Apple : In Depth: How Apple became bigger than the Beatles

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In Depth: How Apple became bigger than the Beatles Posted: 05 Feb 2011 02:00 AM PST Apple is the biggest thing in music – bigger even than The Beatles. We discover how Apple became the music industry's best friend as well as its worst nightmare. Back in November, Apple teased us with a special announcement. "Tomorrow is just another day," the Apple site said. "That you'll never forget." The rumour mill instantly went into overdrive. New iPods? Streaming iTunes? When it turned out the announcement was The Beatles appearing in iTunes, you could hear the sighs echo around cyberspace. John Lennon famously said The Beatles were "bigger than Jesus". Apple, it seems, is even bigger than The Beatles. Apple dominates music. NPD Group reports that the iPod has 76% of the US MP3 player market – Microsoft's Zune and Zune HD account for just 1% – and that iTunes accounts for 28% of all music and 70% of all music downloads sold in America. And yet 10 years ago, the world's biggest music retailer wasn't even in the music business. The long, winding road Apple didn't invent digital music, and it didn't popularise it. While Macs were – and are – a common sight in recording studios, digital downloads owe their success to two PC programs: Winamp and Napster. Winamp and Napster both used MP3, the digital music format that crushed audio files into tiny sizes without dramatically affecting their sound quality. Developed by the Fraunhofer Institute in Germany in the 80s as part of the MPEG-2 standard, MP3 turned out to be the perfect format for digital music. It's good enough to listen to, and small enough to download over dial-up modem connections… and Napster and Winamp were its perfect partners. You'd simply download music with Napster and then play it in Winamp. WINAMP: Napster and Winamp revolutionised music and paved the way for iTunes Napster made it to the Mac in 2000, with clients such as Macster (later Napster for the Mac), MacStar and Rapster. Winamp didn't follow suit, but that was okay: the Mac had Panic Software's Audion and Casady & Greene's SoundJam MP. That year, Steve Jobs saw which way the musical wind was blowing and decided the Mac needed a proper music player. He approached Panic, but it was already in negotiations with AOL, so Jobs made Robin Casady and Michael Greene an offer they couldn't refuse. SoundJam was retired in June 2001, but by then much of its DNA was in something else: iTunes. Day ripper Apple launched iTunes on 9 January, 2001, and the following month it announced iMacs and Cubes with CD burners. iTunes' big selling point was that it could do what the iMac ads described as "Rip. Mix. Burn." That is, turn CDs into MP3 files and create CDs from MP3s. Today it's widely accepted that burning CDs for personal use from music you already own is legal, but that wasn't the case in 2001. The Recording Industry Association of America argued that burning CDs wasn't covered by 'fair use' in copyright law, and in the UK the British Phonographic Society (BPI) pointed out correctly that UK law didn't allow for fair-use copying at all. With adverts actively encouraging people to rip music and make CDs, Apple should have become the industry's number-one enemy, but the major labels had bigger fish to fry. The entire mainstream US music industry, in the form of the RIAA, had already tried and failed to stop Diamond making its Rio MP3 player. They couldn't stop the MP3 player, but they could stop Napster. In July 2001, Napster closed its doors permanently (today's Napster is 100% legal and shares only a name with the original). And then Apple announced the iPod. The iPod wasn't the first MP3 player – that honour falls to Saehan's MPMan F10, which went on sale in 1998 with a then impressive 32MB of storage. Some would argue when the iPod launched, it wasn't the best. In an echo of Decca Records' famous "guitar music is on the way out" dismissal of The Beatles, many Apple-watchers agreed with Slashdot's CmdrTaco: "No wireless. Less space than a [Creative] Nomad. Lame." SOUNDJAM MP: Apple acquired the rights to the much-loved Soundjam MP music player and turned it into iTunes, one of Apple's finest moves Help! He had a point. The iPod didn't sound as good as some other players (your correspondent reviewed the first iPod and found that Creative's Jukebox sounded better, although in my defence I did say "if Apple decides to support PC owners, it'll make a fortune") and it didn't have as many features. So was its success a case of style over content, Apple hype and clever ads? "Come off it," Paul Brindley says. As co-founder of music consultancy MusicAlly, Head of Communications of the Music Publishers Association and former bassist with The Sundays, Brindley has been involved in digital music since the first MP3 downloads. "While the iPod may not have sounded as great as some other players, it worked well, it had the fantastic innovation of the scroll wheel, the storage capacity was higher than most other players and it integrated nicely with iTunes," he says. "Yes, it had good advertising behind it