June 13, 2006 7:00 pm

Crunch time for Apple’s music icon

Pressure on Apple Computer to open its closed system of the iTunes digital music store and the iPod music player is spreading across Europe.

Last week, Norway, Denmark and Sweden said Apple must make music tracks downloaded from iTunes playable on rival devices or get out of their countries. Finland is also looking at intervening.

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In France, legislation that is in its final stages in parliament would force all electronic devices to be “inter-operable”. Other large European countries are thought to be considering action of their own.

Francisco Mingorance, European director of policy at the Business Software Alliance, a trade body whose members include Apple, Microsoft and Dell, admits that the onslaught “seems to have legs”.

In the UK, the BPI, the record industry trade body, told parliament last week that Apple needed to remove the copy protection measures that restrict the use of the tracks to its own iPod.

“Apple has been both a brilliant innovator and successful friend of the industry by coming up with both the hardware or the software,” says Peter Jamieson, BPI chairman. “Sadly, it’s given them an 80 per cent market share.”

The pressure on Apple is coming in part from consumers. But the popularity of the iPod - which has attained iconic status for young music lovers - and the ease of connecting the device with the iTunes online store has so far proved more important.

At $13.9bn in revenues a year, Apple’s company-wide market share is small compared with bigger rivals such as Microsoft ($39.8bn) or Sony ($65.7bn).

Yet in the burgeoning market for online music, Apple dominates. The iTunes music store and the iPod music player both enjoy market share of about 80 per cent in the US and the UK as well as “significantly more than half” in Europe as a whole, according to Jupiter Research. Songs downloaded from the company’s iTunes music store now number well in excess of 1bn, while the iPod accounts for about 40 per cent of the company’s revenues.

However, there are early signs of a concerted consumer campaign. Customers at Apple’s shiny new 24-hour store on Fifth Avenue in New York were last week treated to the spectacle of men and women dressed in fluorescent radiation suits protesting against the “digital rights managment” (DRM) software that stops iTunes tracks being played on other players.

“As the largest purveyor of media infected with DRM, Apple have paved the way for the further erosion of users’ rights and freedoms made possible by the technology,” says DefectivebyDesign, the group behind the protests.

In the UK, the Open Rights Group, another consumer protection organisation, has been lobbying MPs to force companies to open up their DRM. “If I buy a car I expect any brand of petrol to work in it. Consumers are starting to see that they can do less with the music they buy,” says Suw Charman, executive director of the group.

Apple’s defenders argue it has taken the risk, spent the development money and should be free to enjoy the success of its products that have been instrumental in popularising legal digital music.

“Digital downloading wasn’t merely failing to get out of the starting blocks; it’s feet were firmly nailed to the starting blocks before Apple came along,” says Mark Mulligan, an analyst at Jupiter Research. “Without Apple the digital music market would be half its current size.”

Mr Mulligan argues that there is no objective reason why legislators and consumers bodies across Europe should target music rather than other electronic devices such as video games consoles.

Yet there is a view that Apple would be doing itself a favour by opening up its “walled garden” of digital music, ending the spread of political and legal strife and potentially selling more downloads through iTunes.

Salman Momen, head of media technology at Capgemini, believes the iPod’s allure is so strong that Apple has no need to lock consumers in. “I would imagine that the iPod to iTunes integration is so tight that it shouldn’t come under threat,” he says.

The problem may yet be taken out of the hands of politicians, activists and Apple. According to Van Baker, an analyst at Gartner, iPod lovers may have the final say. “Consumers are likely to object rather loudly if governments force Apple’s hand and it withdraws iTunes from the market,” he says.

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