“Can anybody catch iTunes?” (by Ethan Smith, WSJ, Nov. 27, 2006:
pp. R1 & R4) provides a good analysis of how the digital music industry is
shaping up. Many companies, such as eMusic, Yahoo, Napster, Real Network and
Microsoft are attempting to get a sizeable share of the digital music industry,
which is currently ruled by Apple with its iTunes having a commanding 72% of
the online song market. eMusic, its closest rival, holds 10% market share and
others have single digit market share. On the hardware front, Apple owns three
quarters of the market for MP3 player sales with its iPod. Most of the
competitors are avoiding a strategy of converting current iTunes customers, and
thereby engaging in a direct competition, and are targeting those who have yet
to join the digital music bandwagon.
eMusic offers service that is compatible with iTunes. Apple
secured the rights to major labels’ catalogs by using software that limited
users’ ability to copy songs. eMusic found a way around this situation by focusing
on the “unprotected” MP3 format, which can be played on virtually any portable
digital music player. The price that eMusic has to pay is that it cannot carry
major-label artists. The revenue model is based on a monthly fee for a specific
number of song downloads. The company charges $9.99 for 30 downloads a month,
$14.99 for 50 downloads a month and $19.99 for 75 downloads a month. The unused
downloads do not roll over to the next month. The company recently began
selling “prepackaged digital music in a box” at all 650 Borders stores to
target people who are intimidated by downloading music and who still shop for
CDs. The package does not contain a CD but provides a code that allows them to
download the music described on the package. The cost of download is included
in the purchase price.
launched the digital music revolution and who think that music should be free.
Yahoo’s music unlimited provides a low price option and is one of the handful
services that allow users to rent unlimited amount of music for a flat monthly
fee and transfer it to a digital music player. The services do not work with
iPod. Currently, Yahoo’s portable option costs $12 a month with a 12-month
commitment. The Yahoo system relies on copy protection software from Microsoft
and works with a range of portable music players that also use the software.
Yahoo is trying to appeal to potential users who don’t own a dedicated music
player or might not want to shell out for one. The company is working towards
integrating its services with devices consumers already own such as cellphome and
personal digital assistants. So far five devices including the LG CU500 and two
Sony Ericsson models work with Yahoo’s subscription service. Yahoo, along with
Napster, recently launched a partnership with Cingular that integrates
cellphones and subscription music services more tightly. The aim is to develop
a system such that a customer is able to download music from subscription
services to the phone over the air, instead of hooking it up to a PC.
a month for the portable version. Rather than accessing the online service
through a Web browser, subscribers use a dedicated software program on a PC. In
May 2006 the company began offering a free version of its “all you can eat”
subscription service. The subscribers listen to all music they want at no
charge, however, they can listen to any given song only three times a month,
and they can’t load the songs onto a portable player or copy them elsewhere.
The lost subscription revenue is attempted to be compensated by selling advertising.
Napster’s service; the subscription cost is $15 per month. The company recently
entered a three-way partnership with Best Buy and SanDisk to create a tightly
integrated hardware, software and retail combination.
software ecosystem is the most ambitious strategy that aims at challenging
Apple’s presence in the industry with its iTunes and iPod based synergistic
offering. Zune comprises of portable player and service that are designed to
work together smoothly, but not with other online stores or devices. The 30 GB
player sells for $249 and the “Zune marketplace” offers music two ways –
individual songs for 99 cents, or an all-you-can-eat subscription plan at $15
per month. The critics point out the bulkier design and limitation in terms of
service offerings that include only music and music videos as compared to
iPod’s design and in terms of iTunes service offering that include music, music
videos, television shows and movies. Microsoft intends to offer music sharing
feature that lets friends swap songs wirelessly between Zune players.