Apple iPhone & Digital Music Market

Has the digital music market irreversibly tipped in Apple’s favor?

Mobile phone manufacturers’ worst nightmare came true when the iPhone was introduced in the U.S. on June 29, 2007. The iPhone’s international success was followed by the release of the iPhone 3G on July 11, 2008. Today, Apple is the third largest mobile phone manufacturer, after Nokia and Samsung. The digital music market and the mobile phone market have irreversibly tipped in Apple’s favor. The iPod is the kind of innovation that changes generations. People cannot live without their iPod and now some people can’t live without their iPhone. The only thing keeping me from getting an iPhone are switching costs. I would have to change from Verizon to AT&T/Cingular and that would mean losing my free mobile to mobile minutes with my husband and family because everyone else is on Verizon. I have an 80GB iPod so I don’t need it for digital music reasons so I can’t exactly justify the expense. But, a part of me still gets really jealous when someone whips out their brand new iPhone 3G. It was that same feeling that made me purchase my iPod in the first place. I guess I have just been brainwashed by Apple into feeling that false sense of need. As far as the digital music market is concerned, iTunes is still a loss leader for the iPod. It may have inadvertently created a price structure for subscription and non-subscription services but it still offers the most complete library. The sad thing is, illegal downloading is still a problem. When Apple reported in 2006 that its billionth song had been downloaded, consumers were still illegally downloading an estimated billion songs every month worldwide. This makes the digital music industry less and less attractive for handset manufacturers and carriers alike. Prices for subscription services may be going down but people are still finding free ways to trade music and I am not sure anyone can compete with that- not even Apple.