too, but that's too simplistic an assertion." The first iPod had 5GB of storage, which was enough for 1,000 songs. But where were you supposed to get the music from? The record industry maintained that ripping was illegal. Five years after the iPod shipped, the RIAA was still arguing that moving music you'd bought legally to your own iPod was a crime – and when they launched their own download services, MusicNet and PressPlay, in 2002, the DRM-protected files were in Windows Media format, which wasn't iPod compatible. Our recollection of the early download shops was of sky-high prices, confusing copy protection rules and a horrible user experience. Are we being unfair? "Your recollection is on the money," Mark Mulligan says. The Vice President and Research Director of Consumer Product Strategy at Forrester Research has been monitoring the digital-music business since 2000, and recalls: "The first generation of download stores were simply not fit for purpose. They came at a time when the music industry had only just started to countenance that digital might be something more than an irritation that would eventually go away." It wasn't completely bleak – sites such as eMusic offered DRM-free downloads from independent artists, and sites such as MP3.com offered free MP3s from unsigned bands and the occasional household name. But if you wanted to buy a Top-40 album and listen to it on your iPod, you couldn't. Or at least, you couldn't do it legally. Fortunately, things would soon change. TEN YEARS ON: Today's iPods are still setting the standard - and they're still dominating digital music Two years after Napster shut down, piracy was bigger than ever. The record labels were chasing Napster's spiritual successor Kazaa through the courts, but it was still going: at any given time between 1-5 million people were sharing more than 1.5 billion files, and that was just one of several file-sharing systems that appeared in Napster's wake. MusicNet and PressPlay weren't making much of a dent because, as Paul Brindley puts it, "They came at it from the perspective of the majors trying to control the subscription business. They soon realised they were not very good at that, thankfully." Mark Mulligan agrees, describing the legal services as: "A pitifully poor generation of products that actually accentuated the impact of disruption by making the legal alternatives [to file sharing] so poor that they were no alternative at all." And then Apple released iTunes 4, which included its very own music store. Everything MusicNet and PressPlay did wrong, the iTunes Store did right: instead of wildly varying pricing, every song was 99 cents. Instead of weird and inconsistent copy protection ("this track gives you one CD burn and three listens on a portable player, this track can't be burned at all, this track gives you six burns and 100 listens) iTunes tracks had FairPlay. This meant you could use them on three (later, five) Macs, unlimited iPods and unlimited CDs – although you could only burn a playlist containing FairPlay tracks once). Steve Jobs didn't want DRM at all. As he told Rolling Stone, "When we first went to talk to these record companies – you know, it was a while ago. It took us 18 months. And at first we said: none of this technology that you're talking about's going to work. We have PhD graduates here who know the stuff cold, and we don't believe it's possible to protect digital content." The labels wouldn't budge, however, and despite Jobs' misgivings the iTunes Store launched with FairPlay-protected content. Critics accused Apple of operating a closed system, and that's true: it had the shop, the music software and the portable player. "Closed systems can only work if they are used to protect a quality of experience, not to simply control," Mulligan says. "That's why Windows DRM-powered services failed and iTunes succeeded." In less than three years Apple had 1 billion songs (the billionth was Coldplay's Speed of Sound) and four years later downloads cracked the 10-billion mark. As for PressPlay and MusicNet, the former was sold to Roxio, rebadged as Napster 2.0 and relaunched in 2003; MusicNet became MediaNet in 2007 and powers download shops from the likes of Yahoo, HMV and Zune. ZUNE: Despite Microsoft's best efforts, the quite-impressive Zune HD isn't impressive enough to tempt people away from their iPods Baby, you're a rich man By 2007, Apple was the king of the music world. The iPod had 72.7% of the entire MP3 player market and 70% of the music download market. A 2007 study by Piper Jaffray found that among teenagers, iTunes had 90% share. That market power meant Apple, not the music industry, was calling the shots – and that was largely the fault of the record labels. The DRM they insisted on wrapping their downloads in made Apple the most important player in digital music, because the only DRM that worked on iPods was FairPlay. By effectively forcing every iPod owner to buy their songs from iTunes, the labels made Apple the only game in town. From 2003 to 2009, conversations between record labels and Apple went a bit like this: "Please can we put the prices up on iTunes? Please? Pretty please with sugar