Wednesday, December 06, 2006

Digital-music sales have stalled for the first time since Apple launched its iTunes Store in 2003. Digital track sales held steady at 137 million songs in the second and third quarters of this year, according to Nielsen SoundScan. That's a slight drop from the 144 million sold in the first quarter.

Music companies have grown increasingly troubled by Apple's unwillingness to allow music it sells to play on devices from other manufacturers, or to allow music sold on other mainstream sites to work with the market-leading iPod. Music companies worry that those hurdles are holding back legitimate sales of music on the Internet. For instance, cellphone companies this season are rolling out numerous handsets that can play music, but most of them won't play songs purchased from iTunes, cutting off a potentially major new market.

Antipiracy software on music isn't helping the industry because the same music is already available without copy protection on CDs and through Internet file-sharing programs. What's more, many consumers don't like the limitations that copy protection imposes on how and on which devices they can listen to their music. If DRM benefits anyone, Mr. Goldberg argued, it's technology companies like Apple, because it makes it trickier for consumers that have made hefty purchases of digital music through iTunes to switch to non-Apple music devices in the future.

"It just isn't working," he said. "It's not solving piracy. It's not helping consumers: They view it as a tax."

For music executives, allowing Apple to gain increasing control over digital music sales -- iTunes accounts for more than 90% of the tracks sold online some weeks, according to people who work in the music industry -- is shaping up as the latest in a long series of strategic blunders that have helped create powerful new gatekeepers between them and their customers. (Past middlemen have included radio broadcasters, MTV and big retailers like Best Buy Co. and Wal-Mart Stores Inc.