East End David takes on US Goliath
Every fighter wants to take a shot at the world heavyweight champion, everyone wants to see if they can be knocked from their perch. In the digital music world that champion is Apple and one small London-based firm is taking a crack at the title. Ed Waller takes a look.
Everyone has spent the past few weeks ruminating over Warner Music's plans to take on iTunes by not only offering music downloads for a fiver an album, undercutting the market leader by nearly three quid, but also without copyright blocks so users can swaps the tunes between their digital gizmos and devices.
Everyone loves an underdog and the spotlight in this battle is not so much on Warner Music but its partner, a tiny company called 7digital that is based out of an even tinier office in London's fashionable Shoreditch. This support for the underdog is also born of the fact that many players in the business would be happy to see iTunes taken down a peg or two. The price cut is one thing, and that can only be a short-term gimmick to attract initial headlines and punters, but the fact that Warner has decided to offer its music without the usual copyright protection is a major change in tactics, given the fuss everyone made about Napster all those years ago.
The thing is, in the fight against piracy the music labels quickly embedded copyright protection (called DRM technology) in their digital music, and initially welcomed iTunes to the party since it was a way of combating the pirates and getting some much needed revenue from the digital music download sector.
Then iTunes got a little too big for the labels' liking, and it now dominates not only the digital music space (controlling as high as 80% of the market) but has also emerged as number two music retailer across the board, including bricks and mortar stores on the high street. Apple's digital music store is now the number two music retailer in the US, behind only Wal-Mart, based on the latest data from the NPD Group. It has over 50 million customers and has sold over four billion songs, with some 20 million sold on Christmas Day 2007 alone.
Great for digital music, not so great for the music labels, which in their early enthusiasm for the then saviour signed into rigid pricing deals with Apple, in that Apple decides the prices of singles and albums and wants them to remain fixed. In effect, the labels handed Apple the retail end of their digital business on a plate and are now keen for other download services to thrive so they're not beholden to Steve Jobs. Hence Warner Music's support for that tiny East London music downloader 7digital.
But can the bijou company really take a bite out of Apple's market? Apple's domination of the business is based on the integration of iTunes software, through which most music is bought and downloaded, and the wildly popular iPod device, through which most of it is played. Because the latter is sooooo popular, it dominates the download market since only music downloaded via iTunes can play on the iPod.
Until now, that is. Since music is now sold by non-iTunes vendors without DRM protection it can be played on any music devices, including iPods and mobile phones, so the connection between Apple's download service and its playback device is finally broken, and the music labels can now see the potential for more flexible etailers getting music on to the iPod.
However, while 7digital - describing itself as one of the top three music download services in the UK - takes on iTunes, a fight that the likes of Napster, HMV, and Wippit have lost, plenty of other companies are lining up to do likewise. Apple's iTunes is already being undercut by other online music download sites, such as Play.com, which is offering DRM-free tracks from 65p each, compared to iTunes' 79p.
"Apple has had its own way in the music market for far too long," said Wendy Snowdon of Play.com. "I think price is something consumers can understand, and we hope they will see us as a compelling alternative." EMI, however, is the only label signed up to this service, and it offers just one million tunes, compared to Apple's six million.
However, throw in Amazon's digital music download service, currently only available in the US but posing a much bigger threat to Apple's music business, and it looks like iTunes' days at the top of the heap might be numbered.
