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The iPod's Achilles Heel? It's er... Reader's Digest

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Analysis One of the most interesting aspects of Microsoft's would-be iPod-killer Zune isn't technical at all. It has nothing to do with colour screens, codecs or disk capacity.

But someone at Microsoft thinks they've found what may be the Achilles heel of Apple's end-to-end music delivery system, of which the iPod is simply the best known part.

And it's all about how you acquire music.

The iTunes store has been vital to the iPod's success, which in turn has been the engine behind Apple's recent growth. iTunes dominates the legal download market in the same way the iPod dominates the MP3 player business. It's hard to remember now that for the first year of its life the iPod was a flop. But once Apple introduced iTunes for Windows, the mass market perception of the device changed from one of expensive luxury to convenience item.

Instead of requiring the consumer to take an extra step, the iTunes system removed a step. Remember that everyone who wanted a budget portable CD player pretty much had one already, and acquiring CDs has never been a problem. A digital acquisition system removed the "Burn" from "Rip, Mix and Burn", with music flowing seamlessly to a device that was always in sync with your music collection. So "Rip, Mix and Burn" became "Rip, Mix and .... just take it with you".

Of course the cost of this convenience is pretty high - and is still born by the punter eventually - but the consumer perception of ease and convenience had to be there for the iPod to be a success.

Today, if you can get music industry types to agree on anything - and don't forget that the jostling between indies and majors, between publishers and recording rights holders puts any flame war in the shade - it's that the iTunes Store isn't the future of music. And after more than three years, this is a consensus that's based not on wishful thinking, but empirical evidence.

Principally this is because iTunes doesn't make money for anyone except Apple. In itself, the iTunes Store barely breaks even - but it fuels the much more lucrative downstream bit of the delivery system. iTunes sales remain vanishingly small as a proportion of the music business, but most importantly of all, iTunes doesn't generate money for anyone except Apple. Broadband providers, PC manufacturers, insurance companies, and the battery-replacement services have all profited in some way from the iPod's success - but no one in the music value chain. Steve Jobs doesn't even leave crumbs on the table.

Then again, Apple doesn't really care what bits pass through its store, or how much revenue they generate, so long as it keeps giving people reasons to fill up their iPods. Audiobooks? Fine. Podcasts? Why not. Videos and games? They're just more bits - and more reasons to keep returning, and keep buying iPods.

The average iPod owner has done little more than dabble with Apple's store, figures show, carrying an average of 21 iTunes-purchased songs. Extrapolate those numbers to the wider market and you'd have figures suggesting the public has suddenly stopped acquiring music. That clearly isn't true - they're simply getting it from other channels: physical and illegal-digital.

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