While reading this article about Apple hitting the 1 billion song download mark, yes, I said billion, I noticed the claim that essentially Apple breaks even on the downloads but makes money on the iPods. What this means is that it will be hard to dethrone Apple in the music business. And I assume that this is why a lot of the other entrants are chosing a model of charging a flat fee to provide access to everything – that way they can set the monthy fee high enough to actually make a profit of the downloads without requiring people to buy their hardware. But that also means that it will be hard for other companies to make money following the Apple model without their own proprietary hardware to listen to the songs — which will tend to limit the companies that can compete that way, and by that I mean good hardware for the player and a good store experience in iTunes.
(full disclosure, I own Apple Stock and I download songs from iTunes).
