Trouble in Paradise

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This is Celia Hirschman with On The Beat for KCRW.

Here in the United States, we love our iTunes. Everybody knows what that smooth white rectangle can do. For years, the record business tried to get music lovers to legally download, but in the end, it took Steven Jobs and Apple Computers to develop, manage and market the idea. Now, in the wake of their success, Microsoft, Walmart, AOL, Yahoo, Hewlett Packard, Sony, and a dozen more companies are racing to launch or relaunch their own versions.

Though iTunes is still way ahead as the US digital downloading leader, the mere fact that all these other companies have jumped onboard underscores the growth opportunity everyone is anticipating. Many different hardware devices are now on the market, and this Christmas, we'll get a good indication of the future possibilities.

The iTunes story is quite astonishing. Back in December 2000, Apple announced huge declines anticipated for their fourth quarter sales. In fact, they were down 57% from the same quarter of the previous year, this time with a $195 million dollars in losses. No one was cheering.

But less than two weeks into 2001, Steve Jobs announced the launch of iTunes, at the annual Macworld conference in San Francisco. The following week, Apple logged 275,000 downloads. A new vision for the music business was born. With the release of the first iPod later that November, the rapid acceptance of digital downloading by music consumers was meteoric.

Cut to where we are now. iTunes is still the market leader and Apple knows it. As the company continues to expand its global interests, the business reception to iTunes has been less than rosy. iTunes launched in the UK last summer but many of the important independent labels were initially ignored by iTunes management. The British independent music business represents 30% of the overall marketshare, so indie music is far from marginalized there. After a series of public embarrassments, iTunes began to rectify the situation, and bring in the bigger independents. But it's been slow going.

And the problem isn't just isolated to England. This week, iTunes launched throughout 9 other countries in Europe. According to Billboard Magazine, the Italian trade organization, FIMI, who represents both independents and major labels, has just publicly criticized iTunes for neglecting most of their Italian indy labels.

I suspect that there's a cultural bias at work here. In America, the major labels still rule the roost in the music business. Their money and manpower often overshadow the independent labels in the media. When iTunes opened their doors in America, they made sure that the independent labels were all invited. In fact, they held a large meeting in Northern California for hundreds of indy labels to get onboard. They seem to understand that without the indy artist support, iTunes would be perceived as just another corporate gunslinger.

But that philosophy has not translated well in the European business model. In Europe, it's quite common for the most successful records to be on independent labels. Yet, Apple seems to have resisted supporting independents in that manner. It would be smart for Apple to shift attention and focus on bringing in those indy labels. In the end, Apple will be wealthier for it. And that is the point, isn't it?

This is Celia Hirschman with On The Beat for KCRW.