If Al Capone had an iPod

It's astonishing to see the a buzz created by the launch of a legal music downloading service - in this case Napster's arrival in the UK.

Companies such as Napster, Apple, Real and even old world types like Coke and McDonald's want to cash in on this "rush" toward legal online music. The frenzied pace at which music services are being rolled out by these companies and others makes it seem like legal downloads are all the rage and like there is a pot of gold waiting for anyone with some neat software.

In reality, however, legal music sales are pretty paltry. Apple's iPod is responsible for all this excitement, and it ain't exactly because the device plays legal songs.

With 70 million songs moved on iTunes so far, Apple is the clear leader in legal online music sales. Let's be generous and double that figure to estimate total sales of all legal music vendors. That gives about $140 million in revenue per year.

Who cares.

The record labels claim to have lost more than $2 billion per year in music sales due to piracy. Whatever Coke, Apple and Wal-Mart are doing to lessen this total is not of significant benefit. Apple, however, could well make $1 billion in iPod sales this year, which certainly helps Apple.

The prohibition-like atmosphere surrounding online music is painful to watch. The labels can keep suing music fans all they like, and their actions may make a small dent in the piracy problem. But, despite all the fuss, legal downloads still aren't terribly interesting at all. The real money is to be made by using hardware to cash-in on speakeasy tunes, and it's going to stay that way for a long, long time.

Posted by ashleevance, May 20, 2004 02:33 PM | | TrackBack