Protected Audio Content: Consumers, Vendors Line Up Behind Either Apple or Microsoft
Lead Analyst: Joe Wilcox
JupiterResearch believes the permanent protected audio market will consolidate around two formats--Fairplay-AAC and WMA DRM--over the next 24 months. However, the next 12 months are crucial for the Apple and Microsoft camps. Decisions made during this period could create an opportunity for a single format to become dominant.
Key Questions
>> Why is the market for permanent protected content consolidating around two formats?
>> Why is there room for competition if Apple commands a strong format lead?
>> How can Apple, Microsoft, and other vendors maximize sales opportunities?
Key Findings
Landscape: Apple-Microsoft Format War Defines Permanent Protected Audio Content Market
The market for permanent protected audio content is rapidly consolidating around two camps. Apple, which forms a distribution axis with AOL and Hewlett-Packard, is the earlier consumption leader of protected content. By contrast, Microsoft has laid broader distribution infrastructure.
Outlook: Market for Protected Content Is Nascent, Open to Competition
The sudden success of the iTunes Music Store and proliferation of imitators wrongly suggests the market for permanent content is booming. Overall, 71 percent of consumers say they aren't interested in buying digital downloads or paying for monthly subscription services. JupiterResearch believes that, at best, the market for protected audio content is in its early stages of development. While adoption of Apple's Fairplay-AAC format appears to have an early lead on Microsoft's WMA DRM, the market remains fairly wide open to competition.
Mandate: Avoid Conflict, Find Targets
Compatible co-existence is crucial to the success of either format. JupiterResearch believes a drawn-out format war will slow digital download adoption, cause consumer confusion, increase fragmentation, and rob vendors of sales. Vendors should focus on loyal listeners and big spenders. Apple must continue partnerships, while Microsoft must overcome fragmentation and WMA DRM usage problems.
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