Apple Music Service: Songs for 99 Cents
Virgins' Successful 'Single' Campaign
Reconstructing the Record Business

By Duncan Martell

SAN FRANCISCO (Reuters) - Apple Computer Inc.(AAPL.O) on Monday unveiled a service that lets music fans download songs for 99 cents each, a procedure that Apple called simple and cheap enough to compete with the free song-swap sites the record industry blames for its slump.

Apple said its long-awaited iTunes Music software was immediately available for its own Macintosh computers, while a Windows version would be available by the end of the year.

The computer maker said its online music service would feature more than 200,000 songs from the top five music companies -- fewer songs than some other paid services offer, but Apple said the list will grow.

Users would be allowed to burn songs on an unlimited number of CDs for personal use and download them on up to three computers -- without violating copyrights or denying royalty payments to musicians.

"Consumers don't want to be treated like criminals and artists don't want their valuable work stolen," Apple Chief Executive Steve Jobs said in a statement.

Jobs concluded the launch by playing a video in which U2 lead singer Bono, jazz trumpeter Wynton Marsalis and singer-songwriter Alanis Morissette praised Apple's new service.

At the same time, Apple rolled out new versions of its popular iPod handheld digital music players with expanded capacity, saying Mac users would be able to buy music over the Internet and transfer it readily to their iPods.

The record industry has embraced Apple's efforts as a bulwark against online piracy even though established competitors dismissed its claims that it had vaulted to the front in the still-developing online music market.


More than two years ago, Apple took the wraps off an advertising campaign with the phrase, "Rip. Mix. Burn," which irritated many in the music industry who thought the tagline amounted to an incitement to piracy.

Jobs acknowledged as much on Monday, noting dryly: "There was some confusion." However, Jobs said that "rip" simply means transferring music from a CD to a computer's hard drive.

"That's what it means to everyone under 30," Jobs said at a San Francisco event attended by hundreds to unveil the service. He added that in light of Apple's music service, the tagline should be updated to be "Acquire. Manage. Listen."

Record industry executives have expressed hope that Apple's music offering can lure users away from the file-sharing Internet services that music companies have blamed for slumping CD sales.

Cupertino, California-based Apple has built its strategy around the idea that its Macintosh computers, which represent about 3 percent of the personal computer market, could serve as the "digital hub" of a still-emerging digital lifestyle.


Jobs said the pay-as-you-download Apple service, which allows users to hear free, 30-second clips of songs, was superior to other fee-based online music services.

"People are used to owning their music," not renting it, Jobs said. "We think subscriptions are the wrong path."'s Rhapsody digital music service, which costs $9.95 a month, offers streaming music and allows users to burn songs to a CD directly for 99 cents, offers more than Apple's service, the company's chief executive said.

"What Apple offers is about one-third of the features, two-thirds of the music to just over 3 percent of the market," said Sean Ryan, CEO of, adding that its average user listens to 200 or more songs a month, which would make Apple's approach prohibitively expensive.

Rhapsody is being acquired by RealNetworks Inc.(RNWK.O)

Mike Bebel, chief executive of Pressplay, which is backed by Sony and Universal, bristled at the suggestion that Apple's service was better than its rival offering, which includes 100,000 more songs and uses Billboard hit lists.

"I call that an experiential model, not a rental model," Bebel said.

Yet another recent entry into online digital music, MusicNet, backed by RealNetworks and three of the big five labels, said Apple's launch is good for consumers.

"We need to create the market and this is another step in educating consumers," said Ann Garrett, a spokeswoman for MusicNet, which launched two months ago and is available only on AOL, the biggest Internet service provider.

Entertainment companies battling to shut down such file-sharing sites suffered an unexpected setback on Friday when a federal judge in Los Angeles denied a request to shut the Grokster and Morpheus song-swap services, saying they cannot control what is traded over their networks.

Apple already has a hit with its popular iPod digital music player. The device, the size of a deck of playing cards, holds thousands of songs in digital format. It is available in versions that work on Apple's computer and computers using Microsoft's Windows operating system.

The new iPods are available in 10-gigabyte, 15-gigabyte and 30-gigabyte models and cost $299, $399 and $499, respectively. They are thinner and lighter than previous models and have back-lit buttons.

