Above: The future of iTunes? By dave_mcmt.

By now, you’ve likely heard that Apple’s iTunes Music Store has taken the #2 spot in music sales — all music sales – right behind retailer giant Wal-Mart. This tends to lead to one of two somewhat gloating reactions from Apple advocates. One is a sort of “rah, rah, go Apple!” attitude. The other is along the lines of “hurrah, discs are dead, go throw your CDs in with your eight tracks and vinyl while we leap into the future!”

A typical sentiment comes from Scott McNulty on The Unofficial Apple Weblog: “I have an iPod, an iPhone, an Apple TV, and I manage all my music with iTunes as I am sure many, many other people out there do as well… “

Eep. Any votes for “I have a Sony Cassette Walkman, a cheap mobile phone, a … TV, and I manage all my music on my bookshelf”? Is that more boneheaded nostalgia?

Of course, it wasn’t supposed to be this way — any of this.

Below: A future beyond iTunes (allegorically, perhaps). By mclgreenville / memorymotel

First, it’s hard not to notice that Apple’s success involves a somewhat Borg-like approach to media consumption. All Apple gadgets, all Apple software. Ironically, even Windows users — the people Mac users had for years railed against as overly conformist or beholden to Microsoft-branded stuff — use a variety of listening gadgets and happily reject the clunky Windows Media Player for Winamp, Mediamonkey, and foobar2000, among others. Brand loyalty aside, what if you want other control over cataloging, encoding, and mobile listening? It’s your music collection, after all.

But more importantly, iTunes has itself become a kind of Wal-Mart for music: a retailer so large, it starts to impact the rest of the business and stifles variety. And that wasn’t the vision for online music distribution; supposedly we were all going to be rid of major labels and one-size-fits-all outlets. So, that’s the bad news — the good news is, iTunes’ giant presence may be the best thing that ever happened to music sales. Here’s why:

  • Apple’s dominance scared the record industry into dumping DRM. Lots of ink has been given to Steve Jobs’ “Thoughts” memo, which called for eliminating DRM because it’s bad for consumer. But iTunes’ DRM-free music initially cost more and covered less — and Apple was beaten by others to going entirely DRM-free. The real reason major labels dumped baked-in protection was they realized adding DRM to music gave the iTunes/iPod combo total control over the market, and they (rightfully) feared an Apple-dominated music world. Without DRM, you use any player and mobile device you want, meaning you don’t have to buy it from any one vendor. Little wonder that many labels went to nearest rival Amazon first. Dropping DRM wasn’t for the consumer; it was a competitive move.
  • Sales of music aren’t down; they’re just moving from physical to online media — then back again. The “sky is falling” argument from labels generally comes down to this: physical media sales are down enough that they’re wiping out the benefits of explosive growth from online sales. Physical is down, online is up, and online isn’t yet making as much money as physical sales did at its peak. But that money is going to legit, online sales, not piracy. And that’s a big relief to the rest of us; the labels can be left to figure out how to make money on the new format. Meanwhile, just as Radiohead offered a premium physical-CD for its best fans….
  • The CD isn’t dying — it’s just becoming a luxury item. Bloggers have been comparing the death of CDs to the death of vinyl. Maybe that’s the right comparison, but “death” isn’t the right description — for either one. First, there are still billions in CD sales, so don’t expect CDs to go away any time soon. In fact, the CD could rebound slightly if CD sales outlets and labels can find a way to adjust their business model and releases for this new music listening market. One fair bet: make CDs a luxury item. Just ask vinyl. Vinyl has made a resurgence among hard-core aficionados and DJs, people who love its sound, its packaging, the community of people around specialized retailers — all things that could also be true of CDs. The numbers may be small, but if independents can pick up big margins in little markets, who cares? Take the money and run.
  • iTunes’ embrace of a Wal-Mart audience means opportunities for other online retailers. I’ve got two words to sum it up: American Idol, for which Apple is now an official sponsor. Apple has traded in its indie cred for big music business. And tastes in music are more diverse than ever. That means iTunes has nowhere to go but down, as stores like Beatport, dancetracksdigital, Other Music, Bleep, Deutsche Grammaphon pick up specific genres and retailers like Amazon work to win out with unique features and varied content. Apple’s likely to remain healthy, sure, but competitors have both the reason and the opportunity to fight back.

