(TV) Slightly OT: iTunes response lifts online music hopes

["Casey, Leo J" <CaseyL@VOLPE.DOT.GOV>]

Apple sells 1m songs in 1st week 
iTunes response lifts online music hopes 
By Chris Gaither, Globe Staff, 5/6/2003 
Apple Computer Inc. said yesterday that it sold more than 1 million songs through its new digital music service in the first week, boosting hopes that the influential computer maker has found a viable method of persuading consumers to pay for music on the Internet. 
Apple introduced its iTunes Music Store with much fanfare on April 28. In contrast to subscription services, which charge monthly fees to listen to music, Apple modeled Music Store after Amazon.com. Users can listen to a 30-second preview of any of the 200,000 songs in its catalog; then, after setting up an account, they can purchase the songs with one click of the mouse. Singles cost 99 cents apiece, and full albums cost $8 to $13. 
''Looks like Apple has got a success on its hands,'' said Josh Bernoff, principal analyst with Forrester Research, based in Cambridge, who cited the per-song marketing approach as an improvement over the subscription model. 
To the surprise of analysts and Apple, the company said yesterday that more than half of the 1 million songs were purchased not as individual singles, but as part of an album. 
Apple's stronger than expected online music sales in the first week helped boost the company's share price 11.35 percent to $16.09 a share yesterday, up $1.64 in Nasdaq trading. 
The music industry has thrown its weight behind Music Store in hopes that its simple interface could influence some of Apple's fiercely loyal users to abandon free file-sharing programs like Kazaa and Morpheus. The five largest music publishers -- BMG, EMI, Sony Music Entertainment, Universal, and Warner -- licensed songs to Apple. Apple plans to add 3,200 new songs today. 
''Hitting 1 million songs in less than a week was totally unexpected,'' Roger Ames, chairman and CEO of Warner Music Group, said in a statement distributed by Apple. ''Apple has shown music fans, artists, and the music industry as a whole that there really is a successful and easy way of legally distributing music over the Internet.'' Doug Morris, CEO of Universal Music Group, one of the ''big five'' record labels that licensed songs to Apple, released a statement indicating that he had hoped Apple would sell 1 million songs in the first month, not the first week. 
For its part, Apple is counting on the music service as another source of cash. Music Store only works on Apple's computers, roughly 4 percent of the PC market, though a Windows-version is expected by the end of the year. In the meantime, Apple executives said they hope Music Store encourages more people to buy Apple hardware. 
Early results suggest that their plan may be working. Apple said yesterday that it had taken orders for 110,000 new-model iPods, which went on sale last week for $299 to $499, depending on the number of songs they hold. 
To be fair, Apple's sales will probably slow in coming weeks as its users' music collections grow, Bernoff said, adding that Apple will be judged on keeping up its sales in three to six months. Regardless, he said, ''They're going to be a significant factor even if things cool down.'' 
Chris Gaither can be reached at gaither@globe.com. 
This story ran on page C1 of the Boston Globe on 5/6/2003. 
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