On the first anniversary of the launch of its iTunes Music Store, Apple announced that it has sold 70 million songs online, a tremendous achievement for such a nascent market, but far below the 100 million songs that CEO Steve Jobs promised. Furthermore, Apple's high profile song giveaway promotion with Pepsi has been a complete flop: Only 5 million songs have been redeemed, far fewer than the 100 million that have been circulated.
"iTunes has exceeded our wildest expectations during its first year," Jobs said, in a bit of hyperbole, given the 30 million song shortfall and the Pepsi debacle. Apple also quietly began retreating on its anti-Microsoft technology bent, adding support for Windows Media Audio (WMA) to iTunes 4.5, a new version of the player the company released yesterday. With the new version, iTunes users can't play WMA songs directly, but they can morph them into Apple's AAC format, and the resulting songs will play on Apple's hugely successful iPod (and iPod Mini, if you're on of the lucky few that got one).
There have been other changes in Apple's music strategy, some of which appear to be designed to head off competition from the Microsoft camp, which will soon mount a multi-pronged digital media attack. With iTunes 4.5, users can share music between up to five computers (up from three), and a new mixing feature will automatically set up playlists for parties and other events. Apple notes that the iTunes Music Store now sports 700,000 songs, up from 200,000 when the service first launched.
Some of the changes aren't so positive. With previous iTunes versions, users could make up to 10 mix CDs from the same playlist; that number has been dropped to 7. And though customers can purchase more music than ever from the online service, many albums on iTunes now cost significantly more than $9.99 because of price increases from the record companies.
Apple also refuses to budge from its buy-only, music-only strategy. Despite rumors that the company would introduce an iPod with a color screen, or a video iPod, Jobs says that iPods are about music only, and the company has no plans to venture from that niche. Furthermore, the subscription music services that are gaining traction on the PC side are unsuccessful, Jobs says. "People want to own their music," he noted in a conference call yesterday.
That's short-sighted. Late this summer, Microsoft and its many hardware partners will unveil a collection of portable media center devices and portable audio players that will be able to play back subscribed, and not just purchased, music. That means for a low monthly price--expected to be $10 to $20 a month depending on the service--customers will be able to stock their devices with a revolving inventory of 20 GB to 60 GB of content. Purchasing that content would be prohibitively expensive, backers of the scheme correctly note.
Despite the missed goals, it's impossible to underscore the important and far-reaching effects that iTunes has had on the music and consumer electronics industries. In a way, it's a shame that Jobs had to brag about the success he expected to achieve with the service, because iTunes, in fact, been hugely successful with an amazing number of songs sold. That misplaced bravado, the Pepsi debacle, and Apple's downplaying of markets for which it has no solution, suggest the company isn't prepared to innovate the next big consumer electronics push. And that's a shame: A video iPod with subscription services capabilities would have surely kept the Microsoft camp on the sidelines yet again.
Register
Editor's note: Steve Jobs disagrees. He called the Pepsi campaign "disappointing." They were expecting 20-30 million redemptions. --Paul
Matt K April 29, 2004