Apple iPod sales keep climbing, but faces stronger competition

January 15, 2006

Ever since Apple started leading the market with its music download service and digital
audio players, there seems to be no end to its climb in sales. During the
4th quarter of 2005, they sold around 14 million iPods, bringing the total to
over 42 million. When it comes to music, they have sold ~850 million
tracks to date at a rate of 3 million per day; however most of Apple's profit
comes from hardware due to the small share Apple gets per song sold.

As the iPod accounts for about 75% of the digital audio player market, a wide range of companies are aiming to compete yet again with the iPod, this time with a very wide range digital audio players shown off at this year's CES. Unfortunately as the iPod and iTunes are closely coupled due to Apple's refusal to license out its FairPlay DRM or incorporate 3rd party DRM on its iPods, iTunes fans are effectively locked to an iPod for carrying their music about and iPod fans can only use downloaded music purchased from iTunes.

As Napster,
Rhapsody, Yahoo and many other providers use Microsoft's Janus DRM
technology to offer unlimited download subscription based music services, Microsoft is aiming to help here with its 'Plays For Sure' DRM system that was introduced a while back. As most of the portable DAP's at the CES feature 'Plays For Sure', which allows the playback of Janus DRM (WMA DRM 10), Apple is going to face a lot more competition this year, particularly since these players do not support music from iTunes.

No one else in the online music business has the same kind of vertical integration among hardware, software and online buying. Until recently, Napster, Rhapsody and other vendors of online sources used competing and incompatible copy-protection schemes, which meant that you had to buy a music player compatible with your music store. Some offered protected downloads that couldn't be played on any portable device.

Microsoft, which has begun a music service, is bringing a semblance of order to this hodgepodge with a copy-protection scheme called Plays For Sure that online music vendors and makers of players can adopt.

If a music service has a Plays For Sure logo, its music will play on any portable device that has the logo. An increasing number of digital music and video players are supporting that scheme, which will give a uniform alternative to Apple.

With Microsoft, Yahoo, Google and big Internet service providers all getting into the music and video download business - and compatibility problems fading - your choices as a consumer are likely to increase. Apple will no longer seem like the only game in town.

The full article can be read here.

Like how Sony's Walkman cassette tape player originally led the market for portable audio back in the 80's for only a certain period, the same will likely happen with Apple. For example, all it will take is for a few companies to succeed in producing players that attract a portion of the market and Apple will end up losing in two ways: First by the falling hardware sales lost out to competitors and secondly by losing sales on iTunes service due to its refusal to license out its FairPlay DRM technology. Finally, while iTunes is doing very well with its 99c / song pricing, they may be forced to change if the music labels have its way, which would make unlimited subscription based services a more attractive alternative.

Feel free to discuss about iTunes and other online music services on our Music Download, Peer to Peer (P2P) & Legal Issues forum.

Source: Winston-Salem Journal