iPod puts new face on music industry

Around UCLA, a number of students who sport white earphones
while they go about their business are participants in a music
industry transformation.

These white earphones are the trademark of Apple’s line of
MP3 players which dominate the market. Once the cause of grief for
music industry executives, MP3 players and download sites are now
transforming the way students listen to music and are ironically
proving to be profitable to major music labels.

The latest development arising from Apple and iTunes may be a
price increase for downloading songs. There has been speculation
that the five major music labels are in talks with Apple to raise
the price per song from $0.99 to $1.25.

According to industry analysts at the UCLA Anderson School of
Management, the compatible iPod MP3 player has become popular
mainly because of the ease with which it works and its attractive
interface. Yet students on campus emphasize the slick marketing
campaign has greatly influenced their purchasing decisions.

Industry experts say that the iPod’s unique interface
““ which students commonly recognized by its
“clickwheel” ““ has been a large factor in its
ability to corner the market. Accessories such as belt clips and
designer covers by Coach and Kate Spade have also added to the
concept of iPod as a status symbol, and such qualities have been
attributed to the MP3 player’s success.

“People like the iPod because its hardware design is
intuitive, and because it’s ergonomic,” said Danika
Cleary, senior product manager for the iPod.

While the product quality has been a factor in the huge sales of
these products, industry analysts also say that Apple’s
aggressive campaign targeting the “youth population”
““ people from ages 18 to 24 ““ has had less influence on
sales.

For example, the billboards on Interstate 405 with neon and
black colors and television commercials that tied in U2’s
latest album can be identified as part of the strategy.

“I think what makes (the iPod) attractive is the result of
just plain great marketing. The commercials were youth-targeted and
featured contemporary music artists in the background
soundtrack,” Van said.

Keeping product interface and marketing in mind, Anderson
professors say other reasons the MP3-manufacturer may have cornered
the market are the advancements in technology and changing demand
within the music industry.

The history of the music industry has continually changed the
way students listen to music and this too may have added to the
iPod’s success.

In early 2003, amid rising concerns by music industry officials
about losses due to illegal file sharing, Apple launched the iTunes
music store. The unprecedented success of the iPod is evident in
that it has made up nearly a quarter of Apple’s sales and
made the company a force to be reckoned with in the youth market.
Last Wednesday the 300 billionth song had been downloaded from the
iTunes store, according to a press release from the computer and
MP3 manufacturer.

While the major music labels have begun to profit from legal
downloads, the conception of download sites occurred independent of
the music industry. The technology that emerged in the late
’90s allowed file-sharing software to work, thus creating a
demand for music file downloads.

“The people at Apple Computer should be thanking that
Northwestern University student (Shawn Fanning) who founded
Napster. Web sites like his created the underlying demand for
“˜unbundling,’ or downloading individual songs from
different albums,” said Ely Dahan, assistant professor of
marketing at the Anderson School.

The ability to buy favorite songs without paying the price for a
whole album has resonated with much of the youth population.

“It’s more worth it to me to just download one song
for a dollar without the paranoia of getting slammed with a
lawsuit,” said Sandy Van, a third-year comparative literature
student.

The availability and selection at the iTunes store, as the
largest legal download catalog, makes it the first place some
students may go to find that song they just heard playing on the
radio.

“When Napster was only starting to make deals with major
record labels after the lawsuits, Steve Jobs (Apple
Computer’s CEO) position Apple correctly and had the early
mover advantage. He has in turn created the largest legal download
library in the world,” said Dahan.

While the success of the iTunes store can be attributed to the
demand for individual songs, compatibility becomes a huge factor
when comparing Apple Computer’s competitors in the market of
music downloads and MP3 players.

“Part of why the iPod is so popular is that it is the only
player that has its own compatible music store,” said
Cleary.

The now legal Napster music downloading site, along with Real
Player and MusicMatch, are compatible with various different models
of MP3 players, including Dell’s Pocket DJ and
Creative’s Zen Micro, which is the iPod’s closest
competitor. But Apple iPods are the only MP3 players compatible to
play tracks downloaded from the iTunes store.

Though iPods are the only MP3 players compatible to play tracks
downloaded from the iTunes store, they can be used to play almost
every other type of file in most any format.

This one-way compatibility of iTunes presents a problem for
companies seeking to take away some of the share of the MP3 market
that Apple Computer has a hold on.

The Apple iTunes store faces some challenges, including
resistance to the unbundling of songs ““ when users can
purchase individual songs from albums.

“The majority of people haven’t caught onto the
iPod. There are some people who know about it and could care less.
And there are others who find it appealing but think it’s too
difficult to use,” Dahan said.

Of those who remain indifferent to Apple’s innovation,
there are some who are simply resisting the “unbundling of
songs,” like Amanda Dennis, a third-year graduate student in
chemistry, who uses her iPod to listen to entire albums that she
already owns.

“Personally, I like albums because I view an album as more
than just a collection of songs but an artistic rendition. For
music aficionados like myself, compact discs will continue to be a
favorite,” she said.

According to the Recording Industry Association of
America’s Yearend Statistics, the sales of CDs have been
steadily declining since 2000.

“At this point it’s irrational to buy an
album,” Dahan said, “the future of music lies in
downloading songs, and the music industry has already taken note of
that.”