A week or so ago, when Apple announced its iPod Hi-Fi speaker system, the Wall Street Journal published a fairly penetrating article about the impact of digital music on the hi-fi audio market. Interesting points: customers seem to value portability over sound quality (home audio equipment sales dropped 18% in 2005 while digital music player sales tripled).
As someone who’s doing a lossless ripping project to turn all his CDs into digital music files, who has spent some time and money connecting his home audio system to his wireless network, and who owns an iPod, I think there are several explanations for this. First, a lot of people can’t tell the difference. Really. Second, the convenience of searching by song on services like iTunes and Rhapsody (but not, ironically, eMusic, whose text-searching facility is horrible), encourages digital downloads for impulse purchases at the expense of other music purchases (no more buying an album just because you liked the single, or a greatest hits compilation because it reminds you of high school). Third, it’s not out of the question that people might want multiple iPods. I keep being tempted by those $99 1 GB Shuffles, for instance. Fourth, there are real advantages to being able to take the music that you listen to on your home system with you on your iPod in the car, on the subway, and on a plane.
Which may explain the last paragraph of the article, which describes a new service, MusicGiants Inc., that sells “lossless” downloads from “the same major-label content sold by services like the iTunes Music Store” for a 30 cent premium. Except, of course, that the files are encoded as lossless Windows Media Audio files (version 9 encoder), which won’t play on an iPod or a Mac and carry Microsoft’s Windows Media DRM; the service is only available for Windows XP computers; major independent acts like Spoon, whose entire back catalog is digitally available elsewhere, or even Sleater-Kinney, are absent from the service…
All this goes a long way toward explaining the last sentence: “Sales,” says the Wall Street Journal dryly, “have been slow so far.” Well, duh. Fighting iTunes’ DRM with someone else’s DRM isn’t the way to go. I would go so far as to say that the only other horses in the race are eMusic, which sells relatively high quality VBR MP3s of independent music with no DRM attached for around $0.25 a track (based on 40 tracks for $9.99 a month), and Rhapsody, who have a deep catalog and an all you can eat business model (albeit with draconian DRM: if you stop paying for the service, your tunes stop working). Those are different business models with different benefits to the customer. The digital music market is big, but so far it’s not big enough to support undifferentiated services offering the same content, only with different DRM.