Tectonic Change In Music Industry

Allen Evans of Middlesex, Vt., is no stranger to digital music. About two-thirds of his music collection was downloaded for free from Internet file-swapping networks. The rest comes from CDs he and his family already owned.

Recently, Evans downloaded four songs — and gladly paid for them.

The 19-year-old's purchases, along with 1 million other tracks sold in the first week of business for Apple Computer Inc.'s online music store, mark a refreshing turn of events for the ailing music industry.

Steve Jobs, Apple's chief executive, has succeeded in a major coup, forcing tectonic change in an industry notorious for its dinosaur pace and dragon tactics.

Since the late 1990s, the music industry has battled Internet sites that allowed anyone to download and copy virtually any song for free. Entertainment companies sued to shut down such file-sharing services as Napster, but failed to stem the traffic as other sites and technologies replaced it.

Now, there's a legal option that nearly everybody likes.

At 99 cents a download with virtually no restrictions on how and where the songs can be played — including portable devices — Apple's service for Macintosh computer users is proving to be the most promising alternative to free, pirated music.

"The hardest part was to convince the labels that 99-cents-a-download is a legitimate business, and Apple did that work already," said Josh Bernoff, an industry analyst at Forrester Research.

"If it weren't for Steve Jobs' persistence, I don't think this would have happened," said Hilary Rosen, chief executive of the Recording Industry Association of America and its most vocal piracy fighter.

Over 18 months, Jobs and a small team of high-level Apple employees negotiated the deals with Universal, Warner, BMG, EMI and Sony Music Entertainment. At times, Jobs personally demonstrated the music service to persuade the Eagles, Dr. Dre, Sheryl Crow and other reluctant artists to come aboard.

Jobs hit the right chord with artists and with some of the very record executives who had, two years ago, accused him of encouraging piracy with advertisements that encouraged Apple computer users to create their own CDs with digital music files.

Rosen said Jobs sold them on the elegance and simplicity of iTunes Music Store, which is easy to navigate and where a credit card is all that's needed to buy a song or album.

Jobs persuaded them, she said, to bet on his strong belief that consumers want to "own" the music they download - instead of see songs disappear from their computers under existing subscription-based services.

Because Apple commands less than 3 percent of the desktop computer market, the iTunes Music Store amounts to a trial run, Rosen said. Apple says the store won't serve the dominant Windows market until later this year.

Jobs' timing could not be better.

After two years of declining CD sales, unabated online piracy and lukewarm consumer interest for its own services, the industry was ready for something new.

Jobs, who also runs the Pixar Animation Studios behind the "Toy Story" movies, "had the integrity and talent, with the experience of movie and songs and technology," said Jimmy Iovine, chairman of Interscope Geffen A&M, part of Universal Music Group.

Jobs' success is encouraging both competitors and wannabes.

"If he's the one that gets the game going - great," said Dan Hart, chief executive of Echo, a joint venture of Tower Records, Best Buy and four other retail chains that plans to mirror Apple's pay-per-song model in the larger Windows world.

Echo has yet to complete technology and licensing deals, he said, but the time is ripe.

That Apple's store sold a million tracks in the week following its April 28 launch apparently shocked record executives, who said they would have been satisfied with a million in a month.

Apple isn't the first to sell downloads by the song. And other services, too, allow burning onto CDs and transfers to portable music players.

But Apple was the first to piece everything together - with virtually no restrictions, a reasonable price and a relatively easy-to-use computer jukebox program - all without charging subscriptions, industry analysts say.

Customers can keep the songs indefinitely, play them on any number of iPod portable players and burn unlimited copies onto CDs.

By contrast, industry-backed music services such as pressplay and MusicNet require monthly fees and disable songs once subscriptions end.

Singer-songwriter Janis Ian, a Grammy Hall of Fame inductee and vocal critic of her industry's anti-piracy tactics, is thrilled by Apple's offering.

"You can't call it visionary because they should have come up with this five years ago," she said. "It's ironic that a computer manufacturer is teaching the record industry the next step, and so far, that's what's happening."

By May Wong

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