Nothing against Wal-Mart — I’ve bought the odd item there. Or Apple — without Apple, I expect we’d still have bungling majors building broken services of their own, like the pre-iTunes, DRM-laden Napster reactionary stuff. But music lovers benefit from choice. And I think Apple’s very dominance, alongside the death of DRM, could paradoxically let that choice happen.

But let’s be clear: no matter how much you like Apple, one retailer, one store, and one mobile device is not a formula that helps music or encourages innovation. It means one company controls pricing, one company controls assortment, one company decides what margins go to music labels, and one company decides what features you want. That’d be a bleak picture, except I think what Apple is doing is carving out a market it won’t be able to continually dominate — meaning the “one” in all of those will disappear soon. You know, like the eight track.

(photo top right: ktpupp)

  • Zach

    I wholly agree on CDs as luxury items. I have a Mac, iPod, and manage all my music in iTunes, except I have not bought a single song from the iTunes store. Almost all of my music in iTunes comes from CDs I ripped to lossless format. I am one of the rare people (probably not rare amongst CDM readers) that cares about fidelity, so I have nice headphones for my iPod and use reference monitors on my iTunes computer. Until the iTunes store (or anyone other than the Philadelphia Orchestra) starts selling lossless downloads (or better yet, how about 24-bit?), I will stick with CDs. Even then, there is something comforting about having a physical "backup" in the event that my hard drive dies.

  • nylarch

    For me this past year was the year that buying music online started to make sense so I agree that digital sales are going to fill the void. I hated DRM on the iTunes store from the beginning just because of the annoyance – it was like using a dongle – so I just pirated out of convenience. But now that some cool sites exist to buy songs at 320kb I hit up bleep, turntablelab and beatsource (beatport's new offshoot) and spend a good amount per week. I think many will start doing the same.

  • http://kook.interdalmational.com Lord Kook

    "Is that more boneheaded nostalgia?" Yes. Any arguments against the future of music being completely digital are foolish. The only exception I see is vinyl, and only as a format for certain DJs. Of course, you never know :: with every new paradigm comes a back-lash, so maybe in 5 years everyone will be putting out their music on MD or something.

  • http://www.myspace.com/sclr sclr

    i think cds and vinyl will live on. listening to mp3s is fine but sometimes higher quality and even some good old analog tangibility(scratches etc) is pleasurable to the ear. i would even go so far as to say its good for you.

  • http://www.createdigitalmusic.com Peter Kirn

    @Lord Kook: I was joking about the cassette walkman, but wait a minute here.

    CDs, ahem, *are* digital. Am I missing something? And physical storage media as delivery mechanism is a perfectly logical thing in the future as it is now.

    Vinyl is popular now, long after it should have been gone, but yes, as an exception — an exception that's profitable for a handful of boutique labels/retailers selling to that market. And if they're making money (which some of them are), they're not going to particularly care about sweeping generalizations about the future of music the blogosphere tends to make.

    Anyway, I love digital downloads … my point is, aside from the CD (or other physical media distribution devices, like flash memory) surviving into the digital download age, I think — I hope — we'll have juicy options aside from the big and bland iTunes Music Store.

  • http://www.sighup.ca Steve

    Apple had indie cred to trade? When?

  • http://www.cloudmover.net Cloud

    Peter, you think just because Apple signed a lucrative deal with "American Idol" means it's got nowhere to go but down? What a comically simple thing to say.

    The "American Idol" deal drives buyers to the iTunes store and generates income. It's money. Plain and simple. It would be foolish to read anything more into it. I think you are still locked in the brick & mortar mindset of the past. Remember, since there is no longer a restriction on store shelf space no one is left out. The "Idol" deal doesn't drive out Indie bands or trade in some nebulous faceless "Indie cred." It just adds something else to the store shelf.

