View Full Version : Apple Euro iTunes boast 'premature'

Jul 6, 2004, 09:45 AM
Category: News and Press Releases
Link: Apple Euro iTunes boast \'premature\' (http://www.macbytes.com/link.php?sid=20040706104533)
Posted on MacBytes.com (http://www.macbytes.com)

Approved by Mudbug

Jul 6, 2004, 10:54 AM
hmmm, yet another slanted article.

"The real test of iTunes' move into Europe will come in six-to-nine months. That's when Apple should have iPod's holiday-sales results and that will be the thing to judge on whether real profits are possible."

However, there are challenges ahead for Apple. Business Week notes that there are a number of rival music services already established in Europe including OD2, and more completion is looming in the form of Sony and Virgin

so what does that say about napster, od2/cokemusic and the forthcoming virgin? none have iPod-esque players of any worth. according to this logic the others have already failed.

Another hurdle is that Europe's digital-music market is "puny", says Jupiter Research, who value it at "about $10 million". In the US, sales of downloaded music are expected to top $150 million this year. "The online market in Europe is not suddenly going to lift off," said Mulligan

so if apple sells 800,000 songs in one week, an the market is 10 million (i assume a year) that likely makes apple the top music download store. i mean if the market was 10 songs a year and the sold 6 of those ten, then they're the leader.

i wish i were dumb so i could be an analyst.

Jul 6, 2004, 11:43 AM
For one, a smaller percentage of European households than in the U.S. have the fast broadband connections required to easily download music.

Ah, lack of broadband connections means fewer people willing to download their music instead of just running to the store to get it. Makes sense, sure.

Also, the illegal swapping of music files remains widespread in Europe.

Strange, then, that this logical opposite conclusion is the VERY NEXT SENTENCE of the article! Apparently, the lack of broadband is so bad for Europeans that they have to illegally download music .... Huh?

If people are already illegally downloading music, the iTMS offers the exact same advantages in Europe as in the US:

1) Good encodings of songs
2) Reliable and fast downloads (30 seconds vs about an hour)
3) No mid-song "surprises"
4) Oh yeah, it's legal!

I also have to take exception to the ill-forsaken sophistry which opened the article:

Claims by Apple (AAPL ) chief Steve Jobs that iTunes Music Store's performance in the first week makes it "Europe's top online music store" may be premature.

Huh? Apple sold 800k songs its first week in Europe, completely obliterating the sales numbers of its competitors. That, by absolute simple definition, makes it "Europe's top online music store". Will that last forever? Who the heck knows! A claim to be the top store at any point in time never has and never will imply perpetual eternal dominance! What the heck have these guys been smoking?

I saw the headline and expected someone to be claiming that OD2's numbers for the week haven't been reported yet and look to have been 8 million or something ... but, no. The claim was not premature at all. It was completely accurate.

As for the "fixed costs are higher" argument ... well, that's somewhat valid, but I think that Apple's fixed costs here are pretty minor, all things considered. Remember that iTMS as a singular business was ongoing profitable after the first week of Mac deployment. Not, of course, that Apple cares about iTMS business unit profitability at this point (it sees it as a loss leader for iPod sales; any profit is just gravy). But still, how many songs did Apple sell that first week to Mac users alone? I don't remember precisely, but I believe it was significantly less than 800k. Even supposing the fixed costs of the European launch were three times as high as those of the US launch (which is quite a leap ... I'd guess that they might be twice as high, but most likely a small fraction of that), so long as Apple was able to make an ongoing profit off 250k songs per week, they'd be making a profit in Europe as well.

Non-ongoing fixed costs? Yeah, I suspect those were significant for the European launch. But, again, they are a one-time cost, and offset completely by iPod sales growth which the expanding iTMS umbrella feeds.

I think it's really hard to say Apple's iTMS/Europe service is in trouble, or having a hard time, at least if you're trying to keep a straight face and back up your claims with facts. But then, analysts don't sell page views by just giving the same rosy outlook that everyone else is giving. We as readers have to look out for such obviously manufactured "concerns", though.

Jul 6, 2004, 12:07 PM
These guys are getting sillier and sillier. What gives?

Jul 6, 2004, 12:55 PM
yeah this one really smacks of sour grapes. "premature" to report the fact that it sold 16 times the amount of its nearest competitor in its first week? sorry if that bums the reporter out, but it's true. like it or not, Apple is the #1 download service by a huge margin. being petulant about it won't change the facts.

Jul 7, 2004, 10:37 AM
...Europe's digital-music market is "puny", says Jupiter Research, who value it at "about $10 million".
So in one week, the iTunes Music Store accounted for almost ten percent of the entire European market for digital music? Even assuming a generous factor of two for "first week frenzy", that means that in less than six months iTMS sales will have surpassed the entire market.

Okay, I can wait six months to find out how "premature" Apple's boast was.

Jul 7, 2004, 03:51 PM
These guys are getting sillier and sillier. What gives?
They are just reporting on the articles out there, not writing the articles themselves. But yeah, there have been a lot of negative ones lately. Makes you think.