With the release of iTunes 4, Apple Computer announced that they would open an online music store to sell music over the internet. Using the iTunes app, a person living in the US could download a la carte, meaning that they could download one track at a time, by itself, or an entire album. Apple made deals with the "big Five" major record labels initially, promising a certain cut on every song purchased. Every song is available for $0.99, and entire albums go for slightly cheaper (usually).

Originally only for the Mac, Apple released a Windows version of iTunes in the Fall of 2003. The Mac version sold millions of tracks and received wide press coverage, beating competitors Napster, Rhapsody, and MusicMatch to market.

Apple's success is for a number of reasons. First, they are not a subscription based service, like some earlier services. Second, their version of DRM is much looser than any else. Apple hammered out a compromise with the labels; users can download songs and play them on a maximum of 3 computers and unlimited iPods, and burn them to audio CD (a maximum of 10 times per playlist). Apple uses an AAC format available in their newest version of Quicktime. Although 128kbps, it is supposedly comparable to higher bitrate mp3s, albeit with a smaller file size. Also, songs downloaded from the store come with cover art. Purchasing and downloading a song takes literally seconds over broadband, partly due to Apple licensing Amazon.com's 1-click buying patent.

Also, the iTMS is a success partly due to the RIAA simultaneously suing thousands of illegal file sharers, which received plenty of media attention. Apple iCEO Steve Jobs touted his store as a way to avoid "bad karma" and showed studies that showed the average person spent >15 minutes hunting for and downloading music on Kazaa, 99 cents is cheaper if your time isn't free.

Here are some statistics released at MacWorld Expo 2004:

  • iTunes accounts for 70% of all online Music sales, according to a Nielson Soundscan study
  • Apple has sold over 30 million songs from April 2003 to January 2004
  • The top buyer has spent over $29,500 on iTunes music
  • Apple hosts Audible.com books, with over 5000 available for download (>20,000 hours of spoken content) and over 50,000 audiobooks sold in the first quarter
  • 100,000 Gift certificates have been sold since their launch in October 2003
  • AOL members can now download music using their AOL account (no need to fill in credit card information or register)
  • Apple offers over 60 iTunes "essentials" which I believe are exclusive tracks, videos, and behind the scenes stuff with artists
  • Apple now carries Billboard charts
  • The iTMS now carries 12,000 classical tracks
  • The iTMS now has over 500,000 songs availible for download and purchase, as of January 2004, making them the largest online music store in the world
  • Starting February 1, 2004, Pepsi and Apple Computer will give away 100,000,000 Free songs. 1 out of 3 Pepsi bottles will have a $0.99 credit code under the cap to download one song on iTunes. It will probably last for 2 months
  • Apple is currently in negotiations with record companies and copyright holders in Europe and Canada to sell their music in those areas. Apparently, there is a different form of the RIAA in Europe and other areas, and it takes time to draw up new contracts. (Currently, a US address and credit card are all that is necessary to purchase)
  • Independant labels can now sell their music online, provided Apple gets certain commissions and sets the prices for each track ($0.99 per individual track, variable rates for albums)