The following is from a press release issued by Ipsos. What is interesting is not just iTunes incredible market lead, but the fact that two music services that are DRM-free are increasing their share. The press release gives several factors for Rhapsody’s market share increase, but neglects to mention that in the time frame of the research Rhapsody went DRM-free.
Excerpts from Ipsos’ TEMPO Digital Music Brandscape study show that one year following its launch, Amazon.com Music has made a phenomenal first showing. Meanwhile, Rhapsody’s increased focus on advertising and partnership appears to be paying off. But neither development has slowed iTunes’ step, with the site continuing to gain dedicated users who perceive it as the best fee-based digital music destination.
iTunes Continues to Expands Lead Despite Increased Competitive Pressure
The fifth annual TEMPO Digital Music Brandscape study is an in-depth examination of fee-based online music brands, and is part of TEMPO, an Ipsos quarterly study of digital music behaviors.
Awareness and use were steady among most dominant brands this year, but did increase for three top competitors while declining among many lesser-known players.
* iTunes continued to grow in terms of awareness, usage, familiarity, and ‘best brand’ mentions.
* Amazon had a strong first year, with initial awareness, usage, favorability and ‘best brand’ ratings comparable to any of the top brands after iTunes. Moreover, Amazon actually matched iTunes in user satisfaction.
* In perhaps the most significant development this year, however, Rhapsody gained in both aided and unaided awareness, usage and favorability. Although some of this growth may have been trickle-down from growth of digital music, overall, only iTunes and Rhapsody increased in these measures. This suggests that Rhapsody’s growth was not merely a reflection of market-level changes, but a direct result of its redoubled advertising efforts, its commitment to broad partnerships such as those with MTV Networks and Verizon Wireless and the fact that the streaming service competes in a niche alongside rather than in direct competition with iTunes.“iTunes dominates this market,” says Karl Joyce, lead author of the TEMPO study, “but that by no means suggests that there isn’t room for innovative competitors with differentiated offerings. This is precisely who, according to our research, consumers are paying attention to and rewarding with their patronage. Amazon – unique for offering DRM-free downloads from the catalogues of not one, but all four majors – has done quite well in its first year, easily establishing a place for itself among the other top brands operating in iTunes’ shadow. And then there is the story of Rhapsody. Rhapsody is a success story in how to build a brand’s power through increased awareness. Yet despite this strengthening among key competitors, iTunes’ dominance remains unchecked.”
I find it interesting how “consumer advocates” in Europe are demanding Apple changes it’s business strategy by claiming iTunes with DRM violates “consumer rights”. With 57% of consumers preferring iTunes to DRM-free services, these bullys should be ignored. Sadly, the anti-business mentality in Europe will likely mean Apple will be denied the right to run their company freely and will instead have beaurecrats dictate how they operate. Personally, I hope they just withdraw their service from these countries Atlas Shrugged style.
What’s even more interesting (at least in Amazon’s case) is that the open-format, no-DRM songs and albums are selling for LESS than Apple’s DRM versions.
In the original Newsweek article on the Kindle, the author suggested that Amazon was taking a loss on many kindle-editions to maintain the low price. Since the record labels are on record as saying Apple doesn’t charge enough for iTunes songs, it might be that Amazon is operating their mp3 division at a loss, to build market share.
Amazon has another advantage here too: the many people who have bought low-price CDs from Amazon will have Amazon accounts already, so buying the mp3’s won’t involve setting up a new account. The only onerous thing about it would be downloading the special application Amazon uses to co-ordinate buying all the tunes on an ‘album’ of songs.
This is all serious snacking for book publishers to consider when thinking of ebooks. I have little doubt that publishers (who were already fretting over Amazon’s discounting policies regarding pbooks) are nervous, very nervous, over the threat that the Kindle will monopolize the ebook world the way the iPod has the portable media player world.
So going no-DRM, and cutting prices, would be levers to work back against the looming power of Amazon.
Personally, I don’t see the publishers succeeding. They have up till now demonstrated the same head-in-sand, ignore-future, rely-on-last-century’s-business model, that the record labels have. They don’t release ebook editions; when they do, they price them comparably with pbooks (hardcover pbooks) so as to preserve their bookstore sales; then they lard on DRM and only release for a few devices, and so on.
I don’t know what the answer is for publishers, but the case of recent Harry Potter books indicates that the only thing stopping widespread piracy and the utter destruction of publishers’ business models is the twin saving ‘graces’ of:
1. Americans don’t read books anymore
2. The Americans who do read books, are even more backward-looking than the publishers.
But these two anomalies cannot long endure.