BusinessWeek: Online Music Battle Is Not Over, Is Just Starting

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Some may see the battle for online music download supremacy as over, since Apple has over 50% of the downloads, and sells the #1 portable digital music player. According to an article at BusinessWeek, itis important that Apple not be content in its success, for not only is the battle not over, it is just beginning. With companies like Walmart, Virgin, and Sony jumping into the ring alongside such existing services as the now-legitimate Napster. In addition, Apple has more a fight on its hands than Microsoft does, due to the majority of online music download services using Microsoftis WMA format, as opposed to Appleis chosen AAC format, or the popular MP3 format. From BusinessWeek:

That may sound like a good way to lock customers in. For a while, I thought so. But the announcements of new online music stores keep coming. And Napsteris parent company has raised revenue guidance for its online music sales to $5.5 million, from the $3 million range, for the quarter concluding at the end of March. That translates into a run rate of 5 million or so songs per quarter, which is an improvement -- but still a far cry from Appleis music sales, which are in the tens of millions of dollars worth of songs each quarter.

Jobs himself recently acknowledged that Apple could miss its target of 100 million iTMS songs sold by April. Add up these discordant factors, and the competition for iTMS could start to stiffen in 2005. Apple may wind up isolated with a standard nobody else is using.

It doesnit have to be this way. Apple could still guide digital-music standards for years to come -- and create a more open, competitive marketplace that will ultimately benefit everyone -- except Microsoft. How? By letting go of FairPlay and trusting the market -- as well as its own ability to make killer consumer devices.

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This stands Appleis traditional business model on its head. But the impossible already happened when Apple started building products for Windows. Iill take the margins on software over those for hardware any day. And I would take a smaller share of a much bigger digital-music pie over the prospect of facing down Redmond and everyone else in what could turn into a really rough music war.

You can read the full article at BusinessWeekis Web site.

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