From MySpace to BlackBerry, there's no shortage of challengers to the hegemony of iTunes
by Chris Parker
In September, MySpace opened its new music storefront, the same month Best Buy purchased Napster to dip into online music retailing. Rhapsody formed a partnership with MTV/Viacom to help market its subscription/download service, while Microsoft launched its streaming and retail alternatives, Zune Pass and Zune Marketplace. In a shot across the bow of its subscription-supported neighbors, Zune Pass announced recently that every user would be entitled to 10 free monthly downloads.
Yet all these companies are still just scrambling after iTunes' crumbs.
This summer iTunes surpassed 5 billion downloads and overtook Wal-Mart as the world's largest music retailer. The ubiquity of the iPod has given the company such a great advantage that even the entrée of online retailer Amazon last year and the Zune player two years ago have done little to dint their dominance.
With only incremental progress into iTunes' share of the market expected in the short term, many see the emergence of an entirely new platform to open up the download market, long before Amazon or Microsoft catch up. Cell phones could be a game-changer, with the power to rewrite the landscape.
"The iPod was an example of a groundbreaking product that caught everyone's imagination, and the iPhone is the second wave of that," says Neil Smith, Rhapsody VP of business management. "Where will these next innovations come from? The obvious places to look are the mobile-phone makers and carriers because, despite the downturn in the economy, they have robust businesses and are the delivery mechanism for a lot of this stuff."
Mobile phones are a radio-killer, making the web's entire panoply of music fully on-the-go. While music players are great repositories for the music you already own, they're not gateways to what you want to discover. For that, many now look to online entities like they once looked to radio to introduce them to new music.
With personalized streams, shared playlists and the availability of huge catalogs of music at your fingertips, the mobile phone's access to social networking sites, Internet radio and subscription services threaten to revolutionize the idea of "broadcasting."
"The record labels have historically been dependent on radio to popularize new music. They have to figure out some way to get the Internet to do that, and that opens up a whole new segment that's kind of separate," says Phil Leigh, president of the market research group Inside Digital Media. "The digital download industry is going to be only one component, and this second component could be equal in size in five to seven years."
Using cell phones as their portal, online entities have even greater access to the techno-savvy, trend-making, under-35 demographic that radio left behind, offering individualized programming wherever they go. Whether they're supported by subscription or advertising, the ability of these sites to create customized appeals to a listener's tastes could be a boon in itself, as streaming is liberated from the home computer and made available in-car via Bluetooth. The ability to capitalize access to their audience would come in addition to the one-button music retailing most sites offer, which essentially collapses the separation between discovering new music and owning it. But as the iPod (and to a lesser extent the PC) demonstrated, the platform's key in driving content.
The hope is that the mobile phone can soon eliminate the need for a separate player, thanks to its ability to sync with a computer and easily transfer tracks back and forth, along with the phone's general functionality, ever-increasing storage capacity and overall sophistication. Already, the market penetration for mobile phones far outstrips that of music players.
"You're still going to see millions of iPods sold. It's a great item. It's not going to go away," says Paul Resnikoff, publisher of Digital Music News. "But the move is toward the iPhone, to more diversified devices and more complicated systems. That's where the battle really starts to heat up."
Of course, the iPhone is currently considered the best multi-functional phone on the market. But Apple's exclusivity in its partnerships with carriers—it deals with only one carrier per geographical region—locks out nearly three-quarters of the market, limiting it in a way iPod never was. While there's been talk that Apple will eventually open service up to other cell providers, the question remains whether the company will be able to demand the same perks they got from AT&T (a heavily-subsidized phone, and, before June, a portion of the data fees). Meanwhile, there's an incentive for other carriers to field effective challengers, like the BlackBerry.
Eventually, the mobile phone's ability to connect to the web could even render downloading obsolete. "We may be talking about systems that don't rely on discrete downloads to a particular PC or iPod," says Resnikoff. "It may all be in a cloud, your collection of several thousand songs that you access from wherever, and you won't really think about where it's stored."
In the short term, iTunes is still sitting pretty, but the challenges are mounting. We've only just begun this new paradigm and there's still time for the playing field to shift. Remember that AOL was a dominant technology company at one point. For the time being, hold the phone.
like
dislike
