99-cent downloads!

And it’s legal. Apple introduces a new, simple – and cheap – way of getting music online.

BY WARREN COHEN

May 29, 2003

After seeing at least 5 billion songs illegally traded on pirate networks, the music industry has finally found digital religion with Apple computers. On April 28th, Apple CEO Steve Jobs announced a user-friendly online outpost of some 200,000 singles selling for ninety-nine cents each. Many full albums will retail for ten dollars. Apple's music can be burned to CDs and transferred to three different computers as well as to an unlimited number of Apple's iPod portable players. (Conveniently, Apple also announced three new iPod models, the cheapest now reduced to $299.) In its first eighteen hours of business, the Apple Music Store reportedly sold 275,000 songs. And while the service is elegant and simple, Apple is still missing key content from holdout superstars (see below) as well as from many independent record labels.

With his stubble, jeans and sneakers, Jobs might pass for a hippie record-store clerk. He has long criticized the record industry's overzealous digital restrictions, which hampered people's ability to rip, mix and burn their own music. Jobs told Rolling Stone he persuaded record executives to free the reins. “We did tell them in order to make a really great music store we were going to have to offer the users a broad set of personal-use rights,” he says. While the leery labels agreed to allow portability and CD burning, sources say Jobs had to compromise in his hopes of offering music with no restrictions. Because Apple's songs are in Dolby's stellar-sounding AAC format (as opposed to MP3s), it should prevent the files from being swapped on peer-to-peer services, at least for now.

Apple's online store surpasses Napster in ease of use. Searches can be done by artist, album, track or genre. The most popular artists, such as Eminem and U2, have their own splashy home pages with big photos, a list of their albums and a rank of their popular sales. Those acts, along with others such as Bob Dylan and Sheryl Crow, also offer Apple a few exclusive songs and videos. After a one-time entry of personal data and credit card info, one click of a button buys a song or album, which downloads instantly. As Bono said in a recorded message at Jobs' press briefing, “I don't want a doctorate or a Ph. D. in button-pushing to get to the Clash.”

Apple's store faces competition from roughly 100,000 songs already online from shops such as Best Buy and Tower Records. But retailers haven't really hyped such offerings, and prices can reach as high as $1.99 per song. Apple also goes up against label-owned subscription services like MusicNet, pressplay and Rhapsody, which run between $3.95 and $17.95 per month for listening privileges to more than 300,000 tracks but charge extra to burn some of them. Those services haven't yet caught fire, and Jobs scorns the approach. “The subscription services have failed,” he says. “We believe people don't want to rent their music.”

Eventually, subscriptions may prove to be a better bargain, especially since ninety-nine cents still seems steep compared to free. Madonna, for instance, has marketed a $1.49 MP3 single “American Life,” but only 7,913 people have ponied up, according to SoundScan.

Jobs promises to expand the service beyond the Mac cult with a Windows version to be released by year's end. In a best-case scenario, Apple demonstrates a nascent market for digital songs that might one day substitute for declining CD sales. At worst, consumers continue to download free music, something no well-intentioned record-store salesman may be able to stop.

Additional reporting by James Sullivan.

No Shows: Beatles, Zep, DMB Hold Out.

Before opening his online store, Steve Jobs lobbied holdouts such as Mick Jagger and Paul McCartney to release their catalogs to him. The Beatles and the Stones, as well as acts like Led Zeppelin, the Dave Matthews Band and Garth Brooks, don’t offer music digitally. Jobs did get key selections from the Doors, No Doubt and the Eagles. “I’m a Mac user and an iPod user, and this is the first one we’re trying,” says Irving Azoff, the Eagles’ manager. Other acts don’t want to license singles. “We told Apple that if you want to sell our albums, we are more than happy, but they refused” says Cliff Burnstein, Metallica’s manager. “None of us want to contribute to the demise of the album as an art form.” Madonna and Radiohead have similar views.

For other artists, the absence is due to a tussle over how to divide the spoils. In the Apple deal, bands receive a payment of ten to sixteen cents for each ninety-nine-cent single sold.