    To me that is iTunes (and the MP3 phenomenon in general) greatest promise. It is an open marketplace where you buy what you want, when you want, at a reasonable price. Heck, I could get a track on iTunes if I so desired (http://www.tunecore.com). I think it goes without saying, that I couldn't could get an album in Wal-mart without the blessing and payolla of one of the majors.

    The way I see it, the greatest battle for a working musician – getting my track in the store – is "almost" won. For the first time, an Indie band/musician with the craziest atonal tunes is in the same store as the hottest generic teenybopper of the moment. That is a good thing.

    Don't diss Idol and it's fans just because their music is also on the iTunes digital store shelves. There is MORE than enough room for us all.

  • kj

    "Nothing against Wal-Mart…" really? you have "nothing against wal-mart?" well, dude, if that's the case, might i suggest you do a little reading up on wal-mart? i'm guessing after you do that you'll have a LOT "against wal-mart."

  • dead_red_eyes

    Yeah, Wal-Mart is the devil … even more so than Best Buy.

    I'll by vinyl any day over a CD, and I'll buy a CD any day over a digital download. I just love vinyl. Quality stuff if you ask me.

  • http://www.createdigitalmusic.com Peter Kirn

    @Cloud: Sure, absolutely there's enough room for us all — my point is, if your tastes tend toward Bach instead of American Idol, you may be better served by another store. (And I'm only half serious about indie cred — to take the Classical example, there are concrete reasons you'd make that choice having to do with recording quality, selection, and even things like MP3 tagging accuracy.) Not dissing Idol's fans — whatever, I enjoy my occasional reality TV fix (Project Runway!) — but just like some people inexplicably can't stand polka music (search me why), some people are going to tend in another direction.

    And, in fact, the Wal-Mart menality is that you serve interests with one, vast store, controlled by a single interest. Sure, digital solves the problem of selection — unlike Wal-Mart, you don't run out of shelf space, necessarily. But it doesn't solve the issue of pricing, format, navigation of the selection, tagging, label relations, etc., etc. I think an indie artist *should* try to get on iTunes — but I think they also benefit from smaller, curated stores that relate to their interests, or even the more intelligent metadata on a competitive "big box" online store like Amazon. And everyone benefits from competition.

    It's even scarier to imagine what it means for music if Apple controls the store (iTunes), the computer player (iTunes), the mobile player (iPod), the other mobile player (iPhone), and your TV (Apple TV). Not only do you have power concentrated in a monopoly, but this kind of vertical market also tends to stifle any creative thinking, because you have to maintain the vertical.

    @kj: I should have ammended that to "nothing against Wal-Mart I'll bring up in this particular story." ;) And I have nothing against Wal-Mart shoppers, per se; I've been in rural Kentucky towns where there's literally nothing else around. But yeah, plenty against Wal-Mart.

  • kj

    ok, that's cool, peter. didn't mean to bust yr balls! ;-)

  • http://schubert.ece.drexel.edu/drupal-5.2/ Patrick

    I appreciate everyone opinions and weighing in on the big picture. So I'll just share a relevant small-picture example that I think is the most elegant solution I've ever seen.

    When I decided to become a completist for the catalog of NYC-guitar-drone-gods Growing, I asked them at their merch table about their new records. They sold their new EP "lateral" (on Social Registry label) on both cd or on heavy vinyl (with awesome packaging), and the latter comes with a certificate for free hi-fi digital download From SR's website. The certificate literally says, "to thank you for your good taste in supporting physical media, we offer you this free digital download copy of this album"…

    I hope they maintain this policy for all their future recordings on that label, since I'm already re-buying their back-catalog on vinyl.

    cheers,

    Patrick.

