Labels Think Apple Has Perfect Pitch
Top executives at the major record companies have finally found an online music service that makes them excited about the digital future -- but it’s only for Macs.
The new service was developed by Apple Computer Inc., sources said Monday, and offers users of Macintoshes and iPod portable music players many of the same capabilities that already are available from services previously endorsed by the labels. But the Apple offering won over music executives because it makes buying and downloading music as simple and non-technical as buying a book from Amazon.com.
“This is exactly what the music industry has been waiting for,” said one person familiar with the negotiations between the Cupertino, Calif., computer maker and the labels. “It’s hip. It’s quick. It’s easy. If people on the Internet are actually interested in buying music, not just stealing it, this is the answer.”
That ease of use has music executives optimistic that the Apple service will be an effective antidote to surging piracy on the Internet, sources said.
Other legitimate music services have cumbersome technology and pricing plans -- motivated in part by the labels’ demands for security -- that make them much harder to use than unauthorized online services, such as the Kazaa file-sharing system.
Although no licensing deals have been announced, sources close to the situation say at least four of the five major record companies have committed their music to the Apple service. It could be launched next month.
As promising as the new service is, however, there is a big limitation. Apple’s products account for just a sliver of the total computer market -- less than 3% of the computers sold worldwide are Macs. The vast majority of the potential audience for downloadable music services uses machines that run Microsoft Corp.'s Windows software.
An Apple spokeswoman declined to comment on the service Monday, as did representatives from the five major record corporations -- Sony Corp.'s Sony Music Entertainment, Vivendi Universal’s Universal Music Group, AOL Time Warner Inc.'s Warner Music Group, Bertelsmann’s BMG division and EMI Group.
The new service is so important to Apple Chief Executive Steve Jobs that he personally demonstrated it to top executives at all five companies, sources said. More than a dozen music executives have visited Apple since last summer and came away enthusiastic.
The executives also like the massive marketing plan designed by Jobs to educate consumers about the service.
The plan contrasts sharply with Apple’s previous marketing campaign for Macs, which rankled many music executives who felt it promoted piracy. Apple’s advertisements were emblazoned with the mantra “rip, mix, burn,” referring to the computers’ ability to copy songs and record them onto CDs.
Although the iPod has been hailed by many critics as the best portable music player on the market, Mac users have been overlooked by most of the label-backed online music services, including Pressplay, MusicNet and Listen.com Inc.'s Rhapsody.
As a result, Mac users may find it easier to make unauthorized, free copies of songs through an online file-sharing service like LimeWire than to buy a copy through a label-sanctioned service. Apple hopes to change that situation with its new service, which is expected to be included in an updated edition of the iLife package of digital music, photo and movie software.
Sources said Apple will make the songs available for sale through a new version of iTunes, its software for managing music files on Macs. Users will be able to buy and download songs with a single click and transfer them automatically to any iPod they’ve registered with Apple.
Rather than make the songs available in the popular MP3 format, Apple plans to use a higher fidelity technology known as Advanced Audio Codec.
That approach allows the songs to be protected by electronic locks that prevent them from being played on more than one computer. Still, sources say, Apple wants to enable buyers to burn songs onto CDs. That feature would effectively remove the locks.
That’s been a sticking point for executives at Sony, sources said. The other four major record companies, however, appear ready to license their music to the new service.
No details were available on the price of the service, although one source said it would be competitive with other services in the market. Pressplay, for example, charges just under $10 a month for unlimited downloads, plus about $1 for each song that can be burned to CD or transferred to a portable device.