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Apple: iTunes' top competitor is P2P

At the launch of the Australian version of the music store, an Apple exec takes stock of the competition.

Apple Computer's biggest competitors in the digital music downloading market are illegal music file-sharing services such as Kazaa and BitTorrent, said iTunes Vice President Eddy Cue.

On the day Apple launched the Australian version of its music store iTunes, Cue said that people now have an alternative to illegally downloading music and that he believes they are willing to pay a "fair price."

"Our view is that our biggest competitor is illegal music and P2P services. We always thought that if we offered a better alternative, then those customers would be happy to pay," said Cue. "Obviously...we will never be better than 'free.' But we think US$1.27 (1.69 Australian dollars) is a very competitive and fair price to pay."

Apple will sell singles at US$1.27 per track, and albums will cost around US$12.86. Music videos are also available for download at about US$2.57 each.

Cue said that none of the other 20 countries where Apple has launched an online music store had previously established a strong legal market for music downloading.

"We have now sold over 600 million songs worldwide and have nearly 80 percent market share in most of the countries we are in," Cue said. "This is our 21st time, and I will say that there is no place that we have ever launched where music downloads have been strong prior to us."

Cue believes that the next generation of music buyers will not know music as anything other than "digital bandwidth."

"It is certainly our belief that digital music buying is the future of music purchasing. Certainly our customers love it, and you can see it in the younger generation. They buy a lot of music now, and they buy it all online. That is what they know music as. They certainly do not know music as a record or as a CD--they know it as digital bandwidth," Cue said.

According to Cue, it was important that the Australian iTunes music store be built for and by Australians because the domestic music industry is so strong.

"A little bit over 30 percent of the music that gets sold in Australia is local music," he said.

The one major music label missing from Apple's iTunes Australia launch is Sony BMG. Although Cue would not discuss the reasons why Sony had not signed up, he explained that setting up such a store is not easy: "We are working with Sony, and we know their artists would like to be a part of the launch and we hope they will join us."