Apple, iTunes and Competition

MacRumors

macrumors bot
Original poster
Apr 12, 2001
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CNet provides a summary of Apple's current standings in the digital download market. According to the NPD group, iTunes carries a 70% marketshare for digital downloads from December 2003 to July 2004. This marketshare has held steady despite the introduction of other competitors.

The article goes on to summarize Apple's ongoing strategy providing essentially exclusive iTunes-iPod integration - the goal, presumably, to drive iPod sales. In line with this, Apple has resisted allowing outside music stores to provide integration with the iPod.

This has been an area of criticism for 3rd party music stores such as Real Networks and the newly launched MSN Music service.
 

nagromme

macrumors G5
May 2, 2002
12,551
1,186
iPod AND iTunes, integrated, is a BETTER solution than iPod plus, say, Real or Microsoft. Much like OS X integrated with a Mac is better than X on x86 :)
 

howard

macrumors 68020
Nov 18, 2002
2,017
2
this is good news, especially combined with the articles i've been reading that the ipod has 92% hard drive based marketshare and 82% digital portable media marketshare
 

2A Batterie

macrumors 6502a
Jun 9, 2004
622
0
Out of a Suitcase, USA
I'm totally behind Apple, but what would we be saying if Microsoft were in Apple's place right now? I'm sure someone would bellyache about a possible monopoly. I call dibs on the thimble.
 

SiliconAddict

macrumors 603
Jun 19, 2003
5,889
0
Chicago, IL
Apple is doing well right now. Check that extremely well and because of that they should be concerned. I've always gotten the vibe that Apple is a rather arrogant company. Nowhere near as bad as MS but its there. They CANNOT sit on their laurels and pat themselves on the back. Microsoft is about to enter the market. This is the 90% market share company. They will use every slime ball trick and tactic to screw Apple over.
Apple needs to bring their A+ game to this battle. There is no room for Jobs to act like an arrogant sob. For once he needs to suck it up and act like a businessman and make deals to keep the iPod on top. HP was a good first step. As was the deal with moto's phones. It's not enough. If MS wants to go at this hardball they could pour $1,000,000,000 into this endeavor. A company like Microsoft who has no realistic cash limitations HAS to be taken seriously. Apple needs to continue to make partnerships and expand into new territory. (Flash players. Sorry guys but this IS a vulnerable area for Apple.) And I think it’s a bad idea that they are waiting for 50% of the market to fall to another player before doing something with FairPlay. They have some companies itching to license FairPlay. Why the heck would you wait until demand starts to wane to license it?!? That makes no sense. They need to take advantage of how hot the iPod scene is right now.
Apple can stay on top if they play their cards right. Lets be honest here guys. Until MS, Apple has had no competition. Napster and Music Match were and are a joke. This Fall and next Summer is going to be the first true test of how sustainable the iPod\iTunes powerhouse really is. Here's hoping Apple cleans the floor with Microsoft's butt.
 

bcsmith

macrumors member
Jan 6, 2004
63
0
Oaktown, CA
2A Batterie said:
I'm totally behind Apple, but what would we be saying if Microsoft were in Apple's place right now? I'm sure someone would bellyache about a possible monopoly. I call dibs on the thimble.
Market share alone does not make you an illegal monopoly. There are a few competitors out there and there are more on the horizon. As long as companies feel that there is a buck to be made, and they are able to enter the marketplace, they will.

Also, not all monopolies are illegal. Abusing your monopolistic position is. If Apple is the last company standing in the online music download market - which might happen, but it is more likely that there will be a couple of people left - this would not be illegal, or neccessarily a bad thing. It's what they do once they find themselves in that position.

-- Ben
 

swissmann

macrumors 6502a
Sep 17, 2003
781
28
The Utah Alps
When are some of these ITMS and iPod wannabes going to die. I thought it would have happened by now - maybe it has and I just don't know about it. Or maybe a small percentage of market share is still profitable???
 

jxyama

macrumors 68040
Apr 3, 2003
3,735
1
SiliconAddict said:
Microsoft is about to enter the market. This is the 90% market share company. They will use every slime ball trick and tactic to screw Apple over.
to beat apple, M$ will need to first make an mp3 player that can beat iPod.
to be blunt (not to you), music download services make no difference - in the end, majority of users will not care where the music comes from as long as it's on their favorite music player.