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Virgin Entertainment Group, North America, the world's leading multi-channel music and entertainment retailer, is spearheading a movement to reintroduce the Single to music fans. In the midst of declining Singles sales, Virgin Megastores has pledged its commitment to the format by being the first retailer to pioneer a campaign that will support the growth and success of the Single, in an effort to rally support from the music industry.

"Over the past decade the production and distribution of domestic Singles has been dramatically reduced largely because many labels feared the format showed a lack of commercial viability and was leading to the cannibalization of full-length albums," claims Glen Ward, CEO, Virgin Entertainment Group, North America.

Virgin executives feel the lack of Single format negatively impacted the music industry and created a loss in retail sales partly due to the removal of a low-price purchase option for consumers. In an effort to help the industry rebound, Virgin has spent the last few months actively lobbying labels to commit to releasing more commercial singles; most recently this involved a highly visible "Save the Single" presence at NARM, the industry's leading convention. Virgin has also pledged considerable physical space in all of its 23 Megastores as well as ongoing marketing support.

"Making Singles a success in the U.S. market is going to take a concerted effort from both labels and retailers," Ward continues. "First, the labels have to make a commitment to consistently release a significant volume of quality titles. Then, the retailer needs to get behind this in terms of merchandising and promotion -- and that includes both new releases and catalogue."

Virgin executives have always believed in the benefits of the Single and are currently the only key retailer that has maintained a Singles department, with a broad selection of new releases, catalogue and imports in every one of its North American locations. After researching results from import Single sales, Virgin is confident there is a significant market demand for commercial domestic Singles. "The Single format holds an appeal for a wide breadth of music consumers," Dave Alder, Senior Vice President of Product and Marketing, Virgin Entertainment Group, North America. "Because of its low price point, the Single gives younger customers an affordable way to start buying music. It is also very attractive to the collector due to the inclusion of alternative tracks and mixes. The Single's unique content and packaging is a way for fans to add something new and interesting to an established full length CD collection."

Furthering Virgin's commitment to reviving the Single, Virgin Megastores is now running one of the first large-scale Singles promotions that the industry has seen in years. In order to showcase the breadth of Singles product and the value of the format, Virgin is hosting a Save the Single nationwide promotion which allows customers to buy 2 Singles for $10, from a wide selection of over 70 new, catalogue, and import titles. The promotion started on Valentine's Day where Virgin generated consumer interest through a series of events including Singles dating games and a regional advertising campaign. After two months Virgin has seen a significant lift in Singles sales, and is looking to repeat this promotion later in the year. The top-selling Singles titles have been Madonna's "American Life," Erasure's "Solsbury Hill," Cher's "Where the Money's Gone," Lasgo's "Something," Queen's "We Will Rock You" and the American Idol release "God Bless America." Virgin will continue to support the format through maintaining a dedicated Singles department in every store, in-store promotional offers and by continuing to lobby labels. Virgin has also created an email address where consumers can voice their support for the Single and let the industry know which artists they would like to see released on the single format.

To find out more about Virgin's campaign to revive the Single check out


Virgin Entertainment Group is the world's leading multi-channel music and entertainment retailer, providing customers with a range of superior entertainment experiences through a family of integrated Virgin-branded businesses. The "category killer" Virgin Megastores and Virgin Megastore Online at are integral parts of a strategy to provide entertainment customers with what they want, how they want it, and when they want it. For more information, or to check out the location of the nearest Virgin retail, go to

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By Kenny Kerner

The massive layoffs at Sony/Columbia marked the continuation of the music industry attempting to deal with sagging CD sales. But you can do all the restructuring and firing in the world and it will not make up for the fact that record companies today are still signing way too many artists--far more than they are able to work effectively. Why not take a page out of the classic A&M or Elektra storybook? Remember when those labels first opened their doors? They were quality, boutique labels with an eye toward signing only a handful of worthy artists and then developing them into massive record sellers. And guess what? It worked!

Itís simple mathematics, guys. Why do labels have artist rosters numbering in the hundreds when only 10-20% of those artists are profitable? Why not sign fewer artists to shorter deals and work them? If they break the first time out or if they show some serious sales promise, then do a second album. If their first release bombs, drop them and cut your losses. True, any number of things could be responsible for a CDs failure--(poor management, no tour support, a lousy record) but who cares? This is a numbers game, right? Sell records and get rewarded. Bomb--for whatever reasons--and get dropped. What could be simpler or more efficient than that? Thatís what you call Bottom Line!

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