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Tuesday, September 07, 2004
Apple Offered Sony iTunes Deal

Apple chief executive officer (CEO) Steve Jobs offered Nobuyuki Idei, chairman and group CEO of Sony, the chance for Sony to come aboard Apple's iTunes Music Store service.

The offer was made when the two met at the Sony Open golf tournament held in Hawaii this January, according to the paper, which quoted unnamed Sony sources. Jobs is reported to have wanted to bring the Sony brand into the service to maintain a competitive advantage over Microsoft, which launched a beta version of its MSN Music store last week.

Sony declined to comment on the story. Apple spokeswoman Teresa Weaver also had no comment. "We don't comment on rumors and speculation," she said.

Apple launched its iTunes online music store in April 2003 and the company announced the following month that the service had sold over 1 million songs in its first week. By the time the company opened the service for Microsoft Windows users in October 2003, Jobs said the iTunes service had accounted for 70 per cent of legal music downloads and that it was selling 600,000 songs a week. By July this year, the service had sold over 100 million songs, according to the company.

Although Apple may be leading the market now, partnerships are crucial for the longer term, said Mike McGuire, research director with Gartner G2, a division of Gartner.

"Given the forces that are in the market against Apple now, including Microsoft and Sony, this is really going to be a challenging marketplace," McGuire said. "Going forward, partnerships will be crucial, whether it is Sony and Apple, Sony and somebody else or Apple and somebody else. This market is in a state of flux, I can't tell you when the shakeout starts, but a shakeout is inevitable."

Sony launched the NW-HD1, the company's first hard-disk drive-based digital music player to bear the Walkman name, in August this year. The device has half the hard disk capacity of Apple's highest capacity iPod music player. The same month Sony launched its Sony Connect download service, initially offering 500,000 tracks in Sony's proprietary ATRAC (Adaptive Transform Acoustic Coding for MiniDisc) format, which means the music only works on Sony music players or using Sony software.

To be sure, Apple isn't just going at it alone anymore. The company already has a partnership with Hewlett-Packard (HP), which last week unveiled its version of the iPod. The alliance with HP significantly expands the distribution channel of the iPod, a critical step to move the audience for online music services beyond tech-savvy young adults, according to McGuire.

"Partnering to get online music into the mass of consumers is really important. Apple certainly has a tremendous head start right now and their willingness to work with HP to expand the channel is an example of the necessity to partner to expand in this market place," McGuire said.

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