But Apple *did* come late to the "real" online music business...

[Leo Mauler]

--- On Fri, 10/31/08, Jeffrey Watts <jeffrey.w.watts at gmail.com> wrote:

> On Fri, Oct 31, 2008 at 4:44 PM, Justin Dugger
> <jldugger at gmail.com> wrote:
> 
> > http://en.wikipedia.org/wiki/Online_music_store
> > disagrees.  Apple didn't invent online music 
> > retailing.  They were just the first group
> > able to negotiate with the big label cartels. 

Not to pick nits but while you are correct about Apple not inventing online music retailing, they were not only not the first "real" online music business, but they were also not the first "real" online music business to successfully negotiate deals with the big record label cartels (see below).

> > Several others had tried and had to go without.  
> > Napster famously ignored the labels and money
> > all together until it was too late (ironically, 
> > the pressplay Music Store created afterwards was 
> > eventually used to relaunch Napster).
>
> Well, I guess my point was that while there were 
> some small label artists or lame "industry approved" 
> and overexpensive storefronts (possibly only there
> to provide a counterargument for RIAA's persecution 
> of music sharers), Apple's iTunes was the first 
> "real" music store featuring artists from the 
> Big 3: Sony, BMG, WEA and featuring a real product.
> Before iTunes, there wasn't a viable industry.
> 
> It's not like Apple came late to the party and 
> through their evil use of DRM and monopoly somehow 
> wrested control of the market from others - before 
> them there wasn't a market.

But Apple did come late to the party, and through their evil use of DRM and monopoly power wrested control of the market from *Rhapsody*.  Rhapsody is an online music store which is still in business, and started up two years *before* Apple created iTunes.  Rhapsody had deals with all five major record labels, adding their music catalogs to Rhapsody's online offerings, almost one year before Apple's iTunes achieved the same thing, making them a part of the "real" online music business (even by Jeffrey Watts' extremely conservative standards):

http://en.wikipedia.org/wiki/Rhapsody_(online_music_service)

"Rhapsody is an online music service run by RealNetworks. Launched in December 2001 [at the time controlled by "Listen.com"], Rhapsody was the first music service to offer streaming on-demand access to nearly its entire library of digital music."

"In July 2002, Rhapsody became the first on-demand music service to offer the complete digital catalogs of all five major record labels of the time (Sony, EMI, BMG, Universal and Warner)."

Here's a news story from 2002, announcing Rhapsody's signing of all the big record labels' music catalogs to its "real" online music business:

BusinessWeek Online
JULY 1, 2002 
http://tinyurl.com/businessweek-Jul2002

"Rhapsody's Five-Part Harmony"
"CEO Sean Ryan explains what it means now that online-music service's deal with Universal lets it offer all the big labels' catalogs"

"One year to the day after online file-sharing service Napster shut down, another digital-music service is hitting the big time. On July 1, Listen.com announced that its Rhapsody music-subscription service had secured a much-sought-after licensing deal with Universal Music. The agreement anoints Rhapsody as the first online service to offer songs from the five major music labels: Universal, Warner Bros., Sony, BMG, and EMI. Together, that group controls more than 85% of the $13 billion U.S. music market. ... Rhapsody, which many reviewers regard as the best online-music service to date"

iTunes didn't manage to do the same set of deals until its launch date of April 2003, making Apple the *second* group able to negotiate with the big label cartels for online music distribution.

Apple's DRM music on iTunes and its monopoly power over the iPod and the iPhone have given it its current market share:

http://mp3.about.com/od/history/p/iTunes_History.htm

"[Apple's] greatest achievement to date is not the quantity of media that has flowed from its stores (although hugely impressive), but the clever way in which it has controlled what portable hardware is compatible with its iTunes Store."

Apple controlled its own AAC player hardware (and, through restrictive licensing, any other player which can play iTunes music) and also controlled the music that went into the iPod.  Their DRM on the music and monopoly control of the iPod (and iTunes music playback technology) is how they got to where they are today: refusing to follow the big record labels' lead in ending DRM music completely.

As for Apple crushing its competition, namely the first "real" online music store, Rhapsody:

http://en.wikipedia.org/wiki/Rhapsody_(online_music_service)

"Rhapsody customers using the Jukebox client may use the Harmony plug-in by RealNetworks to convert tracks purchased from the Rhapsody service into FairPlay AAC files for use on Apple's iPod line of digital audio players. Apple has countered this feature by modifying the firmware on certain iPods to prevent playback of these converted files without affecting tracks purchased via Apple's iTunes Music Store.  Real initially responded by continually modifying the Harmony plug-in to restore compatibility. ... Apple accused RealNetworks of adopting "the tactics and ethics of a hacker" and said that it would examine the Digital Millennium Copyright Act (DMCA) which some speculated would lead to litigation.  RealNetworks no longer updates the Harmony plug-in, as SEC filings reveal that a lawsuit against them would be potentially costly."

As you can see, Apple's monopoly power over the iPod and the iTunes music store has been used to quash potential competition in the "real" online music business *that was already there before iTunes* by the name of Rhapsody/Listen.com.

I think it really says a lot about Apple's ability to crush the competition that everyone here thought Apple really did "create" the "real" online music business.  You haven't heard about Rhapsody and how Rhapsody *created* the "real" online music business, because Apple dominated the market with iTunes DRM and its monopoly control over iTunes-capable players...after coming almost a year late to the party.