  • http://amoebafunk.com amoeba

    i guess i am having a hard time following your argument peter. on one hand you say apple has everything locked down, then on the other you point to examples of how other things have sprouted up around that.

    i am perfectly happy with the ipod/itunes (well, itunes kinda sux, but it's a great manager for the 'pod). i've had my pod for years bouncing around in my jeep, and it's never given me any trouble. can't say that about any other player i've used (or the associated management methods).

    as far as ITMS, i have only bought two things from it. i bought a few things from amazon, but overall i deal directly with labels or even artists whenever i can. what i listen to usually isn't found in the "big" outlets anyways, but most people seem perfectly happy with ITMS or Walmart because they have what they want and make it easy to get.

    love or hate ITMS, it was the one that changed the game. they proved it was possible, and they did it well. no matter how big they get, there will always be plenty of room for the fringe popping up where it can, where it works and makes sense.

    perhaps you are more upset with the market itself, rather than those serving the market. kinda like drugs – no one would sell it if no one wanted it. personally, i get my drugs (music) from the small corner guy instead of the big pharmacy, but neither of them are stepping on each other from what i see. different markets. different customers. plenty of room. and more opportunities for everyone than ever before.

  • http://www.createdigitalmusic.com Peter Kirn

    Well, iTMS' dominance has had two major impacts that I could say are positive — though unintentional on Apple's part:

    * Apple was perfectly happy to use the FairPlay system as a way of locking people into iTunes/iPod. Once they had conquered both the player and sales market, *then* they decided to "get religion" on going DRM-free. But because FairPlay is tied to lock-in to Apple, and that frightened labels, yes, it did help motivate them to drop DRM.

    * Apple's insane dominance has at least motivated other people to start a business — and to see the potential of the market. And yes, iTunes is perfectly happy managing media bought elsewhere, as we see working elegantly with Amazon MP3.

    The downside of this dominance, though, is that Apple has taken a massive bite out of the market, and it's going to be difficult for other stores to go up against it. And that can make the business model for the people who actually own the music tricky, because unlike Apple, they can't profit on selling players.

    Yes, iTMS changed the game. Yes, there's room for other players. I guess I'd just like to see those other players muscle in a bit on iTunes' market share, lest the music market become like … well, Wal-Mart.

  • http://amoebafunk.com amoeba

    it was the big labels themselves that insisted on DRM. apple was smart enough to take that limitation and turn it into an advantage. but at the same time, i truly believe that it was the quality and ease of use that got apple on top – not some evil DRM lock-in. if apple were allowed to drop DRM tomorrow, they would still stay on top for a long long time. i'm not rah-rahing apple here – they are a business doing smart business things. now the labels, in their infinite wisdom, are STILL seeing their grip loosen no mater what they do. their business model is dead.

    but i think i am starting to see we may differ here. in your last comment you state how it may be difficult for other stores to go up against apple. that may be true, but i doubt it will be that way forever. the next ITMS could be just around the corner. but either way, that doesn't change anything else at all. my point would be this: there are MORE stores than ever before! and the bigger ITMS gets, the MORE stores there will be. hell, every musician can be their own store now. that's the big thing here, i think. technology is such that the *distribution* methods (which is where all the control traditionally was [and the physical media of course]) have totally changed, and is available to anyone with a cheap pc now. i don't NEED sony or emi to record and produce and market and distribute and sell (and steal from me) my music. and i certainly don't need ITMS to sell it. they are the biggest market, and they will take my music and sell it if that were the market i wanted. but i am better served elsewhere.

    as you stated, if i want classical, i won't go to ITMS (hell, i wouldn't even want CDs for classical anyway). if i want dub-core-space-folk, i will go elsewhere too – probably directly to the only band that plays that sort of thing.

    there will always be a #1 retail outlet. for now, ITMS rules it. whatever is next, you could probably use your same points against. what will hurt apple the most is that you need their hardware to play (DRM'd) music from their store. what got them to the top, and what is keeping them there for now is the quality and integration of the 3 components that make it all work.

    the nice thing tho, is i can use music from anywhere else (except other proprietary DRM schemes) with my ipod. i am obviously not locked into ITMS. they may have taken a massive bite out of the market, but it's a bite *someone* would have taken. they had the vision and the acumen to do it. one last time – the probably won't be on top for ever, but whatever takes their place will have to be even better.

    i will agree with you that ITMS == Walmart. great from most people – cheap, easy, convenient. but i never shop at either. and the good thing is, i don't have to.

    i hope i don't come across as an apple fanboi – i really like mac and the OS, but apple pisses me off just as much as any other company. they have power and they abuse it, but they also have quality and vision that keeps me a customer. i just fail to see how they are hurting the market by being on top… they are a tech leader and paving the way for other amazing things to happen, from them and elsewhere.

    walmart, on the other hand, is a cancer. but i won't even go there.

