BREAKINGVIEWS - Apple throws music industry another life vest

NEW YORK Tue Jun 7, 2011 3:57am IST

Apple CEO Steve Jobs talks about the iCloud service at the Apple Worldwide Developers Conference in San Francisco, California, June 6, 2011. REUTERS/Beck Diefenbach

Apple CEO Steve Jobs talks about the iCloud service at the Apple Worldwide Developers Conference in San Francisco, California, June 6, 2011.

Credit: Reuters/Beck Diefenbach

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NEW YORK (Reuters Breakingviews) - Apple has thrown the music industry another life vest. Its new iTunes Match service lets users listen to songs on any device for $25 a year. Significantly, it also works as an amnesty of sorts for customers with ill-gotten tunes in their hard drives. It looks a concession to piracy -- but it at least offers a path to more revenue.

While other music services, such as Amazon's, allow customers to store music remotely, Apple's offers a clever twist. It compares digital signatures of music already stored by customers to the 18 million songs it sells on iTunes. If there's a match, the user gets rights to listen to that content on any device. That makes it quicker and easier than services that require files to be uploaded. It also doesn't distinguish between legal and illegal content.

Apple will hand over 70 percent of the revenue it generates from the service to the music industry, according to people familiar with the plans. Labels and singers could use the money. Digital downloads haven't come close to making up for the cliff CD sales went over. The value of recorded music sold globally has shrunk by 40 percent over the past decade, to about $16 billion, according to the industry's global trade group.

It is noteworthy Apple could even sign a deal with major record companies. The industry has fought hard against piracy, filing expensive lawsuits against everyone from Napster to geeky teenagers. It could of course continue to pursue such cases. But offering a path for pirates to go legit also looks like a pragmatic way to cash in.

Apple's history certainly helps. Digital revenue has been one of the few sources of growth for music companies. And the company led by Steve Jobs has played a huge part. The iTunes store has sold 15 billion songs since its inception in 2003. And Apple's U.S. share of legally downloaded music is about 70 percent, according to NPD. Whether Match will be a hit remains to be seen. But Apple may again be the recording industry's best chance for another platinum seller.

CONTEXT NEWS

-- Apple Chief Executive Steve Jobs introduced a service called iTunes Match at the company's World Wide Developers Conference on June 6. The service gives users remote access to their music collection without having to upload most songs.

-- The service will scan a customer's computer or other electronic devices for songs and match their digital signatures to the 18 million songs in the iTunes database. Music can then be downloaded onto any device for $24.99 a year. The service does not distinguish between legally purchased music and pirated content.

-- Apple has not said what percentage of the revenue it will keep. The company also unveiled its latest versions of its Mac and mobile operating systems at the event.

-- Apple announcement: link.reuters.com/beb99r

(Editing by Jeffrey Goldfarb and Martin Langfield)

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

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