Apple Reports Brisk Sales of Songs in First Week of Download Service

Apple Computer Inc. announced Monday that its slick new online music service got off to a fast start, selling more than 1 million downloadable songs in the first week.

But that might not mean a whole lot for the record labels’ battle against online piracy.

After all, the iTunes Music Store is available only to the fraction of consumers who use the latest Macintosh computers. And Mac users don’t have access to the most popular Internet networks where others grab pirated tracks for free by the billions.

“One million downloads does show demand -- from people who can’t steal,” music industry gadfly Bob Lefsetz wrote in his e-mail newsletter Monday.

Apple Chief Executive Steve Jobs didn’t see it that way. “In less than one week, we’ve broken every record and become the largest online music company in the world,” Jobs said in a statement.

Apple executives offered no evidence to support his contention. None of the other industry-authorized online music services publicly report results.

The Music Store does have at least one advantage over those label-sanctioned ventures: It has virtually no competition. Like the unauthorized online music outlets, the industry-authorized services don’t work on Macs.

Apple’s Music Store is available only to people with Macs running the latest version of Apple’s operating system. These users have downloaded more than 1 million copies of the iTunes software that lets them get into the Music Store, Apple said.

It declined to say how many people downloaded songs, half of which were sold as singles, half as part of a full album.

P.J. McNealy of GartnerG2, a research firm, analyzed the Music Store numbers and concluded that as few as 150,000 consumers -- or less than one-tenth of 1% of all U.S. households -- bought songs in the first week.

Analyst Lee Black at Jupiter Research, a technology consulting firm, said that “there may be pent-up demand” from Mac users for online music. He added that Apple’s promotional blitz for the Music Store showed that “with a good amount of marketing ... there are consumers willing to come out and pay.”

The unanswered question is whether the response of Mac users -- who make up about 3% of the personal computer market -- typifies how the masses would react.

“Novelty is a factor, but also the trend should be upward because it’s just getting started,” said Phil Leigh, an analyst at investment bank Raymond James & Associates.

Apple launched the much-anticipated Music Store on April 28, offering 200,000 songs from the five major record companies for 99 cents each. Full albums sell for a little under $10.

The service drew praise for being exceptionally easy to use and for placing fewer restrictions on buyers than other label-sanctioned services. Compared with the online companies offering music by subscription, McNealy said, the Music Store is “a lot closer to a brain-dead-simple service that the mass consumer will adopt.”

Songs from the Music Store can be recorded onto a virtually unlimited number of CDs and transferred automatically to an unlimited number of portable devices -- provided the devices are Apple iPods.

Apple declined to say how much revenue was generated or how much it pays record labels for songs sold. One label executive said his company collects about 40 cents a track; other executives noted that Apple pays less for older songs than for new releases.

But Apple may not be as interested in selling music as it is in selling iPods and Macs, whose profit margins are significantly larger. The Music Store seems to be paying off there: According to Apple, consumers bought 20,000 iPods last weekend -- and in the course of the week ordered 110,000 more.

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Mac music

Here are the top 10 downloads from Apple’s iTunes Music Store in its first week:

*--* Rank and title Artist 1. Stuck in a Moment U2 2. Clocks Coldplay 3. Lose Yourself Eminem 4. Beautiful Day (live) U2 5. Soak Up the Sun Sheryl Crow 6. I Will Follow (live) U2 7. Don’t Know Why Norah Jones 8. The Way I Am Eminem 9. In My Place Coldplay 10. January Stars Sting

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Source: Apple Computer