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Apples Readies New Online Music Service

Apple Computer Inc. is readying to launch an online service that will cut straight to the core of digital music distribution, winning the praise of some record executives who see it is as a weapon against online piracy.

Music executives who have seen Apple’s upcoming service said it is simple to use, offers single songs from a deep catalog and – unlike Kazaa and the other pirate services that have picked up where the now-defunct Napster left off – it pays royalties to the troubled record industry.

Apple’s new service will feature songs from all five major record labels, link with its iTunes music software and allow for easy downloading to the iPod, Apples popular digital music player, people familiar with the matter said.

The new music service is expected to be unveiled on or around April 28.

“It’s exactly the system that should have existed five years ago,” said one record industry executive.


Apple, which has a reputation for iron-clad secrecy before product launches, declined to discuss the service, which is launching at a crucial time for both the company and the troubled music industry that has become its unlikely partner.

Cupertino, California-based Apple has been in talks with Vivendi Universal about possibly acquiring Universal Music, the world’s largest record label and home to acts such as Eminem and U2. Apple has made digital entertainment the centerpiece of its strategy to carve out a larger market for its stylish and expensive machines.

Apple last week said it had not made a bid for any music company, but did not deny that talks had been ongoing.

Unlike music-industry services like MusicNet and Pressplay, which are built on subscription models, Apple’s service will allow for the sale of individual songs, those who have seen it said. The pricing was not immediately known.

“If Apple can do for the downloadable music sector what the iPod did for portable music, it will be a significant step for the industry,” a second music industry executive said.

Hilary Rosen, chairman and chief executives officer of the Recording Industry Association of America, the music trade group, said Apple’s fanatical fan base could provide just the shot the music industry needs right now.

“I think what the right company can bring is the right relationship with a consumer, which is what the whole music industry is searching for right now,” she told Reuters.

Apple CEO Steve Jobs had previously angered the music industry with his “Rip, Mix, Burn” slogan, which record executives heard as an incitement to online piracy – blamed by the music industry for the decline in album sales over the past two years.

But more recently Jobs has turned on his legendary charm, courting the world’s big labels to license their content, said people familiar with the matter.

Jobs succeeded not only in licensing content from all five record giants, including Universal, but in converting critics into fans with a service that many see a the best potential weapon to date against online piracy.

The stakes are relatively small but growing. Last month, Jupiter Research predicted that consumer spending on digital content – including music – would rise to $2 billion this year from $1.6 billion in 2002.


Apple’s service will only be available to Mac users, who represent less than 3 percent of the global PC market, but at least one music executive also expects the service will be available in a Windows version as well in coming months.

“It’s good right now only for the Apple market, because frankly, that’s how Jobs was able to persuade everyone to give him licensing deals,” one executive said.

Jobs still must convince fans to pay for music they have grown accustomed to getting for free.

At the same time that it readies its online music service, Apple is also expected to announce redesigned iPods with larger capacity.

“Apple wants to make a natural connection between iPods and the service, a seamless connection between hardware and content,” analyst Rob Enderle of Giga Information Group said.

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