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The iPod-iTunes Phenomenon

By Joe Wilcox MacNewsWorld ECT News Network
Jun 10, 2004 1:30 AM PT

One word describes Apple's sudden success with iPod and the iTunes Music Store: "Phenomenon."

The iPod-iTunes Phenomenon

Apple's early music success transcends technology features and is as much about basic human characteristics often overlooked by companies developing new products. The popularity of iPod and the iTunes Music Store offers interesting cultural lessons for Apple and its competitors. What is the measure of success? People.

MTV of the New Century

Technology folks argue about file formats, like Fairplay-AAC versus Windows Media Audio, and winners or losers selling music online. But beyond technology arguments is something more basic: feelings.

People often make decisions on the basis of what makes them feel good. Apple's eventual success might hinge on further extending community -- synching iChat features with the iTunes would be a good start -- or making the music store the place for discovering new music.

I remember the excitement over MTV's launch and how the making of music videos opened new creative venues for artists. The music channel also established an important new way for consumers to discover new music and artists.

MTV was a phenomenon in the early 1980s, but not just because of the new approach to presenting music. The original five veejays gave the music network personality and created the axis around which a community of viewers, successful musicians and aspiring artists developed.

Apple is at the cusp of a similar phenomenon, and much depends on how well the company can execute on its early music momentum. Practically speaking, the iPod and iTunes Music Store deliver attributes consumers are looking for. According to JupiterResearch consumer surveys, the iPod offers the portability, capacity and computer synchronization features that consumers look for.

Search and song sampling are consumers' top priorities for online music stores. The iTunes Music Store provides many avenues for discovering music, and it is this discovery that offers a context around which Apple could create a cultural phenomenon -- the MTV of the 21st century.

Community Is the Context

The context is community, one of the attributes behind MTV's launch success and popularity of the original Napster (now relaunched by Roxio as a legal music service). Whether by top songs and albums posts, celebrity playlists or iMixes, the iTunes Music Store provides many new ways of discovering music, but in a community context. Similar community attributes are found at other successful commercial online operations, such as Amazon or eBay.

Human beings have a need to participate, to belong. I see iPod's popularity as much about the sense of cool as much as its features. I'm reminded of the Sony Walkman, which in its early days exuded a status symbol mystique.

I've been closely following "New Music Tuesdays." I know people that pine for Tuesday and the addition of new songs or music videos. And now Apple gives away a weekly free song, a little teaser to draw people back to the store. Good tunes, too. I would consider "Run," a recent giveaway, to be one of the best songs on Snow Patrol's album "Final Straw."

Through promotions, Apple is extending its music appeal. Starwood Hotels is offering "iTunes Days" at select W locations. The promos coincide with New Music Tuesdays. During the events, held monthly at the select Ws, Starwood will give away iPods and iMacs. Additionally, W has its own iTunes playlist and, as part of the "Wired Wonderland" promotion, offers three free iTunes downloads with broadband access.

The W events, which feature live deejays, are as much about participation as music. Like iTunes Music Store celebrity playlists or iMixes, the promotion creates a place to belong.

Setting the Pace

Creating belonging and facilitating discovery are starts. But driving trends -- hallmark of early MTV -- is where Apple needs to go next. Whether the iTunes Music Store can set agenda for new music is uncertain, but I would say the operation is off to a commendable start. Apple's music director appears to be showcasing some of the best new talent in music, whether by choice of videos, free songs or artist pages.

Already, some of the iTunes store music goes beyond what people would hear on the radio or watch on MTV. The iTunes Music Store carries singles and albums with explicit lyrics, and I can't imagine some of the videos making MTV's rotation. For example, I have seen two different versions of Maroon 5's "This Love" video. The racy one -- the kind of video typically unacceptable for showing on MTV -- is viewable at the iTunes Music Store. Edgy to some people, these differences could heighten the music store's allure.

MTV isn't the only channel on cable to watch music videos, just like Amazon isn't the only site to shop or eBay the only place to bid. But each achieved a certain level of iconic success through community, through discovery. In the iTunes Music Store and iPod, Apple has the same opportunity, even as other companies create successful competing music operations.

Late Starter

Many people might not know that Apple initially missed the digital music phenomenon. I remember looking at new model iMacs at a CompUSA in August 2000. I had been thinking about buying one for my mom, but felt that something was missing. It was a CD-RW drive. CD burners were just starting to become standard equipment on Windows PCs. At the same time, consumer excitement about Winamp and other MP3 music players was reaching frenzied levels. Mac music software choices were skimpy at best, and Apple offered no Macs with CD burners.

The next day, I wrote an article asking whether Apple had "missed the tune on CD-RW drives." Mac enthusiasts flamed my inbox with hundreds of e-mails accusing me that I didn't understand Apple and that CD burners weren't important.

Apple had bet reasonably on DVD and home movie-making. At the time, many analysts forecast that DVD drives would replace the standard CD-ROM drive in a few years. But no one really anticipated the cultural phenomenon called Napster and how file-trading would change consumer behavior with respect to music. Today, according to JupiterResearch surveys, 70 percent of online U.S. consumers listen to music on a computer.

By January 2001, Apple had shifted into catch-up mode, releasing iTunes and putting CD burners into new Macs. Ten months later, Apple introduced the first iPod. Two generations of iTunes and iPods later, Apple debuted the iTunes Music Store in May 2003.

For a latecomer to digital music, Apple set a brisk pace catching competitors and, in some ways, moved ahead of them. How far Apple will eventually go is uncertain. MTV, Amazon and eBay are global operations. While Apple sells iPods in many countries, the iTunes Music Store is confined to the United States. Eventually, Apple will need to take the music store to other countries.

Elsewhere, community and belonging will not be the same as the United States. In Europe, for example, music tastes vary among the countries, as they do between the United States, Canada and Mexico. Some of the community-creating mechanisms might be the same; others will be needed. For example, how about iTunes SMS for Bluetooth phones in Europe? And music stores will need to cater to local tastes.

Much work is ahead for Apple.

Joe Wilcox, a MacNewsWorld columnist, is a senior analyst with JupiterResearch, where he covers Microsoft.

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Salesforce Commerce Solution Guide
Salesforce Commerce Solution Guide