Interesting article from street.com. excerpt:
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Napster NAPS is offering its "Napster To Go" service for $14.95 per month. This flat fee lets users download an unlimited number of songs within that month. This is major news when you consider that iTunes, the service iPod users have to use to legally download and transfer music from the Internet, only allows their customers' access to MP3 downloads at 99 cents per song.
This will let broadband users who actively download music save a bundle vs. Apple's iTunes program, and it could undermine iPod sales, because users of Apple's iPod cannot download music from Napster. Apple's refusal to allow iPod users to use Napster means that iPod users could ultimately give up their trusty iPods for a Napster-compatible MP3 player, or at least have to buy a compatible player. In the light of this incompatibility, we looked at the alternative MP3 players, which can take advantage of the Napster To Go unlimited download service.
The companies that could benefit as iPod users look elsewhere include Dell DELL , iRiver, Samsung, and Audiovox VOXXE . The growth in MP3 player sales by these companies will then compromise Apple's market share
Since Apple's iPod and Apple's iTunes has such a huge head start, they will remain the leaders in the MP3 battle for a while. However, as long as iTunes does not offer unlimited downloads, programs such as Napster To Go should gradually swing market share away from iTunes, particularly among the heavier users. The companies that take advantage of Napster's unlimited downloads obviously will seek to sway iPod users toward their more dynamic products.
What happens to Apple's stock if and when the company loses market share? An industry source estimates that the iPod could account for about 50% of Apple's revenue. As noted above, it seems logical that the revenue that comes from iTunes downloads will drop as Napster To Go and other programs offer unlimited downloads. Currently, the iPod is the industry standard in the MP3 download/player market. However, in the forthcoming months, that will become less true, as Napster and other unlimited download sites cut into Apple iTunes current market share.
I believe that iPods are the standard now only because Apple has had a huge head start in grabbing the market share, and until now no company has offered an unlimited download option for music. As long as Apple refuses to allow iPod owners' access to Napster To Go or offer iTunes users an unlimited download option, more and more current customers will look to save money on music download purchases. To analyze Apple on the basis of iPod sales would also be misleading, because there are many iPod users who are only buying an iPod because it is the industry standard, but they have no intentions of actually using iTunes to download songs at 99 cents per song. They are currently using illegal music-share programs to download all their music for free.
Napster To Go should also serve to reduce the use of illegal downloads. Some users avoid paying 99 cents per song by using illegal downloads through the use of programs such as Kazaa, Limewire, Blubster or Morpheous, among others. This could make Napster To Go a huge success, as at only $14.95 per month, people will be less likely to take the risk of downloading music illegally. |
