It's Not Me, It's You (part 2)

Business Week has an interesting article on Apple's future with music and it doesn't look particularly good for the record industry. Although having surpassed Wal-Mart as the biggest seller of recorded music, Apple appears to be less and less interested in this side of their business.

And why should they be? The record labels have hardly embraced Apple as one of the few points of light in their failing business model. Having fought hard to retain the hated DRM they finally embraced unencoded tracks only to follow up by forcing Apple to raise prices.

Apple understands the product cycle and realizes that the days of the iPod as a pure music player are largely over. The latest Nano's incorporate cameras and video and the iPod Touch supports all the iPhone applications that don't require a cellular network. And that's where it gets juicy for Apple. Instead of arguing with recalcitrant record labels over a few pennies, they are attracting legions of application designers and Cuppertino gets to keep 30% of every sale.

I don't believe that Apple will drop the iTunes music store anytime soon but they realize that the future of music listening is best defined by streaming operations such as the wildly popular (in Europe) Spotify. I doubt that it will be too long before Apple releases it's own such network and enjoys the recurring monthly revenue provided by such a service. To embrace that future I would look for WiFi to appear on all but the smallest iPod Shuffle.

Where does this leave the labels? One could hardly believe that they could be any worse off than they are currently, but that may be exactly the future they're facing. Their legal download options are almost completely limited to one vendor and they have no strategy or cohesive voice to implement an alternative. They have made no friends in Cuppertino and could find themselves marginalized very quickly.