NEW YORK - When Apple launched its iTunes music store a decade
ago amid the ashes of Napster, the music industry - reeling from the
effects of online piracy - was anxious to see how the new music service
would shake out.
"The sky was falling, and iTunes provided a place
where we were going to monetize music and in theory stem the tide of
piracy. So, it was certainly a solution for the time," said Michael
McDonald, who co-founded ATO Records with Dave Matthews and whose Mick
Management roster includes John Mayer and Ray LaMontagne.
The
iTunes music store became much more than a solution; it changed how we
consume music and access entertainment. It's not only music's biggest
retailer, it also dominates the digital video market, capturing 67
percent of the TV show sale market and 65 percent of the movie sale
market, according to information company NPD group. Its apps are the
most profitable, it has expanded to books and magazines, and it is now
available in 119 countries. This week, iTunes posted a record $2.4
billion in revenue in first-quarter earnings.
"They revolutionized
the retail landscape by making a truly interactive and very
user-friendly space and platform, and they managed to do it by keeping a
great music experience attached to what was very difficult technology,"
said Scott Borchetta, head of Big Machine Records, home to Taylor
Swift, Tim McGraw and Rascal Flatts. "They made it very easy to buy
music digitally, and that's why I think they've run so quickly in the
lead for that space and continue to dominate the space."
But as
iTunes celebrates its 10-year mark Sunday, it faces renewed scrutiny on
how it will continue to dominate in the next decade - or whether it can.
With competition from subscription services like Spotify and other
services like Amazon.com, Netflix, Hulu and others, iTunes will likely
need to reinvent itself to remain at the top of the digital
entertainment perch.
Apple Inc.'s Eddy Cue, senior vice president
of Internet software and services, refused to comment on reports that
the company will launch a radio service or some other service to compete
with Spotify.
"We've been able to add and expand and do a lot of
things to make the product even that much better," said Cue, who was
integral to the creation of iTunes. "Why it's going to be great for the
next 10 years is because people still want access and want more of
what's available today."
At first only available to Mac users,
iTunes debuted two years after Apple's groundbreaking iPod. With a
catalog of 200,000 songs - compared with tens and tens of millions of
songs available today - iTunes entered an industry being upended by
illegal downloading yet still skeptical of the new music store.
There
were more than grumbles when Apple co-founder Steve Jobs set parameters
making all songs available at a cap of 99 cents (today, songs can cost
up to $1.29) and giving listeners more control of what they could do
with music collection in terms of portability and ownership.
"In
the case of the labels, we felt and we were able to convince them that
we had a business proposition that would be better for them in the long
term, and gave them an opportunity to compete with piracy," Cue
recalled.
"So our message to them was the only way to beat piracy
wasn't lawsuits or TV ads or anything, but to actually offer what was
available through piracy and people would actually pay for it if you did
that. So we had to get them to all agree. As part of that, you had to
get them to agree to all of the same rights."
Some in the industry
grumbled about having to accept Jobs' rules; some still do (while
digital sales rise, album sales have decreased and the industry's
profits have continued to drop over the decade).
"To me, it's been
one of the biggest assets to the music business in the last 10 years,
but you'll hear from the labels that Steve Jobs ruined the music
business," McDonald said.
"But to me, it's allowed a place to
expose artists who are gaining popularity in all genres, and although it
has impacted the album sales, I think it has become a real barometer of
what's good and what's popular," he said. "Singles artists aren't
selling albums. Well, they never should have. But album artists continue
to sell albums. If anything, it's given a revenue stream to what would
have been the Wild West."
Lady Antebellum's entire career has been
in the iTunes era, and it's a key part of their sales. "We found out
that ... just around 20 percent of our sales is iTunes," said Charles
Kelley. "iTunes is just something we've always embraced."
iTunes
"changed the music industry completely" and "gave people the power as
opposed to record companies the power, in a way," said singer-actress
Jennifer Lopez.
"It has its pros and cons, I think, for artists,"
she said. "I'm an artist, so I look at it from an artist point of view.
But we're in a new age. It's like anything else. You've got to accept
it."
That new age includes the growing popularity of services like
Spotify and Rdio, where listeners can stream music for free and can pay
a set price to listen and collect songs. Industry watchers have heard
rumors that an iRadio could be launched that would be something like
Pandora, the popular Internet radio site.
12:36 AM
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