90% windows share won't make any difference because iPod/iTunes is already available on windows. their financial assets will. just like xbox, M$ will need to start from the hardware...

unless, of course, they are willing to offer WMA tracks for 25 cents and bleed money left and right... (pricing their music slightly below iTMS' 99 cents won't make any difference. it has to be a LOT lower to convince people to give up their iPod, which many people are apparently willing to pay the premium for.)
 

Stella

macrumors G3
Apr 21, 2003
8,273
4,636
Canada
2A Batterie said:
I'm totally behind Apple, but what would we be saying if Microsoft were in Apple's place right now? I'm sure someone would bellyache about a possible monopoly. I call dibs on the thimble.
I think apple should absolutely license out Fairplay. Doing just this could put a large dent into microsoft's drm.. more, Apple should offer it back to the music industry to make it non propriority and completely open.
 

thatwendigo

macrumors 6502a
Nov 17, 2003
992
0
Sum, Ergo Sum.
jxyama said:
to beat apple, M$ will need to first make an mp3 player that can beat iPod.
to be blunt (not to you), music download services make no difference - in the end, majority of users will not care where the music comes from as long as it's on their favorite music player.

90% windows share won't make any difference because iPod/iTunes is already available on windows. their financial assets will. just like xbox, M$ will need to start from the hardware...
No, they don't, because the iPod is a hardware device that accesses the computer directly instead of acting totally on its own. All that Microsoft needs to do is make it as easy on anyone that wants to license WMA as they can, perhaps even going the route of getting everyone they can onboard for free and then "accidentally" breaking AAC on Windows. With their ridiculous bank account, they could then partner with a hardware provider and offer a buyback program for iPods with the promise that, if people will go with this other player, they get 40GB for half the cost of the iPod.

Meanwhile, Microsoft tells any tech publication that they'll pull advertising if they run stories on the iPod, offer extra money and support contracts if they'll promote the "alternative" device, and pursue the legislative route to slam through a bill with their increasingly pervasive lobbying so that all hardware players require vetting by the FCC. The new law could be something as simple as requiring some Microsoft "technology" that has to be licensed, and then not allowing Apple to touch it, no matter how much money is offered.

Anti-Trust? They've got the cash and legal clout to drag out a court battle long enough to kill the iPod, if they can even accomplish half of what I just spun out.

unless, of course, they are willing to offer WMA tracks for 25 cents and bleed money left and right... (pricing their music slightly below iTMS' 99 cents won't make any difference. it has to be a LOT lower to convince people to give up their iPod, which many people are apparently willing to pay the premium for.)
Actually, they could just price low until the market share drops enough and they get people locked in (like they have them with Office), then charge even more. Even if they didn't do that, the TCI/Palladium DRMed layers that will likely emerge in Longhorn and Microsoft's continued attempts to woo the media conglomerates spell out an ugly situation for anyone not on the Windows Media bandwagon.

Remember, Apple has to be able to get the media companies to sign the deals, and a completely consumer-screwing DRM is what they want. Microsoft will give it to them, and either Apple surrenders or goes along for the ride.

It's not if it will happen, but when.

Don't believe me? Ask IBM how much trouble Microsoft got into over OS/2.
 

ioinc

macrumors regular
Jan 7, 2004
151
0
Clearwater, Florida
puckhead193 said:
Way to go Apple! Keep up the good work!

This is only good work if 70% is enough... and its not.
Apple has left the door open for someone else with more money and/or marketing power.

If apple had dropped prices and locked up the market with 90%+ market share... then I would say good job apple.

But this is just history repeating itself...

The for a long time in the 80's the Mac OS was the only real alternative. Apple kept prices high (and thus the market open to others) and eventually lost out to M$.

Same thing with the iPod/iTunes.

Wal Mart, or M$ or somebody will eventually come in and put some real clout behind one of these ventures and in 10 years we will all be talking about the great apple music player that has a whopping 3% market share (and complaining that we don't get enough 3rd party software gadgets).

Good job apple for opening up a market where others did not know one even existed.

