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Apple Boring? No, Brilliant!

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Some might say that the 2009 Macworld Expo keynote was boring. Apple (Nasdaq: AAPL  ) didn't present any groundbreaking new products, didn't redesign the old ones a whole lot, and Steve Jobs wasn't even on stage. "No surprises at Apple's final Macworld," sighs the Guardian. The event "won't be missed" according to InfoWorld. "Macworld fizzles," screams Reuters. Last year's underwhelming event looked positively awesome by comparison.

Of course, they're all wrong. This was the most exciting keynote I've ever seen.

The iTunes music store is finally breaking free of its old DRM shackles. From now on, every new song in the world's best-selling music store comes in the unprotected iTunes Plus format, and you won't need to verify a license for each file before copying it onto your music player of choice. If you don't have an iPod or iPhone, every song can be converted to the industry-standard MP3 format or burned to as many CDs as you like.

That's insane! Piracy everywhere!
The music industry has been fighting this move for ages. All the way back in 2007, Jobs said that he hoped to ditch DRM altogether -- but it took this long to get it done. A new three-tiered pricing structure ranging from $0.69 to $1.29 per song replaces the old $0.99-per-tune standard, in what looks like an Apple-y concession that helped the DRM-free see the light of day.

The record labels feared massive piracy cutting into their CD sales. That's no different from old worries about tape swapping, taping songs off the radio, or the movie industry's home-video recording woes. All of those trends and innovations sure changed the face of the entertainment industry, but none of them killed sales altogether. Content providers simply had to adapt to new ways of doing business. Now, that's happening once again.

Smart artists and forward-thinking record companies already think of file-swapping and downloading as cheap or free advertising, rather than a black hole sucking money right out of their pockets. Big names like Nine Inch Nails, R.E.M., and Radiohead are experimenting with online publishing strategies, and they seem pleased with the results so far. Unless Sony (NYSE: SNE  ) , Universal, EMI, and Warner Music (NYSE: WMG  ) want to risk their prized stallions walking away to independent deals or no label at all, they had better shape up and embrace the new reality of digital publishing.

Proof, meet pudding
Give Apple a couple of quarters to prove the remaining skeptics wrong. I predict that the unrestricted file formats won't hurt iTunes sales in the slightest, and I actually expect growth rates to pick up steam. The iPod may have a headlock on the market, but some of us still prefer a SanDisk (Nasdaq: SNDK  ) Sansa, my own Creative Zen, or even the Microsoft (Nasdaq: MSFT  ) Zune. Apple's design choices are very specific, leaving plenty of room for niche players around the leading iPod player. This company doesn't reach for the lowest common denominator and the mass market; it prefers high-end consumers with high-end tastes that create "raving fanatics."

And don't forget that some ultra-conservative consumers might not have bought a media player yet, simply because of the format issues -- you don't want to pick the equivalent of the HD-DVD if the Blu-ray might kill the competition. That kind of skeptic has probably been buying digital music from the (Nasdaq: AMZN  ) MP3 store so far, and may come over for a fresh look at iTunes now. Six million Amazon tunes pale in comparison to the 10 million iTunes songs.

With the market leader going to a completely open place, and inviting all comers to join it, there's no reason to hold off any longer. Apple just expanded its addressable market. And the company is leading the way into a new era of open, cheap, and convenient media consumption.

Boring? Disappointing? Fizzled? Open your eyes, guys and gals. It doesn't get any better than this.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. He bought the Zen for its built-in microphone, way before the iPhone let you record interviews and such. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (2) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 07, 2009, at 3:44 PM, xxmiller1 wrote:

    Why not DRM free movies? Same difference, right? Only morons are going to pay $27.99 for a Blu-Ray movie.

  • Report this Comment On January 07, 2009, at 4:02 PM, rfaramir wrote:

    Apple's 'concession' is just good business sense. More money will be made from popular hits at $1.29, since demand won't slacken much with the increase. More money might be made from oldies going for $0.69, since many more should be sold. And more money will be made on the rest since it's all DRM-free now.

    I appreciated Apple fighting on the consumer's behalf by resisting tiered pricing up to now, but really, it's not confusing or burdensome. And I'm really glad they got rid of DRM in return.

    I'm long AAPL, I program Macs (not for Apple), and will purchase more from iTMS soon.

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