on top?" the labels would say. "Nope," Apple would respond. As Steve Jobs told reporters in 2005, "If they want to raise the prices it just means they're getting a little greedy… Customers think the price is really good where it is." The standoff continued through 2007, when Steve Jobs wrote his Thoughts On Music essay (http://apple.com/hotnews/thoughtsonmusic) damning DRM and publicly urging labels to dump it. EMI listened, enabling Apple to offer DRM-free songs under the iTunes Plus banner for a small extra charge, but other labels were stubborn. If they wouldn't do what Apple wanted, Apple wouldn't do what they wanted – so iTunes' price remained set at 99 cents and DRM remained on most iTunes tracks. Unlike the labels, Apple doesn't depend on selling music for its income. It could sell every track at a loss and still rake in millions from iPod sales. The labels pushed for higher prices and Apple resisted – and the more songs it sold, the more powerful it became and the less leverage the labels had. COMPETITION: Amazon's MP3 store doesn't appear to be taking market share from iTunes Frustrated, some labels decided it was time to teach Apple a lesson: they would work with Amazon and help it launch an iTunes rival. The Amazon MP3 store launched in 2007 and offered DRM-free music, but it barely dented Apple sales. Even today Amazon is far behind iTunes, with NPD Group reporting that Amazon has 12% of the music download market compared to iTunes' 70%. Amazon's share is growing, but not at Apple's expense: iTunes is up 1% since last year, with Amazon growing at the expense of Rhapsody, Napster and Microsoft's Zune. Apple finally relented on pricing in 2009, but the labels had to dump the DRM to get it. Now, all iTunes music is sold DRM-free. Apple has long passed the point where it needs DRM to keep people shopping in iTunes. Beatles for sale The same Beatles deal that got Apple so excited could be getting other people excited too: antitrust regulators. While it's not illegal to have a monopoly in the US, it is illegal to throw your weight around to unfairly exclude your competitors. And with iTunes exclusives, it's arguable that Apple is engaging in anticompetitive behaviour because that music isn't available anywhere else. That's not a big deal when it's the occasional Ellie Goulding or Rihanna bonus track, but when it's everything recorded by the most important band in history you can see why some might be concerned. BONUS: One man's bonus track is another's anti-competitive behaviour. Critics say iTunes exclusive are unfair to the market Every little thing A lot depends on how you define the market Apple is in. If it's all music, then Apple's sub-30% share of US music sales means it's a big player, but hardly monopolistic. But if you only count downloads, then depending on whom you ask, Apple has between 70% and 90% of the market. When Microsoft had that much of the web browser market, regulators pounced. "Apple is clearly too powerful," Mark Mulligan says. "Any market that has one company controlling 75% plus is not healthy." It's a view echoed by Columbia Law School professor and copyright expert Tim Wu: "Take a monopoly in several markets, mix it with an ideology of exclusion and it's easy to predict antitrust problems." Wu points out that to regulators, iTunes' refusal to support other firms' MP3 players (and the upgrades that stop firms such as Palm from syncing their devices with Apple's software) look very like the kinds of behaviour that got Microsoft into trouble in the 1990s. Mark Mulligan's concern isn't that Apple is taking an anti-competitive stance; it's that Apple's losing its long-held interest in music. "Steve Jobs' passion for music has undoubtedly been one of Apple's biggest assets," he says, but points out that Jobs' focus has moved to iPhones and iPads. "Up until nine months ago iPods were still selling at record rates, so new iTunes customers were arriving at a sufficient rate to keep the digital market growing solidly," he says. "Apple has taken its foot off the music product innovation pedal. Of course it has something up its sleeve, but it won't have the same priority a new-music offering would have had three years ago. As Apple dominates digital revenues, if music is less of a priority then the entire market feels the effect." Apple has become so big in music that when it sneezes, the entire music business catches a cold – and there's no sign of a serious competitor on the horizon. "If Apple faced any serious competitive threat as a music provider they'd respond," Mulligan says. "They don't yet." The most likely competitor is Spotify. At the time of writing, its long-awaited US launch has been delayed yet again, reportedly because it can't come to an agreement with the major record labels, and its UK operation is losing money. "Their business model has so many questions over it Apple probably thinks it's wise to let Spotify burn through its investment," Mulligan says. "Then it could be bought by a large media or technology company that will, within a couple of years, sap the momentum out of it – as happened with MySpace, Bebo and Last.fm. Apple's crown isn't in danger yet."