  • Peter

    "iTunes has itself become a kind of Wal-Mart for music: a retailer so large, it starts to impact the rest of the business and stifles variety."

    Ah, but that's the beauty of the digital realm.

    Large retailers must carry physical inventory. You need to have a place to put that inventory, like a warehouse. Warehouses cost money. You don't want something that isn't going to sell taking up valuable space sitting in a warehouse that could be used for storing something that IS selling.

    So Walmart wants to only stock stuff that is going to sell–and sell fast. They don't want to buy 50 CDs if it's' going to take a year to sell them all. They want to buy 5,000 CDs that will sell in one quarter.

    Unlike Walmart, Apple has no physical inventory. Because their inventory is digital, they can store more of it in a given amount of space (how much can you store on a hard drive? How much space does it take up? Compare that to the amount of space taken up by the same amount of music on CDs).

    So Apple can afford a much larger "inventory" of music than Walmart because it's much cheaper to keep around and there's less risk in music which doesn't sell in large volumes–It costs Apple as much to keep a copy of the #1 selling song as it does to keep the #1,000,000 selling song.

    So I don't think you need to be concerned about Apple's "variety" of music.

  • http://www.createdigitalmusic.com Peter Kirn

    Actually, amoeba, I pretty much agree with everything you're saying there!

    My only concern is, I haven't seen numbers lately, but if Apple continues to push 70-90% of the online download sales, that seems to me to be an unhealthy number. So by "nowhere to go but down," I mean in share … I'd hope that other players, big and small, take a bit of that share as the overall market grows.

  • http://rvjaeger.com ryan j

    I refuse to buy an album that is not a CD or Flac. Of course I can't find any of the music I like in stores these days and a lot of the retailers don't offer, or don't want to offer Flac yet…

  • Downpressor

    This thread is pretty sad. There is in fact a great variety of online music vendors nowadays catering to all sorts of tastes and technical preferences. There are plenty of stores outside the US that never make it into the scope of these discussions.

    There are at least 5 different digital tunes vendors selling my work in Japan and iTunes sells my stuff worldwide. If it wasnt for them, I wouldnt have the resources, time or knowledge to contract with mobile carriers, local ISPs or any other resselers in places I cant speak the language, etc.

    Theres no threat of monopoly here, theres nothing forcing me or any other small fish to deal with Apple. I can at any time go back to selling vinyl only.

    As a customer I find all kinds of neat stuff on iTunes. Just last night I got an album from a band called Yidcore that I'd never heard before but found doing a search for "If I Were A Rich Man" (Fiddler on the Roof). Been plenty of cases like that where I go looking for one thing and end up finding and buying something I had no idea existed but it turns out I like.

    In short I see no threat at all to musical variety here and as a customer I find lots of benefit.

    All you folks bitching about WalMart? Come live some place without big box discounters and see how much you enjoy paying Everyday High Prices for stuff you need.

  • AdamC

    My 2¢ worth, at the end of the day the most popular seller is the one that offers the most convenience.

    There will always be die hard vinyl fans, cd fans but when it comes to MP3s you can store 2000 songs in whichever favourite players of yours and let it run through the full collection of yours without having to get up from where you are sitting and change the cd or vinyl.

    The same with Apple TV it is the apple of the future where you can store all your movies and watch the one that you fancy at that moment. Try front row and you will never look back but if you want to watch your movies six inches from the screen then i would strongly recommend blu-ray. (Front Row works with VLC too)

    I wonder if 99¢ is not a good price then what is? or you would prefer the labels to charge at whatever they want.

    Confession – I don't buy cds because i can't afford them nor vinyl because I can't afford to own a Macintosh sound system.

