[28 July 2009]
San Jose Mercury News (MCT)
SAN JOSE, Calif. — Apple is poised to once again revolutionize the entertainment industry — this time with an “iTablet” portable device that lets users download and read digital books, watch movies and play games while also sparking new consumer interest in music albums packed with material such as video clips and liner notes, according to a new report.
The touch-screen Internet-connected gadget, which the company could launch before the holidays, aims to do what Microsoft failed to accomplish and would instantly compete with Amazon’s Kindle, Sony’s Reader and a soon-to-launch device from Barnes & Noble, the Financial Times reported Monday. The iPod touch-like device is expected to have a 10-inch screen.
Analysts and bloggers have talked at length about an Apple tablet device, with many pointing to an early 2010 launch.
Some have speculated the new product would be an extension of Apple’s iPod line, which owns 70 percent of the North American market for digital music players but is starting to lose momentum. Last week, the company said iPod sales sagged 7 percent to 10.2 million during the quarter that ended in June as compared with the same period a year ago.
Some analysts say such a product could fill a potential lucrative niche in Apple’s product lineup between the iPod and the iMac.
Apple would be leery about releasing a tablet gadget that could compete with its MacBook computers, said Stephen Baker, director of industry analysis for the research organization NPD Group. Apple’s laptop lineup is more of a premium product aimed at consumers willing to pay more for a better computing experience. In the second quarter of this year, Apple had just under 9 percent of the U.S. PC market. Its iPod and iPhone pocket products, though, are aimed at the masses, as a tablet-type gadget would be, as well, he said.
“They need to keep those kinds of products away from the MacBook line. They don’t want to give people a reason to trade down,” Baker said.
Despite the latest rumors, longtime Apple watcher Tim Bajarin, president of Creative Strategies, isn’t convinced the company is ready to unveil some sort of new touch-screen device any time soon.
“Apple has a lot of products that they test and play with in the lab. It’s unclear to me whether this is a lab project or a real product,” he said.
He does, though, believe some sort of new digital album concept is in the works. The plan, code-named “Cocktail,” is to bundle features ranging from video clips to lyric sheets with albums, according to the Financial Times.
“It’s about re-creating the heyday of the album when you would sit around with your friends looking at the artwork while you listened to the music,” the paper quoted an unidentified executive familiar with the project. The companies are looking for a September launch, according to the report.
In addition to its losses from online piracy of music, the recording industry has taken a big revenue hit from the changing behavior of consumers, who are moving away from buying complete albums. Between 2007 and 2008, sales of download singles rose 27 percent to 1.03 billion, while sales of physical CDs dropped 25 percent to 384 million units, according to the Recording Industry Association of America. Download albums rose 34 percent to 57 million.
To counter the trend, record industry executives are looking for new ways to attract consumer interest in music albums. A revamped digital album, combined with a buzz-generating new device on which to experience them, is needed, said Russ Crupnick, senior industry analyst for NPD.
The attempted resurrection of music albums may also be designed to counter the recently lagging sales of overall digital music. The growth rate of sales of individual download songs is slowing this year, something Crupnick attributes to free music sites like Pandora, which let people listen to music in an online radio format.
“This is a market that is kind of maturing,” he said. “We have been seeing a leveling off of the (sales) volume among iTunes users.”
A new digital album concept “is long overdue,” Crupnick added. “It’s really critical that you have people in the iTunes environment who are generating more revenue.”
Apple’s online music store iTunes, launched in 2003, brought digital music to the mainstream with its seamless process of allowing consumers to buy 99-cent songs and download them onto their iPods. But it also helped create an appetite for a la carte music consumption. Instead of exploring the artistic vision for an entire album, music lovers download their favorite songs and leave the rest.
Starting in April, Apple finally agreed to record industry demands to offer music downloads at three prices — 69 cents, 99 cents and $1.29, depending on their popularity. In exchange, the record industry agreed to remove copyright protections limiting the number of devices that can play them.