Apple's first attempt to sell music on the Internet was so successful that the company sold over two million songs in its first few weeks online. Given that only people with Macintosh computers running later versions of OS X could buy songs from Apple's iTunes Music Store, this is such a success story that it might be worth taking a closer look at what Apple managed to get right and consider if the approach can be applied to market other products.
The idea of selling music via the Internet isn't new, and the ingredients required - the right software and a PC with a CD burner connected to the Internet - have been around for years. What's been missing is a business model that consumers were willing to accept. True to its corporate slogan, "Think different," Apple tried marketing music on the Internet in a way no one had tried before, and it worked.
Previous attempts to sell music on the Internet were primarily based on a subscription service model and used proprietary formats. The record industry went overboard on copy protection schemes, and the public wouldn't buy it. One of the commercial music services not only prevented consumers from burning CD's of music they downloaded, but it also required consumers to pay a monthly fee in order to keep listening to music they had already downloaded. This essentially made it impossible for consumers to collect their own copies of music. It only allowed them to rent it.
Apple was the first major business to understand that consumers want music purchased on the Internet to have the same properties as music they bought at a CD store. These days that means portability. Consumers want to be able to make MP3 files, CD's or even cassettes of the music they buy.
So, Apple created a system allows consumers to buy individual songs for 99 cents each, or albums for ten dollars. Once downloaded, consumers can easily burn a CD (assuming their Mac has a CD burner.)
The core of the Apple approach is based on its iTunes player, which is a digital music player much like WinAmp, Windows Media Player or RealPlayer. All of these play standard music CD's, MP3's and Internet radio stations. Apple added a music store option which integrates into the player and displays as just another list.
The Apple iTunes Music Store can be searched for any song by artist, song title or album title. First-time users are required to create an account and supply it with a credit card number. From that time on, buying a song only requires a person to click on the "Buy Me" button in the song list in order to purchase the song. It is also possible to listen the first 30 seconds of the song to preview it, but that requires a high-speed connection to work properly. (It is possible to use Apple's iTunes Music Store over dial-up connections, but it can take five to 10 minutes to download a song on a 56K modem. Not bad for singles, but a problem for albums.)
Apple's only limitation with iTunes is that is that it doesn't allow anyone to burn more than 10 CD's with the same play list. This effectively prevents people from using the Mac to mass produce a title for mass marketing. However, most users would never exceed that kind of limitation.
Apple's long-term success will be dependent on how many artists and labels sign up for its service. As of press time, Apple was offering over 200,000 songs, a nice number but only a fraction of the titles currently available. So far, some very big names are missing, including the Rolling Stones and the Beatles. However, some very big names have already signed up, including Steely Dan and U2.
There's also a healthy selection of jazz artists, including Miles Davis, John Coltrane, Ella Fitzgerald and Count Basie, but only limited number of titles from each artist. This is also true for Frank Sinatra, Dean Martin and Sammy Davis, Jr.. A number of classical music albums are available as well.
As a test of iTunes, we signed up for an account and downloaded 16 songs. Then we created a CD combining the iTunes tracks with a few MP3 we had created earlier. No problems were encountered and the CD sounded fine. Considering we were resigned to buying several CD's just to get a single favorite on each, using iTunes to buy the singles we wanted saved over $50.00. No wonder iTunes is such a hit.
Apples success provides valuable lessons for all marketing on the Internet. As expected, Apple provided a seamlessly integrated system that required very little effort for the consumer to use. More importantly, however, Apple provided a product with terms familiar to consumers. Apple sold music instead of renting it. Apple didn't try the use the situation to force consumers to give up rights they were used to having, and consumers appreciated it.
Apple's success with iTunes marks a milestone in the history of electronic commerce. Even if Apple never becomes the dominant player in the online music industry, whoever does will probably use a business model very similar to Apple's.
Glen Emerson Morris has been a senior consultant for Yahoo!, Ariba, WebMD, Inktomi, Apple, and Adobe.