Bad job apple for setting and leaving prices at a point where the masses were not happy.
 

Mr_Ed

macrumors 6502
Mar 10, 2004
443
8
North and east of Mickeyland
Macrumors said:
CNet providesThis has been an area of criticism for 3rd party music stores such as Real Networks and the newly launched MSN Music service.
Speaking of criticism, I just ran into this web site:
http://www.freedomofmusicchoice.org

They make some pretty good points there and it looks like an honest effort to inform consumers of the facts surrounding Apple's refusal to license their DRM technology.









Just kidding . . . . :D
 

jxyama

macrumors 68040
Apr 3, 2003
3,735
1
thatwendigo said:
No, they don't, because the iPod is a hardware device that accesses the computer directly instead of acting totally on its own. All that Microsoft needs to do is make it as easy on anyone that wants to license WMA as they can, perhaps even going the route of getting everyone they can onboard for free and then "accidentally" breaking AAC on Windows. With their ridiculous bank account, they could then partner with a hardware provider and offer a buyback program for iPods with the promise that, if people will go with this other player, they get 40GB for half the cost of the iPod.

Meanwhile, Microsoft tells any tech publication that they'll pull advertising if they run stories on the iPod, offer extra money and support contracts if they'll promote the "alternative" device, and pursue the legislative route to slam through a bill with their increasingly pervasive lobbying so that all hardware players require vetting by the FCC. The new law could be something as simple as requiring some Microsoft "technology" that has to be licensed, and then not allowing Apple to touch it, no matter how much money is offered.

Anti-Trust? They've got the cash and legal clout to drag out a court battle long enough to kill the iPod, if they can even accomplish half of what I just spun out.



Actually, they could just price low until the market share drops enough and they get people locked in (like they have them with Office), then charge even more. Even if they didn't do that, the TCI/Palladium DRMed layers that will likely emerge in Longhorn and Microsoft's continued attempts to woo the media conglomerates spell out an ugly situation for anyone not on the Windows Media bandwagon.

Remember, Apple has to be able to get the media companies to sign the deals, and a completely consumer-screwing DRM is what they want. Microsoft will give it to them, and either Apple surrenders or goes along for the ride.

It's not if it will happen, but when.

Don't believe me? Ask IBM how much trouble Microsoft got into over OS/2.
everything you wrote will result in a lawsuit immediately. the idea they will get away with any of it is a bit out. there'll at least be an injunction to stop what they are doing. even M$ won't get away with such blatant re-abuse of the monopoly, when they've already been convicted once.

M$ can't really "break" AAC. it's in iTunes. to break AAC at an OS level would mean M$ must disable MPEG2 - DVD format. good luck selling such an OS. :rolleyes:

in any case, it's the hardware that makes all the difference, not the music distribution. you know why? because music player is where consumers have a genuine choice and also involve a lot more monetary committment. in the end, music is music. consumers don't care where they come from. no one will want an "inferior" mp3 player just so they can save 25 cents per song. mp3 players are what people actually use, hold and cherish - digital music is not tangible. trying to differentiate on digital music is useless.

M$ has to sell its management that beating iTMS will make money. they have a lot of cash - that doesn't mean they are willing to simply give them away to a cause that's unprofittable. xbox was made because console gaming is a lucrative market. similarly, even a company as big as M$ has to be convinced that there's money to be made in music distribution.
 

melgross

macrumors 6502
Jan 23, 2004
315
165
New York City
history+

Apple is doing very well with this now, and has been since the beginning.

But there is something that I wonder about. Apple has had about 70% of the download market for a while now. This was when they had less than a third of the player market. Now they have over two thirds, and they still have about 70% of the downloads.

Does this mean that iPod buyers are downloading less music than before? I would think that as Apple cornered more of the player market, the sales from iTunes would not only go up, but would also show a greater percentage of the market as well.

This is something that Apple should be concerned about. One selling point that Apple has made to the music industry was that not only were so many people buying iPods, but each iPod owner bought much more music than the owners of the other players did. Figure this. One third of the market two thirds of the music sales vs. two thirds of the market (everyone else), one third of the music sales. Now Apple has over two thirds of the market, but still has a little over two thirds of the music sales. What's happening? Have the older buyers stopped buying music? Or is everyone buying less?

