Midday Report: Apple's iTunes Turns 10; How It's Changed Music

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Happy birthday, iTunes. You've changed the world.

Apple (AAPL) wasn't the first company to market an MP3 player, but it's dominated the market ever since it introduced the iTunes Music Store 10 years ago this weekend.

Today, nearly two-thirds of all music sales around the world come through the iTunes store.

Music fans obviously love it: Apple has made music easier and cheaper to buy.

itunes
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But it's been devastating for the music industry. Since the iTunes Store debuted in 2003, total music sales in the U.S. have tumbled by 40 percent. According to the Recording Industry Association, sales dropped to just $7.1 billion dollars last year.

And most analysts say sales will never really recover. Buying single songs is now so easy, and so cheap, that consumers will never go back to buying full albums like they did before there was an iTunes Store.

So how did Apple come to dominate the music and revolutionize the music business?

The iPod was a big hit because of its innovative design, small size and ease of use. But it wasn't until Apple married the iPod with the iTunes Store that the music world changed.

It allowed consumers to instantly buy songs they heard, and the company had a huge base of built-in customers. And it's become a positive feedback loop for Apple. Fans keep buying new and better iPods so that they can keep buying new music from the iTunes Store.

It now has over 26 million songs for sale, as well as videos, e-books and apps. In the past 10 years, iTunes has sold more than 25 billion songs.

And Apple keeps finding new ways to attract customers. Twitter announced last week that it will let its users play and share songs from iTunes.

But competition is picking up too. Amazon.com (AMZN) is eating into Apple's market share. The market research firm NPD says AmazonMP3 had 22 percent of the market for digital downloads last year. That's up from 15 percent the year before. Popular music streaming services like Pandora (P) and Spotify may be stealing some customers too.

Still, Apple and its iTunes Store have changed the way we listen to and buy music... so happy birthday.

–Produced by Drew Trachtenberg


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