Why itunes Is Winning

With the announcement last week that itunes has become the #2 retail outlet for music (trailing only behind Walmart), it's time to concede that not only is the digital download growing in popularity as the CD wanes, but that consumers have latched onto the conveniences associated with the downloadable file and there will be no turning back.

On Christmas day 2007, a day when Walmart and other physical (non-virtual) CD retailers do no business at all, itunes sold 20,000,000 downloads. This clearly illustrates why the CD can no longer compete.

For the consumer, music is a leisure component that has become integrated into all aspects of daily life in proportion to it's availability, portability, cost effective delivery system, and individually tailored storage and playback options.

When Sony introduced the Discman, it was the combination of the disk and it's playback system that caused CD sales to explode. For the first time it was possible to travel away from home or car based playback systems and still have a high quality listening experience. With a photo-holder sized carrying case and a slender Discman the consumer could be an audiophile and take a scenic bike ride through the park at the same time. The novelty of this freedom was a heady experience at first, and sales reflected this enthusiasm. Consumers preferred CDs not for superior sound quality alone, but for the combination of quality and portability. The ipod and iphone have done the same thing for the portable file.

It's clear also that music is often an impulse buy. I remember as a kid getting that Christmas money and being frustrated because the record store was closed. Last Christmas the itunes Gift Card made a lot of young people very happy instead of very frustrated. That's why 20,000,000 songs were downloaded. Send a kid to the mall with $20 and he'll spend $6 on food and buy one CD. Send him to itunes with a $20 gift card and he'll download 20 songs. It's that simple.

Last week I did a concert/seminar at the Kimberton Waldorf School here in Chester County, PA. In speaking to the large group of mixed-graders I asked them where they got their music. I received an instantaneous and unanimous answer "itunes!"

But this is not, as some would have it, an age related shift in buying habits. A recent study determined that 80% of all surveyed adults hadn't purchased a single CD in 2007. Young and old alike prefer the advantages of the digital download over the CD.

What the record industry should be doing instead of whining about loss of profits, is to come up with upgrades that reflect the consumer's preferences. We can predict what they will want : 1) higher quality file formats at retail, 2) easier and more convenient downloading options and payment options, 3) more reliable storage and back-up, such as a form of download that allows buyers to re-access a lost file without re-purchasing the song, 4) more customizable playback options such as built in re-mix capabilities and files that convert themselves to various formats at the click of a mouse.

If the record industry wants to keep it's share of the consumer's purchasing power it must compete in the open market with those who have seized the innovation initiative that the record (read "CD") industry failed to seize at the outset of the downloading revolution. Instead of greedily protecting their obsolete interests and suing grandmothers, they should have welcomed the opportunity to bring in 20,000,000 downloads on Christmas day.

copyright 2008 by craig bickhardt