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(09/11/07 5:40am)
SAN JOSE, Calif. – Apple Inc. sold its millionth iPhone over the weekend, days after it slashed the price by a third to spur sales.\nThe milestone was reached weeks earlier than expected and sent shares of Apple up $4.94, or 3.8 percent, to $136.71. The stock regained some of the ground it lost after the price cut spooked investors as a sign of weak demand and slimmer margins.\nIt took just 74 days for the combination cell phone-iPod to hit the 1 million mark, which Apple had said it would achieve by the end of September. By comparison, it took two years for the company to sell 1 million iPods, Apple CEO Steve Jobs noted in a statement.\nLast week, Apple knocked $200 off the price of the 8-gigabyte iPhone, bringing its price to $399, and discontinued the 4-gigabyte version. Apple spokeswoman Natalie Kerris declined to comment on whether the price cut helped spur sales.\nThe price cut may have helped a bit, but Apple clearly was on track already to exceed its own expectations, analysts say.\n“I’d argue that sales have been fairly strong, and this alleviates concerns that sales were weak,” said Shaw Wu, analyst at American Technology Research.\nThe swift price cut, not surprising in the cell phone industry but rare behavior for Apple, angered hundreds of early buyers who bought the touch-screen gadget for top dollar. In response to all the negative reaction, Jobs issued an apology the next day and offered customers $100 credits.\nApple had said it was lowering the iPhone price to attract more customers, in time for the holiday season.\nThe move, which many analysts had predicted, but not quite so quickly, adds pressure to Apple’s rivals, but it also was possibly part of a broader strategy for its entire product lineup.\nOn the same day Apple slashed the iPhone price to $399, it unveiled a new iPod, also for $399. The iPod Touch is basically the same as the iPhone but without the cell phone capability.\nApple cut the price of the hybrid iPod-cell phone to prevent an onslaught of consumers from abandoning it in favor of the Touch, Tim Bajarin, analyst with Creative Strategies, speculated. “They solved the cannibalization problem with this,” he said.
(05/10/06 11:40pm)
SAN JOSE, Calif. -- Songs at Apple Computer Inc.'s iTunes Music Store will remain 99 cents per download after the company extended its distribution deals with major recording labels.\nThe recording industry and Apple had been at odds over Apple's insistence to keep its flat rate with some labels wanting variable pricing, including higher prices for new releases.\n"Apple has all the cards, and when you have all the cards, you can play hardball," said Ted Schadler, analyst at market research firm Forrester Research.\nApple shares jumped 2.9 percent Tuesday, after the renewals were confirmed.\nThe distribution contracts were up for renewal for the first time since iTunes launched in April 2003. Apple said Tuesday it would continue to offer the 99-cent pricing from a library of over 3 million songs, but declined further comment.\nITunes helped propel the legitimate music download business, and Apple claims it has about an 80 percent share of the market, which last year climbed to 353 million song downloads in the United States, according to Nielsen SoundScan.\nAnalysts say recording labels make about 70 cents per download but could pocket significantly more if the prices were raised by a few cents.\nRepresentatives from two of the four major labels -- Sony BMG Music Entertainment and EMI Group PLC -- declined to comment on the iTunes contract renewals. The remaining two -- Vivendi Universal's Universal Music Group and Warner Music Group Corp. -- did not immediately return phone calls.\nNone of the negotiating parties would say how long the new deals will last, but Schadler suspected the record labels insisted on shorter-term contracts.\nApple's dominance of the download market means the Cupertino-based company does have the upper hand for now, but analysts predict its market share will pare down as rival services, including online music subscription services, gain traction.
