Can Microsoft and Yahoo! really compete with Apple on this one?

Apple makes iPods, which apparently is the single largest reason behind the success of its online music store iTunes. Other music stores are not so fortunate. Not only they have to provide music to customers in varied formats (to support more music players), they also have to compete on the low price of 99 cents per song that Apple charges. Moreover, if rumors are true, Apple Stores hardly make a profit of 4 cents on each song sold. Bulk of the amount goes to the recording companies, which does the marketing and distribution of the music. Another small percentage goes to the artists. If it were not the sales of iPods to support, Apple would not be this successful in the music sales business.

Now, the problem arises for other music stores. How do they sustain selling music at competitive prices to beat Apple at their own game? The solution does not seem to be apparent with even companies like Microsoft are finding it hard to come anywhere near to Apple. Yahoo! is the latest entrant in the music selling business with its recent acquisition of Musicmatch. The fact remains, it would either take some major decisions by the record label companies (to reduce their commission) or something revolutionary to make it profitable for other competitors to stay in business. How long can Apple ride on the success of iPod is another interesting thing to watch out for. Michael Robertson from MP3.com said very truly to the Independent that online music providers are so un-profitable that it is more of “a race where the winner gets shot in the head”. Something that we will see becoming more apparent within the near future.