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Is Apple driving music to mobiles?

John Borland CNET News.com

Published: 20 Apr 2005 17:25 BST

Jobs also has refused to license Apple's DRM technology, called FairPlay, to rival MP3 player makers, and has blocked music formats from other companies, such as Microsoft, from the iPod. This makes iPods and the iTunes store incompatible with rival digital music devices and stores, fragmenting the market in a way the labels fear ultimately limits sales.

"We hate the current situation," one top record industry executive said, referring to the issue of incompatibility between different companies' music devices and services. "There is one man who's going to decide this... No record company by itself can basically tell Steve Jobs, 'You're not going to get our catalogue unless you open up FairPlay to Microsoft.' We can't do it together."

Apple declined to comment for this story.

Despite the critics, Apple continues to win praise from many customers and industry analysts. They point to Apple's clear success in spurring the download business as proof that Jobs is on the right track with pricing and other policies.

"Apple really understands that pricing models are critical," said Jupiter Research analyst Michael Gartenberg. "I think 99 cents resonates with consumers as a sweet spot."

Many customers like the convenience and pricing. "iTunes really sucks you in," said Jackie Kerr, an iTunes customer in Baltimore. "I don't mind the 99 cent cost, though sometimes I do feel stupid for paying $1 for some horrifying '80s band I don't want to admit liking."

When iTunes launched, most of the record labels were more squarely in Apple's camp. Part of the reason was Apple's limited role in the computer industry: They saw the Macintosh market — less than 5 percent of the total computer market — as a small, relatively safe way to experiment with Jobs' ideas.

Instead, iTunes, replicated on the PC platform a few months later, exploded into a popular hit that almost overnight defined the standards for the digital music business. Apple's iTunes store captures close to 70 percent of digital music sales, according to the most recent analyst figures. The iPod holds a similar share in the portable MP3 player market.

"I think it's safe to say that Apple has generated so much interest in digital music downloads as a paid service, the labels clearly understand Apple's influence," Gartenberg said.