Tutorial: How to bring Aero Snap to OS X Posted: 04 Feb 2011 02:45 AM PST Mac users like to play the superiority card when it comes to Windows, sniggering behind the backs of people 'dumb' enough to use Microsoft's operating system, perhaps going so far as to point fingers and yell something about photocopiers in Redmond. But drink some reality juice and it's clear that Cupertino isn't the only place where innovation happens – often enough, Microsoft has some pretty good ideas of its own. The taskbar introduced with Windows 95 was one such feature, providing a centralised switcher/launcher long before the Mac OS X Dock arrived. Windows 7 also has plenty of interesting interface ideas, largely centred around its taskbar and window management. We don't see Apple warming up its photocopier, but enterprising indie developer Christian Baumgart has taken on the task. His HyperDock add-on enables you to bring a bunch of Windows 7 features to the Mac, and, despite what you might think, they may well improve your productivity. One of the best features in Windows 7 is Aero Snap, which enables you to drag a window to a screen edge to resize it to full- or half-screen, without having to manually line things up. HyperDock includes the same feature, and it works with the majority of Mac apps. Another feature of Windows 7 is the ability to hover over a taskbar icon to preview an app's windows. On the Mac, Dock Exposé does much the same thing, but HyperDock's implementation is useful if you're not enamoured with Dock Exposé, and also if you'd like a few extra features. Below, we show you how to use these and other features; for more details about HyperDock, visit http://hyperdock.bahoom.de. How to: Bring Aero Snap to your Mac 1. Snap to split-screen After installing HyperDock, launch Safariand open two windows. Drag one to the left screen edge; when the semi-transparent box appears, release the mouse button and the window will resize to fill the left half of the screen. Drag the other window to the right. 2. Full-screen windows Split-screen is great for comparing two windows, but sometimes you'll have a single document you want to fill the screen. Mac OS X lacks an actual 'full-screen' button, but with HyperDock you can just drag a window to the top screen edge and it'll fill the entire screen. 3. Move windows easily Open System Preferences and select HyperDock. Select the Window Management tab. Under Window Dragging, you'll see modifiers for moving and resizing windows. Move your cursor over a window, hold Crtrl+Option and then move the cursor for window control. 4. View Dock previews HyperDock's Dock previews are less of a 'jolt' when activated than Dock Exposé. Hover the mouse cursor over a Dock icon and you'll see the app's windows. Minimised windows show a '–' symbol. Hover over a preview to view it at full size; hover over one and click '×' to close. 5. iCal and iTunes previews iTunes and iCalby default provide information-based previews. Hold your cursor over iCal's icon to see upcoming events. Hold your cursor over theiTunes icon to see the currently playing track; hover over the artwork to access controls and clickable rating stars. 6. Preview behaviour Back in HyperDock's preferences, click the General tab. Here, you can disable the iCal and iTunes previews and also amend preview behaviour. Next, click Appearance. Experiment with the settings to change the size and appearance of the preview bubbles. 7. View Dock shortcuts Still in preferences, click Shortcuts. On the left, select Any Dock Icon. On the right are actions and events. As per the events shown, hold Option and click Safari in the Dock. Dock Exposé will be invoked. Hit Escape then hold Command and click Safari's Dock icon – a new window opens. 8. Edit Dock shortcuts To edit an existing Dock shortcut, click the up/down arrow icon at the right of the event, select Other Button/Keys and define a new shortcut. You can also use the '+' icons to add new apps to the left-hand pane or new action/event pairs to the right-hand pane.

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