(09/23/04 4:33am)
SAN JOSE, Calif. -- Call it the kitty's third life.\nRoxio Inc. bought the Napster brand name and feline logo at a bankruptcy auction two years ago and with the acquisition of another music service, Pressplay, relaunched the once-renegade file-swapping pioneer as a legal music service last October.\nNow in its latest reincarnation, Roxio has shed its CD-burning software business and plans to concentrate solely on selling and delivering music over the Web. It will adopt Napster as its corporate name, trading under a new ticker symbol.\nThe pure-play move will mark Napster's birth as the name of a public company, but more importantly, arm the company with resources to help survive the rough-and-tumble as other deep-pocketed, powerful rivals enter the crowded online music space.\nIn the past two weeks, Microsoft Corp. debuted its online music service, and Yahoo Inc. acquired online jukebox provider Musicmatch Inc. EMI Group's Virgin is among those expected to soon join the fray, which already includes the pioneer of legitimate downloads and the current market leader, Apple Computer Inc.\nRoxio's sale of its software business to Sonic Solutions for $80 million in cash and stocks will give Napster a cash base of more than $100 million once the deal closes, expected by year's end.\n"One of the most important questions for our investors is, 'Does Napster have the staying power to stay and thrive?' Having the cash answers that question," said Chris Gorog, chief executive and chairman of Roxio.\nIt will be more than enough to cover Napster until it becomes profitable, Gorog said, "and we're on a clear path to do that."\nRoxio's revenues grew 24 percent to $29.9 million in the April-June quarter compared with a year ago, though the company had a net loss of $2.6 million, or 8 cents per share, dragged in part by the Napster unit's $8.1 million loss.\nBut Gorog said Napster's sales are growing at a double-digit rate -- it increased by more than tenfold to $7.9 million that quarter -- and he projected online music revenues will reach $30 million to $40 million this fiscal year.\nAnalysts say Napster has its work cut out.\nNapster's key strategy is to ramp up its subscription service, which costs users $9.95 a month for unlimited access on their computers to more than 750,000 songs. With the debut of a "Napster To Go" premium service this fall -- initially set to cost an additional $5 a month -- subscribers soon will also be able to transfer the tunes to compatible portable music players.\nNapster must "deliver compelling marketing messages to educate consumers about the value of a subscription rather than a download model," said Mike McGuire, analyst with Gartner G2 market research firm. "The consumer has to see that it's a better way, not just a different way, to get their music."\nThe relatively easy concept behind the pay-per-download model will make it the more dominant of the two for at least the next couple of years, McGuire said.\nMost music download services allow users to buy a song for about 99 cents, burn it to a CD an unlimited number of times and transfer it to some kind of portable device. You buy it; you own it.\nWith a subscription, songs are essentially leased. Once a customer stops paying, access to the music catalog disappears.\nNapster offers both options, as does RealNetworks Inc.'s Rhapsody and America Online Inc.'s MusicNetAtAOL. But Gorog and other subscription proponents say their model gives listeners more freedom to explore music and listen to thousands of tracks without having to invest a buck apiece.\n"The simple download model is not that provocatively different than how people consume CDs today," Gorog said, "whereas the subscription service is being able to be immersed in a world's catalog of music. That's a big `wow' factor for consumers, something they haven't experienced before."\nBy all accounts, the online subscription model has substantially higher profit margins than a la carte download sales. And unlike competitors such as Apple or Wal-Mart Stores Inc., which sell only downloads, Napster isn't using its download service to boost sales of other products, making subscriptions key to its profitability.\nSo if Napster's marketing efforts pay off -- it's offering prepaid music gift cards and pitching free and discounted services to college campuses -- it expects subscriptions to drive its future.\nNapster's bet could be headed in the right direction.\nSales from both subscriptions and downloads are expected to soar during the next five years, and of the $1.7 billion projected for 2009, more than half will be from subscriptions, said David Card, an analyst with Jupiter Research. This year, subscriptions are only about 40 percent of the projected $271 million in online music sales, Card said.\nBest Buy Co. Inc. is heavily promoting Napster as part of a multiyear marketing deal that gives Napster extra shelf space, including kiosks for customers to try the Napster service on the spot.\nScott Young, Best Buy's vice president of digital entertainment, said the electronics retail chain is banking on Napster because its mixture of subscription and download offerings playable on more than 70 devices "is the one that's applicable to the broadest number of customers."\nGorog believes there will eventually be five leading providers when online music reaches mass market adoption, and he aims to have Napster among them, though not necessarily at the very top.\nPerhaps that crowning goal could be reserved for the kitty's next life.
