Another Piece of the Puzzle Falls into Place

So Apple’s iTunes store finally arrives in Europe….

One of Apple’s key commitments when they first began making the European iTunes store a reality was a unified price point. Licensing factors have prevented Apple from being able to offer tracks at €0.99 in all markets but they have been able to state a consistent price in each market (£0.79 in UK, €0.99 in Germany and France). Offering a single price is a very strong consumer proposition but the odds are that Apple will make a loss on some of the ‘crown jewel’ tracks (e.g. Robbie Williams) but will make some of that loss back on the old back catalogue (e.g. Status Quo). Also, it’s a shame that European’s (especially so the British) have to pay more for their music than Americans. Whereas American iTunes customers only have to pay €0.89 per track, UK customers have to pay €1.48. With UK music fans having to pay 40% more for their iTunes music than Americans and 33% more than French and Germans some might think it time to dust off Tony Blair’s “Rip Off Britain” speech….

The pricing quibbles aside, iTunes is a welcome entrant into the market and once Sony’s Connect service is launched, most of the parts of the puzzle will be in place, with extensive choice for European consumers, at least in UK, France and Germany. So why have the likes of Spain and Italy been left aside? The simple fact is there isn’t enough market opportunity in those markets. JupiterResearch recently produced a Digital Music Opportunity Index to quantify the degree of opportunity exists in Europe’s key markets and the findings echo the markets which these music services are being launched into: UK, Germany and France are Europe’s most important music markets with strong technology adoption trends whilst Spain and Italy have weaker technology adoption (e.g. broadband and MP3 players) and, most pertinently, strong piracy trends.

And piracy is going to remain one of, if not the, biggest challenge for Europe’s latest digital music store. A whole generation of music fans have grown up expecting online music to be free. Coupled with that, until today, just about every single track on a European iPod was either ripped from a CD or downloaded from illegal services. Competing against that backdrop, the success metrics of the newly launched European iTunes stores that Apple may be most concerned may be the impact on iPod sales in each market rather than number of tracks sold.

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