Jobs has said before that if Apple had to, they would either license Fairplay, or allow Windows Media files on the iPod. That point is not here.

The one thing that Apple has to watch out for in the player market, is that some other players are finally getting good reviews. Sometimes even better than the iPod itself. Check Consumer Reports this month, for example. We can't pooh pooh this sort of thing. As more players copy Apple's screen and menu, and make their players look more like Apples', the difference becomes less.
 

kornyboy

macrumors 68000
Sep 27, 2004
1,532
0
Knoxville, TN (USA)
Treading Water

I think that the other online music stores are realizing that even if they release their own player there is no way to really catch up with what apple is doing with the iPod and its music store. That is why they are upset that apple won't let their stores support iPod intergration. They are just trying to figure out a way to "tread water" so they can't be blamed for trying.
 

desdomg

macrumors member
Dec 12, 2003
90
0
Apple is doing just fine. Great to see.

To those licensing gurus out there I would say that this is a non issue in the music DL market. That market is driven by the players and the player store integration - and Apple has the best on all counts.

Dont forget too that Apples iTMS was set up to compete with FREE P2P music on the net, so M$ price competition wont necessarily have an effect.

It is the whole package folks want, not the bits.
 

shamino

macrumors 68040
Jan 7, 2004
3,386
130
Purcellville, VA
thatwendigo said:
... perhaps even going the route of getting everyone they can onboard for free and then "accidentally" breaking AAC on Windows.
And how, in your imagination, is this even possible?

iTunes isn't using any Microsoft software to implement AAC support. It is using the QuickTime libraries - another Apple product. If Microsoft made a change to Windows such that QuickTime couldn't run, I guarantee you that Apple would have it patched and updated in less than a week.

In order for MS to modify windows so much that QT could never be made to work, they'd have to pretty much break every multimedia program ever written for the platform. MS may want to take over the iPod's market, but they'd not dumb enough to destroy their Windows installed base in the process.
thatwendigo said:
Meanwhile, Microsoft tells any tech publication that they'll pull advertising if they run stories on the iPod, offer extra money and support contracts if they'll promote the "alternative" device...
This wouldn't surprise me. It's been done many times before.
thatwendigo said:
...and pursue the legislative route to slam through a bill with their increasingly pervasive lobbying so that all hardware players require vetting by the FCC. The new law could be something as simple as requiring some Microsoft "technology" that has to be licensed, and then not allowing Apple to touch it, no matter how much money is offered.
I seriously doubt that they'd ever manage to do something like this. There have been prior attempts, which have failed miserably. Remember the "clipper" chip that the Clinton administration wanted to mandate as the only legal encryption device for the US?
thatwendigo said:
...Remember, Apple has to be able to get the media companies to sign the deals, and a completely consumer-screwing DRM is what they want. Microsoft will give it to them, and either Apple surrenders or goes along for the ride.

It's not if it will happen, but when.

Don't believe me? Ask IBM how much trouble Microsoft got into over OS/2.
So what's your proposal? That Apple simply give up and cancel the iPod/iTMS now, because nobody can ever compete against Microsoft?

That's a pretty depressing idea, even from you.
 

coconn06

macrumors regular
Jun 14, 2003
197
0
King of Prussia, PA
ioinc said:
But this is just history repeating itself...

The for a long time in the 80's the Mac OS was the only real alternative. Apple kept prices high (and thus the market open to others) and eventually lost out to M$.

Same thing with the iPod/iTunes.
People always compare the iTunes/iPod situation with the Mac sitution in the 80's, but it's fundamentally different IMO.

The difference between the Mac platform and the IBM-compatible platform (which Windows ran on) was that the software - ALL software - was different for each platform.

That's not true in the case of iTunes/iPod. Sure, music purchased on iTunes or other stores is platform dependent, but the majority of digital music, MP3s, is compatible with all MP3 players and software. And even DRMed software can be circumvented by many methods, including burning to a CD and re-importing as MP3.

So this is a non-issue for most people right now. If the online music become a huge market and can somehow overcome illegal downloading, this will be more of an issue for Apple.