DRM-free iTunes seen spurring demand for Apple's iPods
The arrival of DRM-free music on Apple's iTunes Store will only serve to broaden the use of digital media players amongst consumers, likely boosting overall demand for the company's iPod line, one Wall Street analyst says.
"This effect could also result in more iPod sales as consumers have positive experiences with iTunes+iPod and the overall move to the digital music world gets easier," he wrote.
The analyst, who estimate that less than 5 percent of the music in the average iPod user's library includes music purchased from iTunes, said he believes the success of the iPod is dependent upon the total experience of the device and the music store, not the fact that iTunes music only plays on iPods.
"We believe DRM free music will have a positive impact on iPod demand given DRM free music should result in more usage of digital devices," he wrote. "The impact of increased iTunes downloads will outweigh the impact of some customers using non-iPod players with iTunes downloads."
Munster noted that there may be some short-term perception that the move could form a negative impact on iPod sales, as consumers will gain the ability play EMI's iTunes downloads on any digital music player. However, he said it's important to note that non-iPod MP3 players will not sync with iTunes the same way iPods do.
"Our belief is the success of the iPod is not because consumers are locked on the iTunes platform, but its success has been because of the total device and iTunes experience," he reiterated.
The PiperJaffray analyst maintains an Outperform rating and $124 price target on shares of Apple.
38 Comments
Non-iPod players may not have all the integrattion and features of the iPod, but they DO synch with iTunes. In fact, iTunes knows about other brand players' capabilities, and supports them intelligently when they are connected. (Since after all, iTunes was synching to other players before there ever was an iPod.)
there will never be a totally DRM free iTunes, end of story.
"Our belief is the success of the iPod is not because consumers are locked on the iTunes platform, but its success has been because of the total device and iTunes experience"
Yeah.... tell that to Norway\
This is GENIUS for Apple on so many levels:
1- DRM-free music and higher-quality downloads increase the popularity of online downloads. iTMS, as the dominant online music store, stands to benefit the most, and Apple gets more distribution marketshare/power/say over what goes on in the music industry.
2- Higher-quality tracks for sale at $1.29 increase iTMS revenues in tandem with the above, magnifying the iTMS' marketshare increase.
3- The greater space required to store high-quality 256 kbps tracks helps push consumers upmarket to higher-capacity iPods, and will push them to upgrade sooner.
4- This move helps get European regulators off Apple's back and Apple out of court, since DRM free music plays on any device, and any device can use the non-DRM portion of the iTMS.
5- Offering the major labels a way to sell on iTMS at higher pricepoints (something the labels have been desperately wanting for a long time) improves Apple's relations with the major labels and undercuts efforts for the labels to find alternate online distribution, even though its clear that the way in which Apple is 'compromising' with the labels helps Apple most of all.
6- Given the lack of credible alternatives to the iPod/iTunes juggernaut, opening things up likely results in Apple INCREASING marketshare in both players and online downloads, not losing share. Expect to see SanDisk Sansas downloading tunes off of iTMS, while iTMS acts as an advertisement for how good things are on the Apple side of the fence.
It's just GENIUS all the way around. Hats off to Steve Jobs. I'd hate to have go up against him in business.
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It doesn't take a certified analyst to figure this out...
...in fact, it doesn't even require more than about 17 brain cells.
-Clive