Apple Plants Dividend Seed

Apple Computer (Nasdaq: AAPL  ) has finally agreed to pay a dividend. No, not the kind of owner dividend that would have Motley Fool Income Investor subscribers donning their iPods to go dancing in the streets, but a payout to Web publishers who send music shoppers to its iTunes music store.

Wednesday, the computer maker borrowed from Amazon (Nasdaq: AMZN  ) and competitor Roxio's (Nasdaq: ROXI  ) Napster in unveiling the iTunes Affiliate Program, which will allow Web sites to link to content in the digital archives of the iTunes Music Store. Apple will pay up to 5% of revenues generated on click-throughs. At $0.99 per song and $9.99 per album, that's anywhere from $0.05 to $0.50. Apple will issue checks to affiliates when their payout equals $25 or more. That equals 500 songs and 50 albums. (Apple says it has sold more than 125 million downloads thus far.)

To be sure, the music downloading market has been hotter than September in Vegas. The problem is the cutthroat nature of the business. Not only are the margins near zero but also everyone wants in on the game. RealNetworks (Nasdaq: RNWK  ) even hacked the iPod so that music downloads from its Harmony music store would run on the players. And late yesterday Microsoft (Nasdaq: MSFT  ) launched its MSN Music store, perhaps the biggest threat yet to iTunes' dominance.

It would be easy (and understandable) for investors to brush off the iTunes announcement as just the latest salvo in an overhyped digital music war. But there's more to it than that. If the records ever stop playing at Apple, its digital entertainment franchise -- headlined by the cultish iPod -- will take a serious hit. Sure, there's hope that the super-sleek new iMac will revive flagging desktop computer sales, but it's the pod people who have been driving revenues and profits recently. Investors shouldn't expect that to change.

Need more rockin' Foolish iTunes coverage? Try these:

  • When it comes to Apple, RealNetworks is becoming real annoying.
  • Napster lives! Again.
  • Borrowing a page from burger purveyor McDonald's (NYSE: MCD  ) , Apple said last month that it had served 100 million through iTunes.

What do you think? Will the new iMac take over as the next big thing at Apple? Or will the iPod remain king of the hill in Cupertino? Can Microsoft's MSN Music store take a bite out of iTunes? How about Roxio's new Napster To Go? Debate all this and more at the Apple discussion board. Only at Fool.com.

Fool contributor Tim Beyers thinks Apple hit another home run with the new iMac, but he won't be trading in his PowerBook anytime soon. Tim owns no shares in any of the companies mentioned, and you can view his Fool profile here.


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