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The impact of iTunes It was great for Apple, but how about the music business?
AP Music Writer
NEW YORK
When Apple rolled out iTunes for the masses in the spring of 2003, the music industry was at a point of transition — and chaos.
Entering the new millennium, albums were enjoying blockbuster sales of several million units for its superstar artists, and profits were booming. Yet the threat of Napster and other forms of illegal downloading threatened to eviscerate those profits as many music fans were starting to get used to the idea that music, and loads of it, could be free.
Apple’s iTunes entered into that landscape with a concept that wasn’t exactly new: a system where you could pay for songs online. Yet iTunes, with its simple interface, its simple concept — 99 cents per song — and revolutionary MP3 device, the iPod, made it the golden standard.
The entry of Apple and its leader, Steve Jobs, who died October 5, into the music world was more than a success — it was a phenomenon. Today, iTunes is the largest music retailer, has redefined the listening experience and has largely become the way that music is consumed.
HELPING OR HINDERING SALES?
What’s less clear is how much the music industry — which is continuing to decline — has benefited. Even today, consensus is mixed.
“It really did remind an entire industry, and gave a cue to even a culture beyond the industry that if you provided music in a convenient, direct way and responded to the consumers’ interest and demands, they would in fact buy it, especially if it was priced appropriately,” said James Diener, CEO and President of A&M/Octone Records.
Apple introduced iTunes in 2001, a few months before it would release the now-ubiquitous iPod (which begat the iPod Nano, the iPhone, the iPad). At the time, it was not a music store but a rip-and-burn library service only available for Mac users. It initially was viewed with great skepticism by record companies for its ability to make digital copies of music — something the industry thought would lead to piracy.
The industry had a lot to protect. It was enjoying booming sales at the turn of the last century, fueled by the success of teen sensations like Britney Spears, the Backstreet Boys and ‘N Sync. But it was just starting to feel the effects of the illegal downloading era: The top-selling album of that year, Linking Park’s “Hybrid Theory,” sold 4.8 million, down from 2000’s top-seller, ‘N Sync’s “No Strings Attached,” which sold almost 8 million a year before.
“That was at the same time we were confronting Napster, we were confronting the beginnings of the global piracy epidemic that was to come,” said Jim Donio, president of the National Association of Recording Merchandisers, or NARM.
“At the same moment of time, we were also experiencing the biggest weekly sales of all time. It was a very odd confluence of events, because you had the harbinger of immense challenges, but at the same time, reaping the rewards of incredible record breaking physical sales. ... It was heated, it was tense.”
ITUNES STORE
When Apple’s iTunes became a full-service online music store in 2003, it offered more than 200,000 songs that could be loaded on your iPod and fully portable, all for 99 cents a download, no matter who the artist was (in recent years, it has allowed for more variation, with some singles now costing $1.29 per song).
Bill Werde, editorial director at Billboard, said that while other services were available at the time, the genius of Jobs was making iTunes the ultimate consumer destination.
“You look around today, we sell tens of millions of digital tracks each year,” he continued. “Given that Apple has an 80 percent, 70 percent market share in that digital space when it comes to downloads, you really see how important Apple has become in selling music to music fans.”
Apple set the pricing, to the chagrin of the music industry, promoting parity for singles and albums.
Diener believes that price standardization was one of the key reasons for iTunes’ success. But while iTunes was booming, the era also hastened the demise of traditional retail stores like Tower and Virgin. No longer did rabid fans need to form a line in front of a music store to get their favorite album, then play it once they got home; They could order it at home and listen instantaneously.
They also didn’t have the buy the whole album: iTunes ushered in the era of the singles artists. Cherry-picking songs from albums has become the norm, and some artists have complained that iTunes led to the diminishment of the album.
But Werde says Napster and other forms of illegal downloading already had started that process in motion.
In 2010, iTunes marked the sale of its 10 billionth song. Even longtime stalwarts have come to embrace iTunes: The Beatles’ catalog finally became available late last year. Paul McCartney considered Jobs a friend and called him “a great creative artist” and a music lover.
STILL HURTING
Yet for all of iTunes’ success, the music industry is still floundering. While sales are up slightly this year, the industry has been on a dramatic decline for the past decade, as labels have been shuttered and thousands of jobs lost as it continues to contract. While digital downloads continue to explode, overall album sales have dropped by at least half.