Above: The future of iTunes? By dave_mcmt.

By now, you’ve likely heard that Apple’s iTunes Music Store has taken the #2 spot in music sales — all music sales — right behind retailer giant Wal-Mart. This tends to lead to one of two somewhat gloating reactions from Apple advocates. One is a sort of “rah, rah, go Apple!” attitude. The other is along the lines of “hurrah, discs are dead, go throw your CDs in with your eight tracks and vinyl while we leap into the future!”

A typical sentiment comes from Scott McNulty on The Unofficial Apple Weblog: “I have an iPod, an iPhone, an Apple TV, and I manage all my music with iTunes as I am sure many, many other people out there do as well… “

Eep. Any votes for “I have a Sony Cassette Walkman, a cheap mobile phone, a … TV, and I manage all my music on my bookshelf”? Is that more boneheaded nostalgia?

Of course, it wasn’t supposed to be this way — any of this.

Below: A future beyond iTunes (allegorically, perhaps). By mclgreenville / memorymotel

First, it’s hard not to notice that Apple’s success involves a somewhat Borg-like approach to media consumption. All Apple gadgets, all Apple software. Ironically, even Windows users — the people Mac users had for years railed against as overly conformist or beholden to Microsoft-branded stuff — use a variety of listening gadgets and happily reject the clunky Windows Media Player for Winamp, Mediamonkey, and foobar2000, among others. Brand loyalty aside, what if you want other control over cataloging, encoding, and mobile listening? It’s your music collection, after all.

But more importantly, iTunes has itself become a kind of Wal-Mart for music: a retailer so large, it starts to impact the rest of the business and stifles variety. And that wasn’t the vision for online music distribution; supposedly we were all going to be rid of major labels and one-size-fits-all outlets. So, that’s the bad news — the good news is, iTunes’ giant presence may be the best thing that ever happened to music sales. Here’s why:

  • Apple’s dominance scared the record industry into dumping DRM. Lots of ink has been given to Steve Jobs’ “Thoughts” memo, which called for eliminating DRM because it’s bad for consumer. But iTunes’ DRM-free music initially cost more and covered less — and Apple was beaten by others to going entirely DRM-free. The real reason major labels dumped baked-in protection was they realized adding DRM to music gave the iTunes/iPod combo total control over the market, and they (rightfully) feared an Apple-dominated music world. Without DRM, you use any player and mobile device you want, meaning you don’t have to buy it from any one vendor. Little wonder that many labels went to nearest rival Amazon first. Dropping DRM wasn’t for the consumer; it was a competitive move.
  • Sales of music aren’t down; they’re just moving from physical to online media — then back again. The “sky is falling” argument from labels generally comes down to this: physical media sales are down enough that they’re wiping out the benefits of explosive growth from online sales. Physical is down, online is up, and online isn’t yet making as much money as physical sales did at its peak. But that money is going to legit, online sales, not piracy. And that’s a big relief to the rest of us; the labels can be left to figure out how to make money on the new format. Meanwhile, just as Radiohead offered a premium physical-CD for its best fans….
  • The CD isn’t dying — it’s just becoming a luxury item. Bloggers have been comparing the death of CDs to the death of vinyl. Maybe that’s the right comparison, but “death” isn’t the right description — for either one. First, there are still billions in CD sales, so don’t expect CDs to go away any time soon. In fact, the CD could rebound slightly if CD sales outlets and labels can find a way to adjust their business model and releases for this new music listening market. One fair bet: make CDs a luxury item. Just ask vinyl. Vinyl has made a resurgence among hard-core aficionados and DJs, people who love its sound, its packaging, the community of people around specialized retailers — all things that could also be true of CDs. The numbers may be small, but if independents can pick up big margins in little markets, who cares? Take the money and run.
  • iTunes’ embrace of a Wal-Mart audience means opportunities for other online retailers. I’ve got two words to sum it up: American Idol, for which Apple is now an official sponsor. Apple has traded in its indie cred for big music business. And tastes in music are more diverse than ever. That means iTunes has nowhere to go but down, as stores like Beatport, dancetracksdigital, Other Music, Bleep, Deutsche Grammaphon pick up specific genres and retailers like Amazon work to win out with unique features and varied content. Apple’s likely to remain healthy, sure, but competitors have both the reason and the opportunity to fight back.

Nothing against Wal-Mart — I’ve bought the odd item there. Or Apple — without Apple, I expect we’d still have bungling majors building broken services of their own, like the pre-iTunes, DRM-laden Napster reactionary stuff. But music lovers benefit from choice. And I think Apple’s very dominance, alongside the death of DRM, could paradoxically let that choice happen.

But let’s be clear: no matter how much you like Apple, one retailer, one store, and one mobile device is not a formula that helps music or encourages innovation. It means one company controls pricing, one company controls assortment, one company decides what margins go to music labels, and one company decides what features you want. That’d be a bleak picture, except I think what Apple is doing is carving out a market it won’t be able to continually dominate — meaning the “one” in all of those will disappear soon. You know, like the eight track.

(photo top right: ktpupp)