  • Eliakim

    Apple never wanted DRM in the first place. It was the big labels that wanted it. And now they find that what they wanted turned into a big millstone around their neck… LOL! It serves them right. So, they are trying to "backtrack" as fast as they can (giving limited amounts of DRM-free music to others) and trying to regain some control *over* the consumer market, instead of listening to what consumers want. They simply want to control the consumer market in order to practice their extortion on the consumer, as they are used to from the past. They're unhappy Apple has broken that stranglehold that they've had.

    So, I don't trust the big labels in that they somehow have the consumer's interest at heart and they want to help the consumer and break down the "big bad Apple" who is causing all this trouble! LOL…

    Nope, if they ever gain any amount of control over the market, once again, they'll simply slap on more draconian DRM and make sure that no one ever caters to the consumer — ever again. So, don't let them do that.

    Apple is the one who has the consumer's best interest at heart, simply because they make the best products in that they try to figure out what benefits the consumer the most, while (at the same time), Apple is going to make money at doing that. Both win!

    The "proof" that Apple is good at catering to the consumer is simply their overwhelming market share in this segment. It doesn't happen that way simply from glitzy products or lots of advertising or the "cool factor" alone. It's something that the consumer sees as a definite benefit to them, over and against the big music labels.

    I hope the big labels go down the tube and the artists start going direct, through intermediaries like Apple (and bypass the labels) and get a bigger share themselves, along with Apple keeping on making better products for the consumer and the labels lamenting that they lost control of an extortion market that they used to rake in the dough with.

  • robin parry

    as a music lover and a musician for 35 years, either way being paid for the music you slave over is now a vanishing possibility, so to appears ANY originality, come on, with all this amazing software, why does it all sound sooooooo unoriginal, techno ended itself in a cul de sac, whats next? something original, a new aphex perhaps, but please stop the really bad clones, a track isnt music or art unless there is an audience present! and it appears that most dont even know who their listening to ON THEIR OWN IPODS. music has been turned into a commodity to help sell things, trigger emotional hitpoints, no more something to inspire, anger, critisize or even spur us to do better, just wallow in the effluent of our own sick cultre's triviallity,

  • http://www.jchot.com J-chot

    ok here goes:

    VINYL:

    -doesn't work in the car

    -hard to hand out at a show/expensive to produce.

    -degrades with use and requires special care.

    -the absolutely astounding and staggeringly gigantic variety of discoverible treasure at prices cheaper than conaco/AMPM hotdogs at more places than you can shake a stick at.

    TAPES:

    -horrible, but novel quality.

    -CHEAP!!!

    -a vast untapped sampleing source.

    -indie rock irony bonus points.

    MP3s

    -can be free

    -easy to swap/dupe/distribute online.

    -hard to hand out at shows.

    -those car stereos that can play thumb drives are the greatest inventions ever. no more spindles in the car.

    -no one will find my, or anyone elses mp3s at a thiftstore years from now/no second hand sales.

    -mp3s are like buttholes and myspace accounts.

    everyone's got em. you spent 200 hrs on your tracks, but you're on the same level of "johnny the mash-up kid" who pirated an old copy of cool edit pro.

    - you can't hustle mp3s..seriously.

    cds:

    -easy/cheap to hand out

    -cheapest physical medium to mass produce.

    -gets damaged more easily than any other medium

    -way harder to ignore than mp3s

    -totally 10 years ago…I mean really. cds are the new tapes.(wink)

    I think there's enough room for everyone here.

  • http://www.jchot.com J-chot

    hey robin perry, your paradigm sucks.

    techno is alot like jazz, large amounts of both sound the same when taken lightly.

    "a track isnt music or art unless there is an audience present!"

    you mean to tell me that my be-mulletted iron maiden coverband isn't art!!

    there will ALWAYS be copycats. they will be cast aside with time just like all those beatles imitation bands that no-one even remembers

  • clydicus

    What about "iTunes Exclusives"? To me, the idea of artists releasing tracks as exclusively available to one hardware platform or another is "really bad for consumers*, and in the long run bad for artists.