• by Mark Naples , May 15, 2003

You've got to hand it to the folks in Cupertino. It's not been very long since Steve Jobs announced that Apple was getting into the music business, and about two weeks after its launch, the cool ads are already airing during the NBA playoffs.

Maybe you've seen some too, with teenagers and young adults singing their favorite songs really well, alllllllmost well enough to get to the third stanza. It's a great campaign, announcing that any music you want to download is just 99 cents a song.

A quick visit to www.apple.com makes it clear that Apple has their ducks in a row here. With a simple user interface that will likely make thousands of iPod users reconsider their Morpheus and WinMX accounts, Apple will not only sell a ton of music, they'll build an enormous database at which to target market other Apple goodies.

Already, the company has announced that they've sold more than two million songs, with more than half of them being purchased within complete albums. This will help distance Apple's effort from its file-sharing competitors, dispelling many critics' concerns that selling music on a per-track basis will destroy album sales.

This seemingly small but meaningful change arrives alongside the announcement that America Online has begun charging nonmembers a fee to download decorative graphics, or "skins," to AOL Instant Messenger. AOL began charging $1.95 a month, or $9.95 a year, for its "AIM Expressions," at the end of March.

Of course, AOL has been seeking new revenue streams, so this may be one of many ongoing efforts to monetize their "value add" inventory. Maybe they'll even permit users to personalize their "you've got mail" message.

While much has been written about music sharing versus music piracy, and about the huge databases and brand awareness brands like AOL, Yahoo! and Microsoft have derived from instant messaging, I think we should pay close attention to these two potentially enormous movements in our industry. Two items that were free a few months ago across the Web and supported only by marketing are suddenly not free when provided by their most prominent distribution channel brands (using iPod primarily as a consumer-driven proxy). Obviously, many of the strongest media brands have charged fees for access all along too. While the New York Times Digital has pushed the creative envelope with its tremendous ad creative standards and remained free, the Wall Street Journal's online edition has been fee-based all along. While both are profitable, the NY Times Digital is less of an exception than it used to be. Nevertheless, could pay-for-play be moving closer to the status quo online?

For years, of course, users who have signed up for Morpheus and many other music sharing services have enabled companies like Gator to market products and services to them, providing revenue shares to the host that draws users; much in the same way conventional media has always done in traditional print. Web publishers would find this comparison ironic, but I digress.

Apple turns this subversion completely around by leveraging their iPod dominance and brand-building muscle, targeting the young, Web savvy "streamies" who love their downloads and are paying closer attention to the US Department of Justice's pursuit of this than you might guess. In a recent conversation, my 14-year old nephew, Peter, knew more details about the recent indictments of those midwestern college students than I did. Kids today have no barriers to this kind of relevance. They get what Apple is doing, and I'm betting that they will like it. Marketers want to reach the exact demographic that this Apple campaign is targeting. It will be interesting to see how many revenue streams they create from this - and what becomes less free next.