With Apple’s entry into the digital music business with the iTunes Music Store, which will be made available to Windows users later this year, “a fundamental shift in Apple’s strategy may be afoot,” David Zeiler writes in
a SunSpot.net column.
Although the music store and iPods may be a way to entice more people to the Mac platform, there may be an even more important piece in the puzzle, he adds. Analyst Charles Wolf of Needham & Co. estimates that once Apple has the Windows version of iTunes in place, the store could capture 20 percent of the pay-per-download market. This could translate to $600 million in annual revenue and $50 million to $60 million in operating income, nearly equal to Apple’s $65 million in profit for the 2002 fiscal year, Zeiler notes. And that’s not even counting the increased iPod sales that should be generated.
The move makes sense because Mac sales have been “stagnant for years,” the columnist says. Apple’s revenue is about US$1.5 billion every quarter, with unit shipments ranging from 700,000 to 800,000. Both are down from just a few years ago, when the popularity of the original iMac helped Apple bring in more than $2 billion per quarter.
“All of this isn’t to say, however, that Apple plans to stop making Macs; that day, most likely, is a long way off,” Zeiler says. “But branching out into digital media delivery provides an opportunity to grow the company that it can’t get by just making Macs alone. And success in the digital media arena would help sell more Macs.”
He also foresees the day when Apple will sell digital video over the Internet. After all, with the iTunes Music Store infrastructure and the QuickTime multimedia technology, key components are in place, Zeiler says.