`By Nekesa Mumbi Moody Associated Press | Posted: Sunday, October 9, 2011 12:00 am
`
`NEW YORK - When Apple rolled out iTunes for the masses in the spring of 2003, the music industry was at a
`point of transition - and chaos.
`
`Entering the new millennium, albums were enjoying blockbuster sales of several million units for its superstar
`artists, and profits were booming. Yet the threat of Napster and other forms of illegal downloading threatened to
`eviscerate those profits as many music fans were starting to get used to the idea that music, and loads of it, could
`be free.
`
`Apple's iTunes entered into that landscape with a concept that wasn't exactly new: a system where you could pay
`for songs online. Yet iTunes, with its simple interface, its simple concept - 99 cents per song - and revolutionary
`MP3 device, the iPod, made it the golden standard.
`
`The entry of Apple and its leader, Steve Jobs, who died Wednesday, into the music world was more than a success
`- it was a phenomenon. Today, iTunes is the largest music retailer, has redefined the listening experience and has
`largely become the way that music is consumed.
`
`What's less clear is how much the music industry - which is continuing to decline - has benefited. Even today,
`consensus is mixed.
`
`"It really did remind an entire industry, and gave a cue to even a culture beyond the industry that if you provided
`music in a convenient, direct way and responded to the consumers' interest and demands, they would in fact buy it,
`especially if it was priced appropriately," said James Diener, CEO and President of A&M/Octone Records.
`
`"It forced change in a positive way. People who are critical of what iTunes may have done perhaps have short
`memories and don't realize that the alternative at the time was that an enormous amount of music was leaking onto
`the Internet and being consumed for free," Diener added. "The alternative was to inspire people to buy music, and
`to go to a digital retail site. ... That was a remarkable step forward."
`
`Apple introduced iTunes in 2001, a few months before it would release the now-ubiquitous iPod (which begat the
`iPod Nano, the iPhone, the iPad). At the time, it was not a music store but a rip-and-burn library service only
`available for Mac users. It initially was viewed with great skepticism by record companies for its ability to make
`digital copies of music - something the industry thought would lead to piracy.
`
`The industry had a lot to protect. It was enjoying booming sales at the turn of the last century, fueled by the
`success of teen sensations like Britney Spears, the Backstreet Boys and 'N Sync. But it was just starting to feel the
`effects of the illegal downloading era: The top-selling album of that year, Linkin Park's "Hybrid Theory," sold 4.8
`million, down from 2000's top-seller, 'N Sync's "No Strings Attached," which sold almost 8 million a year before.
`
`"That was at the same time we were confronting Napster, we were confronting the beginnings of the global piracy
`epidemic that was to come," said Jim Donio, president of the National Association of Recording Merchandisers, or
`NARM.
`
`"At the same moment of time, we were also experiencing the biggest weekly sales of all time. It was a very odd
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`confluence of events, because you had the harbinger of immense challenges, but at the same time, reaping the
`rewards of incredible record breaking physical sales. ... It was heated, it was tense."
`
`When Apple's iTunes became a full-service online music store in 2003, it offered more than 200,000 songs that
`could be loaded on your iPod and fully portable, all for 99 cents a download, no matter who the artist was (in
`recent years, it has allowed for more variation, with some singles now costing $1.29 per song).
`
`Bill Werde, editorial director at Billboard, said that while other services were available at the time, the genius of
`Jobs was making iTunes the ultimate consumer destination.
`
`"He created the retail experience that most people know now. He focused on the fan, he focused on the user
`experience, he didn't focus on rights and complicated pricing schemes. He focused just on what would be simple
`and what would be easy for a music fan to do, and what would be good for a music fan to experience," Werde
`said.
`
`"You look around today, we sell tens of millions of digital tracks each year," he continued. "Given that Apple has
`an 80 percent, 70 percent market share in that digital space when it comes to downloads, you really see how
`important Apple has become in selling music to music fans."
`
`Apple set the pricing, to the chagrin of the music industry, promoting parity for singles and albums.
`
`"If you walked into a physical record store prior to iTunes ... there was more confusion about what the value of
`what certain records were worth. You'd see one record that was a brand new release marked at $17.98, and then
`another one right next to it for $13.98, so there was a lot of clarity for iTunes," Diener said. "I think what iTunes
`did, which was wise on their part and difficult necessarily for the industry to appreciate at first, was they just
`standardized all the pricing. ... That was growing pains for the industry because they were used to having more
`control of the pricing of their products."
`
`Diener believes that price standardization was one of the key reasons for iTunes' success. But while iTunes was
`booming, the era also hastened the demise of traditional retail stores like Tower and Virgin. No longer did rabid
`fans need to form a line in front of a music store to get their favorite album, then play it once they got home; They
`could order it at home and listen instantaneously.
`
`They also didn't have to buy the whole album: iTunes ushered in the era of the singles artists. Cherry-picking
`songs from albums has become the norm, and some artists have complained that iTunes led to the diminishment of
`the album.
`
`"I don't disagree with some of that criticism," Diener said. "By unbundling the album and allowing consumers to
`buy songs one at a time, it changed the whole nature of consumer thinking of what is the basic unit of music - is it
`an album or is it a single?"
`
`But Werde says Napster and other forms of illegal downloading already had started that process in motion.
`
`"I don't think that iTunes unbundled the album, but I think Apple sort of benefited from this eco-system that
`certainly supported the single," he said. "Really, it's the music fan that unbundled the album, by all of these fans
`clearly responding to this amazing new way to experience their music. I mean, the shuffle button? I think the
`shuffle button may have single-handedly changed the musical horizon of 50 percent of the world."
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`In 2010, iTunes marked the sale of its 10 billionth song. Even longtime stalwarts have come to embrace iTunes:
`The Beatles' catalog finally became available late last year. Paul McCartney considered Jobs a friend and called
`him "a great creative artist" and a music lover.
`
`Yet for all of iTunes' success, the music industry is still floundering. While sales are up slightly this year, the
`industry has been on a dramatic decline for the past decade, as labels have been shuttered and thousands of jobs
`lost as it continues to contract. While digital downloads continue to explode, overall album sales have dropped by
`at least half.
`
`"Steve Jobs leaves behind a little bit of a complex legacy," Werde said.
`
`"He helped create what we think of today as the legal digital music market, which is a substantial music market
`around the world. But at the same time, the music business in the retail space is probably worth about half of what
`it was worth ten years ago, so I don't know that anyone saved the music business," he said. "No one has yet solved
`the problem that music can still be free."
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