Size is Relative – It’s the Number of Credit Cards On Account That Matters

By Mike McGuire | September 10, 2009 | 0 Comments

There are currently 100 million active credit cards on account with iTunes. And according to Apple, iTunes is the number one music retailer in the world. Not “number one in online downloads,” but number one. Of all channels.

That, my friends, is the most important news to come out of Apple Inc.’s 09/09/09 announcement, whether you’re a content company, a game or software developer, a technology vendor looking to develop online content stores or services, of if you’re a competitor.

Oh, and Steve Jobs is apparently back, because he was on the stage for a bit more than hour during Wednesday’s announcement. 

During the keynote, Jobs and a cadre of lieutenants and guests took the stage to announce: upgraded Nanos, iPod Classics, Shuffles and iPod Touch models. (My colleague Van Baker is blogging about the hardware on his blog space within the Gartner Blogging Network http://blogs.gartner.com/van_baker).

For my money (and my coverage area) the real news was not just the number of credit cards iTunes (the store) has amassed, but also the subtle changes/enhancements Apple made to the iTunes software and, by extension, the iTunes store. 

First off, what was referred to as “Cocktail” in the rumor-mill run-up to Wednesday’s event is formally known as the “iTunes LP” and is the iTunes version of what some refer to as an “interactive” album or digital album. In addition to the songs that comprise an “album,” Apple works with labels and artists to include lyrics, bonus tracks, liner notes, promotional art such as pictures, as well as video content.  As of Wednesday’s event, there are eight “LPs” on the iTunes store including the Grateful Dead (“American Beauty”), the Dave Matthews Band ( “Big Whiskey and the GrooGrux King), Bob Dylan (“Highway 61 Revisited”), and Norah Jones (“Come Away with Me”). Will lyrics, memorabilia, rare photos or videos be enough to get consumers to give the notion of “bundled” content?

Conceptually, “LP” is not new, because the labels would love to be able to get back to the time where consumers want to buy a complete bundle of songs. Makes sense since the selling price goes from $.99 to, maybe something more than $.99. However, Apple is pulling this off at the time of rumors in the press that the major labels are working on their own format that they have called CMX.   Honestly, I don’t think this is going to be much of a conflict. The thought that the labels decide to create a format or file that’s incompatible with iTunes or with iPods or iPhones seems too illogical. And, here again, I’m fairly certain there is no other legitimate online music/media service/store that has 100 million credit cards on account.

Second, Apple extended its “Genius” recommendation technology beyond simply generating playlists and recommendations for additional purchase at the iTunes store in two important ways.

First, the “Genius” recommendations will now be extended to the AppStore for iPhone and iPod Touch applications. So an iPhone or Touch user will get recommendations based on the applications they’ve already purchased, as well as other inputs such as what types of applications a user has searched for, as well as collaborative-filtering approaches.

The second extension of “Genius” is to create what are called a “Genius Mix.” In the initial version, a “Genius” playlist was a fixed number – 25, 50, 75 or 100 songs. A “Genius Mix” extends that to a playlist that is really only limited by the user’s existing library. More important the “Genius Mix” is updated as new content is added to the user’s library. So, supposing a user creates a “Genius Mix” based on John Coltrane, instead of a fixed number of songs, a stream of jazz, jazz- or Coltrane-related songs will play. Here again, how long a “mix” plays depends on the extent of the customer’s library.

Apple is refining the user-experience for iTunes users by delivering a pick-and-stream usage model similar to Pandora, Spotify or Slacker. Unlike those Internet-stream/cloud models, however, the Genius Mix’ extensibility is limited by the user’s existing library.  This makes a lot of sense if you’re Apple because the emphasis is helping the customer “rediscover” music they already own.

There were no tablets, no new iPhones and no announcements about the Beatles catalog showing up on iTunes. On the other hand, if you’re a company with 100 million credit cards on account, day-the-earth-stood-still product announcements aren’t necessarily easy to pull off. More important, they’re not as important as showing steady continual improvements to the products that got those first 100 million folks to plop down those credit cards in the first place.

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