It all used to be so straightforward. If you wanted to listen to some music when it was convenient to you rather than when it was on the wireless, you would go to a record shop, get something made out of vinyl and put it on the gramophone. As a means of getting your favourite tunes it lasted for an awfully long time. Things changed a little when CDs arrived in the 80s but essentially the same model held sway, without so many scratches.
Fast-forward to the late 90s and the start of digital music downloading. Often using peer-to-peer systems, this allows people to share items they have "ripped" to their hard disk from CDs or indeed from vinyl. More recently these downloads have become more legitimate, and a couple of weeks ago the first music download chart was launched. All of which puts recent moves from Napster and Microsoft in an interesting light.
Napster - until a few years ago the biggest name in illegal peer-to-peer downloading - has been building up a catalogue of legitimately owned music. And thanks to the upcoming UK release of Microsoft's latest software Windows Media Player 10 (WMP10), Napster subscribers will no longer be limited to playing music they have purchased on a computer or an MP3 player - they'll be able to rent tracks from a library of around a million tunes. Leanne Sharman, vice president and UK general manager of Napster, says that the Napster To Go service will launch with the WMP10 by the end of this month and as a standalone service by the end of the year. For a monthly subscription that has yet to be decided (the US price is $14.95, $5 more than the normal Napster subscription) you'll be able to rent tracks from Napster's one million song library.
If you're not already a digital music devotee this might look like just a slight new wrinkle on buying an iPod or any other MP3 player. The major difference is that an MP3 player is a hardware system that relies on digital music which you'll have had to buy or transfer from a CD you own until now; the new Napster system will offer a virtually endless supply of music from its library for what in America looks like the cost of a new CD album per month. Microsoft is predictably bullish about WMP10's prospects, and the portable multimedia player it has in the pipeline. "Portable media centres are a new category of devices that will change the way we think about digital entertainment on the go, because they allow people to take all of their digital entertainment with them - music, photos, recorded television, video," says James Bernard, the company's product manager.
He points to as yet unexplored areas such as watching sports highlights on the train, taking portable films on a business trip and other applications.
"Someday, people might be able to download a new track, and also get a music video, interview with an artist or concert footage. While there will continue to be a strong market for audioonly devices, it's this kind of innovation that will offer consumers choice and take online music to the next level."
All of which is fine and dandy, except that there are already portable music devices out there and since WMP10 isn't out yet it's pretty clear that they haven't needed it yet.
Mark Mulligan, analyst with Jupiter Research, believes Microsoft may be disadvantaged in this area because Apple already has the market lead with its iPod product. "Normally when there's anything to do with digital media you'd expect Microsoft to be the key driver in the market but they've been slightly late to market this time. At the moment the defining company is Apple and iTunes." In fact, believes Mulligan, the iPod is leading the digital music market as much as the iTunes store. If this pattern continues then people like Napster, who provide the online music store only, could have something of a problem.
"The way to think about how a digital music store exists alongside digital music devices is pretty much like a walnut dashboard in a car - you're not going to buy a car because you want a walnut dashboard, however it might decide which model you get." In other words while digital music on a computer has some appeal, it's not going to get the massmarket interested just yet.
Sharman, by contrast, believes that 2005 will be a pivotal year for take-up of digital music. Downloads will work alongside rather than compete with the more traditional media, she says: "It's changing the way consumers will start to consume music in the UK," she says. "We're starting to see trends of consumers going online and next year we'll see this increasing. People will still want to purchase a CD in the high street and use services like Napster as a complementary service."
The figures suggest there will be a way to go before the traditional music retailers start to get hurt by digital downloading, portable or otherwise. Jupiter's figures show strong adoption of the digital media but it remains a minority pursuit. "We're talking about single-digit percentages of penetration of these devices," says Mulligan. "It's comparable to mini-disc players. They haven't revolutionised the way people consume music. That said, digital music devices will have a stronger role as time goes on, but it's not about to replace the CD."
By 2008-2009 downloaded music will account for 7-8% of the music market, he suggests. Another potential problem for Microsoft is its Windows Media Audio format. Windows media files don't play on iPods. And at the time of writing, iPods are the most popular form of portable media player. Mulligan believes this could be a serious issue for Microsoft: "One of the huge assets they [Apple] have got is the huge installed base of media player users," he says.
This has both advantages and disadvantages, he says. The advantage is a clear built-in market leadership. The disadvantage is that without a hardware media player, Microsoft is dependent on partners to get its music download strategy into profitability. "They can't go out and push a Microsoft music service in the way Apple can as they would alienate so many of their partners," says Mulligan.
Whether Microsoft or Apple eventually brings the download market into the mainstream, it's clear that it'll happen eventually - just think of the shelf space you'd save. But it's going to happen slowly, and if 8% by 2009 is the best estimate then traditional music retailers and distributors needn't start worrying about their viability just yet.
