Apple has announced that customers have downloaded over 250 million songs through the iTunes service  since its launch. And that number continues to accelerate as the vast number of people who bought iPod music players over the holidays go online and start downloading in earnest.
But the days of iTunes' overwhelming dominance may be numbered, Yankee Group's Mike Goodman told NewsFactor. Apple has shown no interest in the up-and-coming subscription business model for online music, he notes -- and that resistance may hurt iTunes.
Two Models, One Customer Base
Two models dominate the online-music arena at present, Goodman explained. The per-song model charges a flat fee for downloading a particular piece of music. That fee covers playing the music on the customer 's computer and also transferring it among the customer's own devices, such as a portable MP3 player or a CD-ROM. ITunes has established itself firmly in this camp.
But the subscription model has been gaining popularity of late, Goodman noted. The newly legitimized Napster is one example. For a flat fee per month, users can listen to unlimited streams of music and create playlists on their computers mixing and matching songs. They cannot, however, move that music to a portable player. Doing so requires purchasing the songs separately.
Technology Watershed: Tethered Downloads
Although these two business models have stayed separate up to now, the advent of Microsoft 's new digital rights management technology embodied in Windows Media Player may change all that, Goodman explained. The technology -- code-named "Janus" -- allows music services to tie individual downloads to a monthly subscription. Thus, consumers can download music to their computers and move it around on their devices as long as they maintain their monthly subscription with the service.
This is the point at which such services as Napster and Musicmatch have the opportunity to make inroads against iTunes. "Tethered downloads include the best of both worlds," Goodman said. "The two different models have existed simultaneously because of technology limitations. But that barrier has fallen by the wayside."
Apple certainly has the option of jumping onto the tethered download bandwagon, Goodman noted. But it has given no indication of doing so. That decision may cost it a drop in the sales of its immensely popular iPod music players from an 80-90 percent market share down to 50-60 percent, Goodman predicted.
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