Apple Set to Unveil iTunes for Windows This Week

By | October 14, 2003 at 12:00 AM

Coming soon to a Windows PC near you: Apple Computer Inc.’s. popular iTunes online music store, which analysts say will join an already crowded market that could mute its chances of repeating the success of the Macintosh-only version.

The computer maker is set to unveil this week the long-promised Windows-compatible version of its online music service. Last week, it sent invitations to reporters for an event on Thursday in San Francisco proclaiming, “The year’s biggest music story is about to get even bigger.”

An Apple spokesman declined further comment.

Yet now, some analysts say that while iTunes for Windows may be just the thing for fans, it may be coming too late for the broader market. There are already similar services for Windows users, such as MusicMatch, already entrenched and another called BuyMusic.com. File-swapping service Napster has resurrected itself as a pay service, now under a parent company, Roxio Inc..

“They’re going to have a serious problem with the Windows community,” said Rob Enderle, principal of market research firm the Enderle Group. “If they could have gone there first, they could have carved out a beachhead.”

Apple unveiled the iTunes service for the 3 percent of the PC market that uses Macintosh computers in April. Incorporated into its popular and easy-to-use iTunes software for managing digitized songs, the interface is simple, and songs cost 99 cents each to download.

The service took off, and the Cupertino, California, company has sold more than 10 million songs in the five months since launching the service, which has more than 200,000 songs for sale.

“The service has done great on the Mac side,” Enderle said.

SAME OLD SONG?

But the iTunes Music Store strikes a familiar tune for Apple, analysts said. Apple was the first to popularize the graphical user interface, but was ultimately leapfrogged by Microsoft. It was ahead of the curve with the Newton handheld computer, but the handheld didn’t take off until years later.

In the case of online music, other offerings that have come along have aped the Apple model, some dispensing with the subscription-based model in favor of Apple’s a la carte model.

The Napster service goes live Oct. 29, selling more than 500,000 songs, what it calls the world’s largest digital music library, at 99 cents each. And BuyMusic, in its television commercials, went so far as to borrow the style of Apple’s own humorous ones, with actors singing along with their digital music players against a white backdrop.

A MusicMatch spokeswoman said it was unclear how the Windows version of Apple’s online music store would affect its relationship with the Mac maker.

“We were partners (with Apple) but always expected we would one day be competitors once they launched the iTunes download service,” a MusicMatch spokeswoman said. “MusicMatch jukebox will continue to support iPod, but it’s up to Apple to decide if they’ll ship IPOD with MusicMatch jukebox. It’s totally in their hands at this point.”

Other services include RealNetworks Inc.’s Rhapsody service. Dell Inc., AOL Time Warner Inc.’s America Online and Amazon.com Inc. are also considering whether to offer similar services.

When it unveiled the service, Apple said it was simple and cheap enough to compete with the free song-swap sites that the record industry blames for its two-year slump. And Apple was one of the few companies offering online music sales to ink licensing agreements with all five big record labels.

The service also helped fuel a strong rally in Apple’s stock price, with shares soaring more than 70 percent since the service was introduced. And Apple said that in its June quarter, it had record sales of its iPod music players.

Apple Chief Financial Officer Fred Anderson has said that the Windows launch of iTunes would be a Trojan Horse for the company that many say popularized the personal computer, spurring more sales of the iPod players, which have also been popular with Windows users.

Dan Niles, an analyst at Lehman Brothers, estimated that Apple sold 303,000 iPod digital music players in the June quarter at an average price of $365, up from 78,000 in the March quarter, fueled by the launch of the company’s online music store.

But just how profitable is iTunes Music Store?

Apple said in its June quarter earnings conference call that the iTunes Music Store was close to break-even in its first quarter of operations.

Niles estimates that Apple keeps about 30 cents from each 99-cent song sold, before credit card transaction costs, which he said are high as a percentage of revenue, up to 4 percent.

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