(05/21/03 10:46pm)
CUPERTINO, Calif. -- Allen Evans of Middlesex, Vt., is no stranger to digital music. About two-thirds of his music collection comes from free copies on file-swapping networks. The remainder was ripped from CDs he and his family already owned.\nRecently, Evans downloaded four songs -- and gladly paid for them.\nThe 19-year-old's purchases, along with 1 million other tracks sold in the first week of business for Apple Computer Inc.'s online music store, mark a refreshing turn of events for the ailing music industry.\nSteve Jobs, Apple's chief executive and the closest thing Silicon Valley has to a rock star, has succeeded in a major coup, forcing tectonic change in an industry notorious for its dinosaur pace and dragon tactics.\nAt 99 cents a download with virtually no restrictions on how and where the songs can be played, Apple's service for Macintosh users is proving to be the most promising alternative yet to free, pirated music.\n"The hardest part was to convince the labels that 99-cents-a-download is a legitimate business, and Apple did that work already," said Josh Bernoff, an industry analyst at Forrester Research.\n"If it weren't for Steve Jobs' persistence, I don't think this would have happened," said Hilary Rosen, chief executive of the Recording Industry Association of America and its most vocal piracy fighter.\nOver 18 months, Jobs and a small team of high-level Apple employees negotiated the deals with Universal, Warner, BMG, EMI and Sony Music Entertainment. At times, Jobs personally demonstrated the music service to persuade the Eagles, Dr. Dre, Sheryl Crow and other reluctant artists to come aboard.\nJobs hit the right chord with artists and with some of the very record executives who had, two years ago, accused him of encouraging piracy.\nRosen said Jobs sold them on the elegance and simplicity of the iTunes Music Store design. He persuaded them, she said, to bet on his strong belief that consumers want to "own" the music they download -- instead of see songs disappear from their computers under existing subscription-based services.\nBecause Apple commands less than 3 percent of the desktop computer market, the iTunes Music Store amounts to a trial run, Rosen said.\nMore importantly, Jobs struck at the right time.\nAfter two years of declining CD sales, unabated online piracy and lukewarm consumer interest for its own online subscription services, the industry was ready for something new. Jobs' success is encouraging to competitors and wannabes, especially those that serve the Windows market, which Apple says the iTunes Music Store won't serve until later this year.\n"If he's the one that gets the game going -- great," said Dan Hart, chief executive of Echo, a joint venture of Tower Records, Best Buy and four other retail chains that plan to mirror Apple's pay-per-song model in the larger Windows world.\nEcho has yet to complete technology and licensing deals, he said, but the time is ripe.\nThat Apple's store sold a million tracks in the week following its April 28 launch apparently shocked record executives, who said they would have been satisfied with a million in a month.\n"Apple's success has shown that by loosening the restrictions on what consumers can do with the music, that's the right way to compete with free" file sharing, Hart said.\nCompetitors point out that Apple isn't the first to sell downloads by the song. And other services, too, allow burning onto CDs and transfers to portable music players.\nBut Apple was the first to piece everything together -- with virtually no restrictions, a reasonable price and a relatively easy-to-use computer jukebox program -- all without charging subscriptions, industry analysts say.\nCustomers can keep the songs indefinitely, play them on any number of iPod portable players and burn unlimited copies onto CDs.\nBy contrast, industry-backed music services such as pressplay and MusicNet require monthly fees and disable songs once subscriptions end.\nSinger-songwriter Janis Ian, a Grammy Hall of Fame inductee and vocal critic of her industry's anti-piracy tactics, is thrilled by the new Apple offering.\n"You can't call it visionary because they should have come up with this five years ago," she said. "It's ironic that a computer manufacturer is teaching the record industry the next step, and so far, that's what's happening."\nListen.com, which is being acquired by RealNetworks, plans to keep charging subscriptions to Rhapsody, its online music service, while adding a pay-per-song option, said company spokesman Matt Graves.\nEcho plans to let consumers choose between a subscription package and single-song downloads.\nMicrosoft Corp., too, is entering the online music fray next week with MSN Radio Plus. Though it will initially charge $4.99 a month for streaming -- listening to music while connected online -- MSN may one day match Apple's per-song downloading onto computers, said Hadi Partovi, general manager of MSN Entertainment.\n"Microsoft is glad to see the labels are providing more flexibility. They're providing that to anybody, not just to Apple," Microsoft chairman Bill Gates said in an interview. "We think we can help the labels and shift behavior toward the legitimate purchase now that the flexibility has gone up."\nDan Sheeran, vice president of marketing at RealNetworks, sent Apple a thank-you e-mail. By promoting the idea of legal downloads, he wrote, Apple "is really good at getting a lot of attention -- and other people tend to get the economic benefit"