The iTunes Walled Garden

Many people (including me) expected Apple to unveil an unlocked phone. In hindsight, Apple's move isn't all that surprising. Like the cellular carriers, Apple has its own walled garden in iTunes, which is in many ways a closed, proprietary architecture. While the iPod can play MP3s, iTunes will only play on iPods and no other music players can play songs in iTunes format.

From the consumer's standpoint the weakness of this model is obvious: it limits choice. There's another issue too. If you buy the iTunes song you get only the iTunes file format, which is of lower quality than a music CD, plus you have to put up with the awkward digital rights management restrictions associated with that file. On the other hand, you can buy a music CD for the same price (or less), rip the songs and load them onto the iPod in MP3 format, a portable, industry standard format. If you buy your music that way you preserve your options. And in the event that, someday, someone actually makes a music player that's as cool and easy to use as the iPod, you're good to go - and you still have the high fidelity version for the CD player.

So why buy iTunes, which delivers a lower quality, proprietary and less portable file format with DRM strings attached? iTunes has gained ground by riding the coattails of the iPod. That honeymoon may be coming to an end. The speculation about a gradual decline in iTunes sales over the last two quarters might indicate that some consumers are doing the math. (The assertion of a sales decline has been made by some market analysts and was vigorously denied by Apple's Jobs at MacWorld this week. But Jobs wouldn't back that up by revealing actual sales numbers, which Apple continues to keep secret).

There could be another reason for the alleged decline in iTunes sales: Perhaps users are pirating more and buying less.

But music publishers may be more worried about Apple's inflexibility than they are about piracy these days. Apple's rigid music pricing (.99 per song) and unwillingness to open up its music format - combined with supposedly flattening iTunes downloads - may have emboldened EMI's Blue Note Records to pre-release the latest Norah Jones recording, Thinking About You, later this month in unprotected MP3 format through Yahoo Music.

For now, iTunes still controls 90% of the legitimate download market, which by some estimates is itself just 10% of the total music downloads on the Internet. Ultimately, however, I suspect that the current iTunes model will fall by the wayside for much the same reason that music downloads on cellular carrier services haven't caught on.