Pundits weigh in on Apple’s music plans

“High-quality design and simplicity of use” are expected to be the hallmarks of a new digital music service to be unveiled by Apple on Monday, according to an article in Billboard, the music trade publication. With pundits are weighing in on viability of the service, as well as the much-rumored interest of Apple in buying Universal Music Group.

The Billboard article describes the service as “an a la carte download store — not unlike that of rival Liquid Audio — that’s built into Apple’s iTunes player.” No subscription will be required for the service, and tracks will retail for an average of 99 cents, Billboard reports. Once you buy music tracks, they’re transferred to your iTunes music library and automatically synced with your iPod.

You’ll be able to burn your tunes to CDs. Your credit card information is stored on file in the Apple music services’ “shopping-cart system” so you won’t have to re-enter the data each time you buy music.

Writing for Forbes, Arik Hesseldahl thinks that Apple’s venture will “instantly become the big Kahuna of online music services.” But he doubts its long term prospects if it remains a Mac only business.

“… the fact remains that Apple users still account for only a sliver-sized share of the computer-using public around the world,” Hesseldahl writes. “And unless Apple plans to commit what many of its faithful fans would consider an unspeakable heresy — offer the service to users of Microsoft ‘s Windows platform — its chances for mass appeal will be limited.”

He also feels that the market for paid digital music is “minuscule” and quotes Jupiter Research as saying the market topped out at 350,000 users last year and about US$50 million in sales “while free and largely illegal services like Kazaa and Morpheus boast untold millions of users.”

“Apple’s betting there is some kind of pent-up demand for a well-run legitimate music service that requires users to break out their credit cards,” Hesseldahl writes. “It may be right, and there’s little reason to believe that Apple can’t bring out a service that is superior in appearance and ease of use compared with those of its competitors. But can it run this business at a profit? Given the associated costs — infrastructure and royalties, among others — the key to that will be a huge volume of downloads. And the only way to guarantee that is to reach out to Windows users.”

Meanwhile, Apple has publicly stated that it has “never made any offer to invest in or acquire a major music company,” analysts continue to debate the pros and cons of the computer maker buying the Universal Music Group.

News of Apple’s interest in Universal Music Group first broke on April 11 with speculation that the company would make a US$5 billion to $6 billion bid for the music business by the end of April. Apple was supposedly making the bid to fuel the company’s as yet unannounced music service, which makes downloading and purchasing music as simple and non-technical as buying a book from Amazon.com, according to people that have used the service.

The confirmation and subsequent retraction by Vivendi Director Claude Bebear, who reportedly said that Apple “will probably make an offer” for Universal Music Group, prompted Apple CEO, Steve Jobs, to issue a statement last week that read, in part: “The press statements this morning attributed to Vivendi board member Claude Bebear are untrue, as Mr. Bebear has confirmed in a later report. Beyond these comments, we will abide by Apple’s policy of not commenting on rumors.”

Alex Salkever, in his Byte of the Apple column at Business Week Online, thinks the rumored move would be a bad one for Apple. He says the mere speculation of Apple buying the giant music company has hurt Apple’s stock and going through with the deal would be even worse

“Even though Universal Music had an operating profit of $510 million last year and is cash-flow rich, the music business can fluctuate wildly year to year depending on the success of new stars and new songs,” Salkever writes. “Besides, in my opinion, Apple is on the verge of a break-out quarter, with or without a music division in its future. A much-anticipated new line of chips should breathe new life into Apple desktop sales later this summer. And when graphic design and publishing program Quark finally comes out with an OS X version in the next few months, the pent-up demand for new Apple products in the creative sector could produce a surge in revenues.”

On the flip side, Paul Gilster thinks an Apple-Universal Music would be a good thing, as he explains in a News Observer column. Though he admits that he (like everyone else) really has no idea whether Apple will actually buy Vivendi’s Universal Music Group, he thinks such a union is a perfect fit.

“Give people an easy way to buy music on their PCs at reasonable prices, rather than the limited fare offered by services such as Musicnet and Pressplay, and the numbers could turn around,” Gilster says. “I can’t think of any company better positioned philosophically to provide such a service than Apple. The maker of the iPod has always been friendly to MP3 formats, and its iTunes software is far and away the best program for managing a music collection and burning it onto CDs. And unlike Microsoft, Apple has been far more circumspect about developing digital-rights management, or DRM, technologies.”