Want a recipe for hype? Start with a buyout rumor that is so outlandish that it almost seems plausible. Set that aside in a Crock-Pot. Let it simmer. Then sprinkle in a dash of reality by introducing a simple yet related new service. Oh, and yes, make sure you still serve it while it's hot.
Apple Computer (NASDAQ:AAPL) played to a full audience last month when whispers of the hip computer specialist attempting to acquire Universal Music Group from money hungry Vivendi (NYSE:V) made headlines scream.
Last week, we found out, once and for all, why Apple was meeting with Vivendi in the first place. It was simply trying to secure the record label's content library for its new iTunes Music Store. What did the speculation buzz ultimately accomplish? I'll tell you. Apple got more publicity for a service that's only available to the 3% of the world (less than 5% of the country) that's powered by its computers than the record labels did when they launched pressplay and MusicNet for the other 97% two years ago.
While Apple's service will be rock and rolled out for the Microsoft (NASDAQ:MSFT)-fueled majority later this year, there are some very good reasons to get excited about Apple's entry into the digital music market right now. Earlier service incarnations like pressplay and MusicNet were plagued with more strings than a marionette convention. Pitted against the widespread proliferation of peer-to-peer file trading sites like KaZaA and Grokster, the legal services had to deal with the obvious: The prohibitive label-run sites were not only more expensive than free, but they were also less convenient.
CDs vs. P2Ps
Apple's service is simple and relatively unencumbered. Each download is available for $0.99 and you can then stream, burn to a CD, or transfer the track to a portable MP3 device with generously loose limitations to your heart's content. For the tens of millions of you out there who have tried to rationalize or sugarcoat your file-sharing inclinations, today I'm here to tell you that your crutches just got shorter.
Before I get branded a Recording Industry Association of America kiss-up, or have to field dozens of e-mails wondering if the pay is good as Hilary Rosen's pool boy, let's cover the two most common arguments made in favor of the file-sharing networks.
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CDs stink these days. It's just one good track or two and filler. Well, you'll love Apple. Just mix and match on the killer and sidestep the filler.
- Prerecorded music sales have fallen for three consecutive years because the labels are putting out garbage. If quality is such an issue, why are you downloading MP3s in the first place? Is it just golden oldies on your hard drive? It's no coincidence that CD sales are falling and record stores shuttering as broadband usage and file trading continues to grow. New releases have always been the most popular swaps. With the number of estimated song downloads now up to 2.6 billion a month, do you really think that narrow-minded labels and vanilla-flavored commercial radio are keeping consumers from CD purchases? Obviously, the appetite for acquiring new music is as voracious as it's ever been.
Apple's new digital music service cuts to the chase. Unless the track you're looking for isn't part of the company's 200,000 song library, the only reason left for turning to the P2P sites is either the intentional or misguided intent to participate in online looting. Any argument that free downloads are somehow ethical because their inherent worth to you is less than a buck is about as grounded as speeding past a toll booth because the highway scenery isn't to your liking or ducking into a movie theater through the fire exit because the flick got panned by the local critic.
Apple's ticket to ride
But let's kick that podium platform from under me. I'm not here to pontificate. We've got a serious problem here, and let's tackle what Apple intends to do about it.
The music industry got slammed for one reason only: The size of an MP3 file is a heck of a lot smaller than a full-length movie or a computer game. It takes just dozens of seconds to download a hit single on a speedy connection and kick off the viral chain of swapping over a trading network. That's why that same camp that's singing the praises of the cost-saving potential of video-on-demand and wired video game software upgrades through Microsoft's Xbox Live hasn't taken the time to face the music when it comes to music. Piracy is a perpetual problem in all forms of content, but it's brutal when melodic because the files are bite-sized.
That is why Apple is in the driver's seat right now. Music is the ideal media to reap the inventory-free fruit of online distribution. It is clearing a lot of the obstacles, but it's also getting help from the music industry's efforts in pursuing Internet service providers, wired colleges, and individual users.
Most folks sharing song files wouldn't consider shoplifting at a nearby music store. It's not just that the music beneath all of the packaging is worthless; it's that they don't believe there will be any legal ramifications for staying up all night downloading music.
That's why Apple's timing couldn't be better. Just as artists are flooding sites with botched files, the industry threatening users with targeted legal warnings and actual legal demands of Joe hobbyist, it is coming in as the white knight packed with olive branches as the perfect third-party arbitrator.
But if olive branches can be carved into Trojan horses, you can see how Apple stands to gain a lot more than the obvious here. It's bigger than just getting its brand out there and getting more non-Apple users to its site to help move some more Macs and iPods. The reason that this service isn't available yet for the Windows watchers and Linux laborers is that the songs aren't encoded using the MP3 compression technology. The iTunes Music Store is selling songs under the company's MPEG-4 standard based Advanced Audio Coding (AAC) format and its digital locks are keeping the present options limited to Macs as downloading and CD-burning agents and iPods as the portable player of choice.
So, the recording industry loves it because they're walking away with two-thirds of the sales that Apple generates for tracks that can't be immediately fed back into the file-sharing networks. Music fans who still value music beyond the intrinsic now have a $0.99 option or can buy complete albums for just $9.99 from a company that is not only not a coalition of the villainous major labels but it also happens to be running the least restrictive legal service available today.
There was a time when Apple agreed not to form its own record label in order to legally use its name despite the prominence of The Beatles' Apple Records at the time. But that was Yesterday. Right now, Apple, music fans, and the recording industry have something even bigger: They've got a Ticket to Ride.
Rick Aristotle Munarriz owns some apples -- and some Apple. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.
