]

There are only four major labels. Sony and BMG merged four years ago:
http://www.chartattack.com/damn/2003/12/1210.cfm

[rlewisnewman]

Well, I buy my music many places. eMusic, Amazon, ITMS, Classics Online, and many others. I go not for price, but availability. I recently went to Amazon MP3 downloads to find music by Trans Siberian Orchestra. Amazon had only one album vs. ITMS' almost complete collection. Guess who I bought from? Also searched for music by Supertramp. One album on Amazon MP3 downloads, from a group trying to sound like Supertramp. ITMS actually had the real albums. So for my money its ITMS. Admittedly my choice of music is somewhat eclectic, but if I can find it on ITMS, and eMusic why not Amazon. Oh, Amazon does redirect me to other albums but they are regular CD's in Amazons CD section NOT the MP3 download side.

[fcgoates]

This whole argument is kind of pointless in my opinion. Why, o' why, doesn't ITMS just lower the prices to match Amazon? They could advertise all music is DRM Free except for Sony music and save their precious store? Its not like Apple is hurting for money and they shouldn't have to jack up the prices by 30 cents and watch Amazon beat them by 40 cents per song.

Personally, I can't wait for some software that will come out, show you the price per song that you want (in the same fashion as other websites like this one) and allow you to download from your choice of pay music site into one browser that will house all your music, video, etc., that you can then download into any portable device like an iPod, Zune, etc. I can't tell you how much I hate to use WMP, ITMS, ITunes, Napster, etc. and then my older version PC freezes as WMP and ITunes battle with each other when trying to open them up.

[john55440]

Amazon.com is clearly the best legal source of music, offering the choice of either CDs or DRM-free MP3s.

In addition, MP3 is a univeral format that plays on anything. iTunes doesn't sell MP3s.

[agitater]

I don't give a sweet darn about iTunes or Jobs or whether or not the record labels do or don't still control the majority of decisions and directions in the music business. I don't care about DRM - at all! All I want is to be able to purchase and download high fidelity, 396Kbps variable bit rate MP3s instead of the lo-fi 128-196Kbps fixed rate garbage currently available. Until Apple and other major music sites, in partnership with the record labels, offer at least the same quality as I can currently get from a commercial music CD, what's the point? Of course the tracks only cost 99 cents each online - they're all just lo-fi crap. DRM? Who cares! Online music purchases are pointless in the first place not because of DRM but because the audio quality is terrible! So the labels lift DRM and we then rush online to purchase and download the same lo-fi (but un-DRM'd) tracks? Good lord, have we all gone crazy? If you want great quality, un-DRM'd music right now - today - from any artist you choose, just go to your local record store and buy a CD. When you get it home, you can RIP it at any quality you want and then listen to the music in your car, on your living room stereo, on your computer and on your portable music player. What's the problem?

Technology writers and music/media/entertainment writers talk about everything in this space except product quality. So are all of these paid writers simply unwitting pawns of the the technology and entertainment companies? For pete's sake, get to the crux of the matter - the quality of MP3/music downloads - and put pressure on Apple, Rhapsody, and all the record labels to provide us with the quality we deserve in return for the outrageous amounts of money we're paying for all this stuff.

The music industry doesn't want us to think about quality. For the time being it's less expensive for them and their licensed partners to RIP and store in their online libraries lo-fi, low bitrate files, marketing them to us with the same energy and language previously reserved for LPs and CDs. They're lying. While the CD/brick & mortar music business and distribution channels become financially unwieldy as more and more people move online, the music industry and the record labels worry about everything except product quality. It's pathetic. DRM? Even more pathetic. Like any DRM scheme is going to remain undefeated for more than 10 minutes? It's idiotic.

I'll pay for quality. We'll all pay for quality. Unless you're purchasing a commercial CD however, you're not going to find quality at an online music store unless you mail order a commercial CD. DRM is, and always was, a minor issue.

[x.killeddestiny.x]

Well as much as the fall of iTunes and the iPod is possibe especialy as slowly the iPod is losing its market share due to Sandisk's players mostly there is the possibility iTunes will crumble but not anytime soon. Alot of people who use computers are just plain dumb and they go out and buy an iPod cuz its ou everyone has these things they must be the best (wrong) and then thier like oh I'll use iTunes and then they just go find their song click download done. If other companies can bring this simplicity then thier bound to have sucsess but as long as the record lables keep thier stuff in iTunes people will continue to go the easy route. So the fate of iTunes is defenitly in the record lables hands no matter how sucsessful Amazon is because most people who use iTunes don't even know what DRM is and just go well can I still play it on my computer and iPod? iTunes will never fall until consumers become wiser and record companys pull outa iTunes.

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