Digital-music download and subscription service Napster became the first service of its kind to open its virtual doors in Europe, handing key rival Apple iTunes Music Store an embarrassing defeat. Roxio, Napster's owner, announced late yesterday that its service will go live today in the UK, giving customers there their first peek at services the United States has enjoyed for several months. Europeans have had access to other exclusive music services for some time now, however, including On Demand Distribution (OD2), which sells songs through partners such as MSN Music Club and HMV Digital Downloads.
"The UK is a $2 billion music market," Roxio Chairman and CEO Chris Gorog said. "It's the third largest in the world. It's a very important market for us." More important, perhaps, is the lead time Napster now enjoys. The iTunes Music Store was able to drum up a lot of momentum during the 6 month lead time it had in the United States last year. In Europe, at least, time is on Napster's side.
But Napster will have more help as it takes the fight against the iTunes Music Store global. Apple Computer's European presence is more subdued than its US presence, and the company's computer products have even less market share in Europe than they do in the United States. And thanks to the company's supply problems with the Apple iPod Mini, European customers are still waiting for a chance to order the hard-to-find devices, whereas many Napster-compatible portable devices are widely available there.
Meanwhile, contract-negotiation problems with the five major music companies are holding up Napster and iTunes Music Store rollouts in other European countries. Gorog said that he hopes the UK launch will help alleviate concerns. "We'll be looking to move into one or more European territories by the end of the year," he said. "The faster we can roll out across Europe, the faster we can achieve cash break-even."
In related news, Apple announced this week that it will split the company, operationally, into two parts, separating the people who develop iPod-related products from those who work on the company's flailing Macintosh computers. The move corroborates opinions, including that of yours truly, that Apple is slowly shedding its computer-maker roots to concentrate on consumer electronics, and the company is expected to make a series of consumer-electronics-related announcements next month at an annual developer show. Furthermore, Apple's Chief Software Technical Officer Avie Tevanian revealed last week that the company can't afford to keep up its Mac OS X development pace and will scale back those efforts. Presumably, the high-margin iPods and the popular iTunes Music Store service have given company a bigger Return on Investment (ROI) than slogging it out with Microsoft in an unwinnable OS battle.