Apple blasé about online music rivals
Tue Dec 16, 7:09 AM ET
By Michelle Kessler, USA TODAY
Who's afraid of retail giant Wal-Mart? Not Apple Computer (AAPL) CEO Steve Jobs (news - web sites).
Jobs said Monday that more than 25 million songs have been downloaded from Apple's iTunes music store, launched in April. That topped analysts' expectations for the service, which charges 99 cents a song.
But iTunes, challenged now only by small players, will soon face big competitors. Wal-Mart (WMT) is expected to launch a downloading site before year's end. Sony (SNE) and Microsoft (MSFT) plan to enter the market in 2004.
Jobs says he has no plans to lower prices or dramatically change iTunes to address the new threats. "We're going to continue on our winning strategy," he said in an interview.
Wal-Mart usually drives prices down when it enters a market, says economist Mark Zandi of Economy.com. But Jobs says Apple already competes with low prices, such as rival Rhapsody's 79-cent downloads. Quality keeps customers loyal, Jobs says. Besides, Wal-Mart's Web store "did not set the world on fire," Jobs says. "We'll see if it (music site) is competitive." Walmart.com is the No. 4 shopping Web site, says Nielsen/NetRatings.
Nor does Jobs plan to let iTunes customers use portable digital music players made by other companies. Today, customers can download songs to nearly any PC but need Apple's iPod if they want a portable player. (Apple makes most of its money selling iPods, not songs, analysts say.) "Our strategy is to support the No. 1 MP3 player in the market," Jobs says. IPod has 50% market share, researcher NPD Group says.
Rivals such as Dell have introduced more flexible portable players for other services. Jobs says Apple "trounced Dell this quarter" in music player sales. Researcher Jupiter predicts the $80 million digital music market will hit $1.6 billion in 2008. The field is quickly getting more crowded.
Jobs also said that half of iTunes sales are entire albums, not individual songs. Some music critics and artists feared that selling songs individually would destroy the album format.
