Commentary: Facing the music

Commentary: Facing the music

By Forrester Research
Special to CNET News.com
October 20, 2003, 12:05PM PT

By Josh Bernoff, Principal Analyst

Apple Computer’s Windows music store leads its rivals in ease of use and distribution. Together with Musicmatch and Napster, it will catapult legitimate music downloads into the mainstream.

Apple last week announced the Windows version of iTunes, which is both a free music application and an online music store with 400,000 downloadable and burnable songs for 99 cents a track. iTunes for Windows has two strengths:

• Peerless ease of use. In porting its iTunes application to Windows, Apple has maintained all of the features that made it popular on the Macintosh. iTunes’ interface makes it easy to: organize and find digital music files; rip songs from CDs with great sound quality; make playlists; burn CDs and DVDs; copy files to Apple’s iPod portable players; and buy music from Apple’s iTunes store. The strength here is in the integration–everything from iPod support to the store is part of one logically organized application.

• Broad awareness. iPod users are a natural iTunes audience; Apple leads in portable player sales–with 1 million iPod users already–and continues to advertise heavily. Apple will move beyond this base by partnering with America Online, which will include iTunes song-buying buttons throughout its popular music area in a release due before year-end. To further expand awareness, Apple and Pepsi will include a code that enables one free iTunes song download on 100 million Pepsi bottle caps, in a promotion that’s set to kick off during the Super Bowl.

		Related story Business is brisk at the company’s new iTunes music store for Windows. The service draws praise from many, but some users run into glitches.

A crescendo of digital music
The announcement of iTunes for Windows echoes the news coming out of Musicmatch and Roxio, parent company of the reborn Napster. This is the pregnant moment in digital music: Lawsuits are creating doubt among users of free services like Kazaa, while the variety and usability of legitimate digital music services provides a real, usable alternative. All major digital music services already have hundreds of thousands of tracks from all the major labels and many independents, and most have liberal burning policies and support portable players.

In this environment, the winning services will combine the very two elements on which Apple has focused:

• Distribution and awareness. Apple recognized that its service wouldn’t succeed on Windows without a lot of chances for consumers to try it–hence the AOL and Pepsi deals. Napster’s biggest problem, despite its name recognition, will be getting people to try its service. BuyMusic’s focus on TV advertising won’t work nearly as well as Web-based distribution, which reaches people at their computers, allowing impulse downloads. Successful services will partner with portals, broadband suppliers and high-traffic sites like Amazon.com and eBay to promote trial downloads.

• Ease of use and integration. Trying a music service is great, but repeated, frequent use is what creates ongoing sale opportunities. For consumers to grow to love a service, it must ease a variety of digital music activities like organizing playlists–not just buying. This is what will make iTunes sticky and should build

up sales at other music services that integrate jukeboxes, like Musicmatch and Napster.

Keeping time with the times
Apple should get out to an early lead in music downloads, based on its strength in both distribution and ease

of use. Here’s our assessment of the prospects for the other recently launched (or soon-to-be-launched) music services:

• Musicmatch must convert and expand its base. With 37 million users for its jukebox, Musicmatch has a head start. Its music service, integrated into the jukebox, excels at music recommendations. To match Apple, Musicmatch must develop tighter relationships with portable players and romance a high-traffic portal like Yahoo.

• Napster needs better distribution. Napster’s new service is the closest to Apple’s in ease of use, including a simple system for CD burning. It’s integrated with a new portable player due out from Samsung and will add CD ripping in the next release. Although it has a famous name, Roxio needs to boost awareness–a relationship with the Windows Media site won’t be enough. Napster should also make itself the default music choice of broadband suppliers like Comcast and Verizon.

• MusicNet and RealNetworks’ Rhapsody must reach beyond subscription models. MusicNet has attracted 140,000 paying subscribers through its AOL relationship but will now have to compete with Apple for AOL’s music buyers. To survive, it must accelerate its next version by featuring a la carte downloads and expand distribution beyond AOL. Similarly, Rhapsody must branch out beyond subscriptions, or it will end up marginalized.

• BuyMusic won’t make it as a standalone store. In contrast to Musicmatch and Napster, BuyMusic is just a store–it doesn’t manage music files. This, plus the lack of partners that’d drive traffic to the site, will keep BuyMusic far behind other players in this market.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.