Sunday, March 30, 2008

iTunes: the adverts

Surprising Apple rumours appeared last week from, of all places, the Financial Times. Apparently,

Apple is in discussions with the big music companies about a radical new business model that would give customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices.

It's surprising because Apple has been so successful with their existing business model. Why would they go through the risk of changing it, especially if competitors like Nokia already have similar models in place?

I suspect that Apple sense a new market opportunity, and it comes from iTunes. If the iTunes store becomes free to consumers, then its usage will rocket by an astronomical amount - that's the basic law of pricing. Apple could monetize that usage by turning it into a website (rather than client application), and introducing adverts.

Apple's new browser, Safari 3.1, already contains the key components to get this done - the new HTML5 <audio> and <video> elements, plus offline file storage for your music collection. They've been circulating Safari as widely as possible - even on Windows - and now we know why. Apple could make iTunes far more 'sticky' for consumers (and hence get more ad money) by adding context to the music - user reviews, lyrics, recommendation lists, and artist news. For just $20 per iPod, Steve Jobs would be guaranteed one of the most lucrative websites on the internet.

So, is iTunes finally coming to the web? We'll find out by the end of this year.

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