Apple has benefited mightily in the past decade from the shift from CDs to online music services — a shift it helped set into motion with the unveiling of the iPod in 2001. Two years later, Apple launched the iTunes music store offering songs for 99 cents apiece.
During the past year, iTunes has faced some stepped-up competition from both Google and Swedish-based Spot-ify. Google introduced a music service that lets users buy songs through the Android Market, and the European music-streaming startup Spotify offered an upgraded shopping system that allows users to purchase entire playlists of MP3s with a single click and sync them directly to their music players.
Google has partnered with more than a thousand record labels (including Vivendi SA’s Universal Music Group, Sony Corp.’s music unit and EMI Group Ltd.) in assembling an offering of some 13 million songs that users can share on its Google+ social network. Spotify is coming at iTunes from a different angle than most other sync platforms, starting out with a strong inventory, more than a million subscribers and a war chest estimated at $100 million.
Thus far, Apple has fended off competitors by issuing frequent upgrades of the media-management software to thwart third-party iPod synching. One downside of that strategy has been that, over time, iTunes has morphed and bloated into an increasingly confusing and compartmentalized hodgepodge of products jerry-rigged as one. In terms of ease of use, iTunes is the least Apple-like piece of software the company produces. While version 10.5 brought support for iOS 5 and iCloud, as well as some small changes to the user interface, most observers agree the software must trim down and get back into fighting condition in preparation for the coming challenges to its market dominance. Besides Google and Spotify, iTunes is also facing onslaughts from San Francisco startup DoubleTwist and a Seattle-based outfit known as Amazon.com.
The victor in this struggle will claim the hearts and payment methods of a user base that, in the last fiscal year, generated $6.3 billion. It will be interesting to see how Apple does it.