It's kind of strange to see that Apple have opened up iTunes— once you've bought a few albums from iTunes, when your iPod dies, you have had to replace it with another iPod to play your DRM'd music; which is no bad thing for Apple, who have the portable music-playing market pretty much cornered. But earlier this month, they removed DRM from the iTunes Music Store. At the same time, they opened up the Music Store to work over 3G (previously, it was only available over a WiFi connection.)
But the really interesting thing about what Apple have done isn't where it puts iTunes is now, but the direction that iTunes appears to be heading in. Specifically, it's potential (along with the internet-enabled iPhone and iPod Touch)— not as a music store, but as a delivery channel.
Apple don't really make all that much money out of selling music- at least, not compared to iPods and iPhones (which now make up more than half of their total business.) But the record industry have found their digital channels tied up by Apple's control over the market— although Amazon and Wal-Mart have been selling DRM-free MP3s, they haven't seen a significant jump in their share of the market as a result.
So instead of worrying about piracy, the labels are now more worried about Apple being in charge of their online retail channel. Apple's concession has been the introduction of a three-tier pricing systems; previously, all tracks were $0.99- now there are three price points; $0.69, $0.99 or $1.29, which means labels can now charge a premium for new releases— something they have wanted for some time now.
But the shape of the portable music player market is changing- now you can pick up an iPhone for free, which is obviously less cash than any iPod because of the cross-subsidy with the phone networks. So the real money is coming into Apple from phone networks rather than consumers. (Hence the competitors like Nokia's "comes with music"- getting a third party to pay them for the music, rather than the consumer.)
Other multimedia phones also play music (although- until now- not music bought from iTunes), but are restricted by the amount of music they can carry; as they use solid-state storage rather than hard drives, they are usually limited to less than 8Gb— as opposed to up to 120Gb that something like an iPod Classic can carry.
So what does this mean for Apple? What are they getting out of selling DRM-free music?
I think the key is in the last "upgrade" that Apple made to iTunes; Genius. One it's enabled, "Genius" tells Apple all about your iTunes library; what you've bought, what you own, and what you listen to. It can then tell you what songs are "like" other songs (based on the listening habits of you, and millions of other iTunes users) and build playlists, or suggest purchases.
So far, it's not a terribly interesting service on it's own but— along with the move to take away DRM— what could be interesting is where it's heading. A record of your iTunes library now effectively exists on Apple's servers. But not on your iPhone, or iPod Touch; their limited storage means that, unless you have a relatively small collection, they can only hold a fraction of your total music library.
Apple have let go of their control over what you can do with a song once you've downloaded it— but they still have control over the channel you download it through. So what happens if Apple make the most of this channel— not as an exclusive purchase channel, but as a delivery channel— and move your music collection into "the cloud". This would enable you to listen to a streaming channel of all your purchased music— effectively a personalised internet radio station. Music that you've bought through iTunes that is sitting on your home computer could then be sent to your iPhone (or, with a WiFi connection, your iPod Touch.)
Your music collection could work like emails; they live on a server, being downloaded only when you need them. This could be a really powerful selling point for iTunes— currently there is no real advantage for downloaded music over CDs other than the convenience of having it as soon as you click to buy it. CDs have a physical component that people like, they carry a higher quality recording, and they still hold a financial value; you can sell them on, or share them with your friends.
It would also offer a benefit over illegal downloads— you could download a thousand MP3 for free, but you might not be able to fit them all onto your iPhone (especially not alongside any videos, podcasts, photos and applications that are also taking up that increasingly valuable storage space.) And it would offer a good reason for iTunes users to buy an iPhone when they next upgrade their iPod, MP3 player or mobile phone.
It's something you can already do with podcasts- stream them through iTunes, or download them straight to your iPhone. You can do it with iPhone Applications- if you try to download an Application you have already downloaded on that iTunes account, you get a message asking if you want to download it again— they have a log which they use to track what you've bought. No need to buy the same application twice if you want to download it again (say, if you've taken it off your phone, still have it on your PC, but want to use it now…
The real question that remains is whether record labels would allow it— but it's something that is already happening on music services such as Pandora, Last.fm, Spotify— and many others which provide a personalised online radio service. Until recently, you've also been able to connect to YouTube and find a video that has used a music track as it's soundtrack— but that's something Google appear to be putting a stop to.
Perhaps the question is only about what terms the record labels would allow Apple to provide this service under? Apart from providing a possible reason to buy music digitally instead of pirating it, this would also offer a good reason to buy it online instead of buying CDs (which is exactly what the industry needs at a time when CD sales are in sharp decline.) Music that record labels want to sell could be included in this stream— say, listen for free up to three times, then pay for it if you want to hear it again. In the same way that record labels promote radio airplay for their latest singles, labels could promote iTunes "exposures".
If my optimistic prediction of Apple's plans for iTunes is right, it looks like 2009 could be a very interesting year for the music industry…
I am Some Random Nerd. I work in "Digital Media", and this is where I play with it. Call it a personal home page, blog, realtime lifestream or whatever the buzzword of the moment is. It just is what it is, so please enjoy your visit.
Thoughts and theories are my own (other than where quoted) and are personal rather than professional.
