Apple, Microsoft Trade Barbs Over Consumer Choice of Music Services, Players

On the day Microsoft officially launched its online music service, Apple Computer responded to accusations that it doesnit offer consumers choice in music file types by saying its number one position as the most popular portable music player and online music service proves people are choosing Appleis products for a reason.

On Monday, Christine Andrews, lead product manager of Microsoftis MSN Music service charged Apple with not offering consumers freedom of choice.

"iTunes has done a great job of helping to elevate the (digital music) market," Mr. Andrews told CBS "Weire different because Apple is a closed system. If you want Apple, you have to use the iPod. A lot of people want choice and we offer that."

By saying "closed system", Mr. Andrews was referring to the decision by Apple Chief Executive Steve Jobs not to license the companyis Fairplay Digital Rights Management (DRM) technology to competitors, thereby forcing consumers to buy downloaded music only from its online music store.

Late Tuesday, Apple shot back saying consumers have already made their choice known by making the iPod and iPod mini the number one-selling portable music players in America and the iTunes Music Store (iTMS) the number one music download site in the U.S.

"92% of customers buying hard-drive based music players are choosing iPods, and over 65% of customers buying any type of portable digital music player including flash-based players are choosing iPods," Apple said in a prepared statement obtained by The Mac Observer.

"This means that the iTunes Music Store, with its catalog of over 1 million songs, works with 65% of all MP3 players and 92% of all hard-drive based music players being sold today. There is a lot of customer choice happening today, itis just that Microsoft doesnit like the choices customers are making."

On Tuesday, TMO was first to report Appleis market share of actual units shipped in August stood at 65.8% compared to 27.6% in August of 2003, according to market research firm NPD Group. Itis closest rival was Rio at 6.4%, followed by iRiver in third with 5.6%. The numbers are based on all types of portable music players - hard drive-based as well as flash memory-based.

Of HD-based players, Appleis market share of actual units shipped in August stood at a whopping 92%, compared to Rio with 2.5% and Creative Technology at 2.3%. A year ago, Apple controlled the same sector by 52.6%. Itis closets competitor then was Rio with 7.8%.

With sales of 125 million digital downloads, Apple maintains it currently controls a 70% market share of the online music service business. In actually fact, Apple is calculating itis own market share number based on its knowledge of downloads from its iTMS and subtracting from the total number of online music service downloads reported weekly by Nielsen/SoundScan, according to reliable industry sources familiar with the online music industry. There is no independent service auditing download numbers or reporting market shares of the music download industry.