NewsNotables – Issue 78

iTunes Great for Apple, but Was It for Music Biz?

The Associated Press, October 8, 2011

When Apple rolled out iTunes for the masses in 2003, the music industry was at a point of transition and chaos. Albums were enjoying blockbuster sales of several million units for its superstar artists and profits were soaring. The threat of forms of illegal downloading threatened those profits as many music fans were starting to get used to the idea that music could be free.

Apple’s iTunes entered the market with a system where you could pay for songs online. Yet iTunes, with its simple interface, 99 cents per song and revolutionary MP3 device, the iPod, made it the gold standard. The entry of Apple 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. What’s less clear is how much the music industry, which continues to decline, has benefited. Consensus is mixed.

The music industry had a lot to protect. It was enjoying 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 the year sold 4.8 million, down from 2000’s top seller, which sold almost 8 million a year before. At the same time, the music industry was confronting the beginnings of the global piracy epidemic.

While iTunes was booming , it 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 to buy the whole album. iTunes ushered in the area of 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.

Even though iTunes has had tremendous success, the music industry is still floundering. 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. Digital downloads continue to explode but overall album sales have dropped by more than half.

Comment: Steve Jobs has left a little bit of a complex legacy. He helped create the legal digital music market around the world. But at the same time, the music business in the retail space is probably worth less than half of what it was worth 10 years ago. So, the question is, did he help save the music business, or did he capitalize on a new and innovative way to distribute music? Some would argue that the industry was in chaos anyway, and Jobs, as usual, knew what the public wanted and figured out a way to give it to them.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics