And what happened to Musicmatch?

In September 2004, internet giant Yahoo! bought it for $160 million to strengthen its activities in the field of digital music and renamed the product Yahoo! Music Jukebox. Exactly four years later, it discontinued the product when it became clear that none of Yahoo!’s activities in the field of digital music had been successful.

At the end of 2003, it did not seem that the iPod would definitively establish itself as a legend. Sales were interesting, to be sure. In the first fourteen months after its launch (until January 2003), 600,000 iPods were sold, and Apple sold 730,000 iPods during the 2003 Christmas season, more than triple the number sold the previous Christmas. However, iPod sales were essentially limited to the US, the iTunes Store did not work abroad, and Apple was forced not only to prohibit the sale of music to foreign users, but also to actively prevent it, for example by checking the country of origin of the bank issuing the payment card with which the user wanted to pay for the music.

In addition, the MP3 player market was highly fragmented. Although Apple was already dominant in terms of MP3 player sales at the end of 2002, it was estimated to be in second or third place in terms of units sold, and was even fifth worldwide at the end of 2003. At Christmas 2003, sales were still dominated by cheap MP3 players with 128 MB of flash memory, mainly produced by Korean companies such as Creative Labs, iRiver, Rio/Diamond Multimedia, Arcor, and the Chinese company RCA. Roughly half of the MP3 players sold were priced under $100, and Apple had nothing to offer in this price range. However, the problem was not just the price; for many customers, it was primarily the size. The iPod was indeed quite a heavy player for jogging in the park. The iPod was far from dominating the market, and competitors Creative Labs, iRiver, and especially Sony were preparing to attack.

The weapon that led to Apple’s victory in the field of digital music was ultimately created despite Steve Jobs’ opinion. It was Fadell who pushed for the creation of a small version of the iPod designed for athletes. Fadell argued with an anecdote about a runner whose pants were pulled down by a heavy iPod while running in the city. “It was embarrassing, and it was the fault of the heavy iPod,” Fadell argued emotionally. Jobs finally reluctantly agreed to have a small iPod designed, but he did not put much attention or hope into it. The iPod Mini was introduced in January 2004 in five metallic colors, encased in an elegant aluminum case the size of a credit card, with a capacity of 4GB for $249. Jobs didn’t really understand who would buy such a device, since the classic iPod with 15GB of capacity cost $299. Total iPod sales by January 2004 amounted to two million units, representing a 31% share of the US market.

Then came the shock: demand for the iPod Mini was so high that Apple had to delay its global launch by a month to meet demand in the US. By the end of 2004, Apple had sold more than eight million iPods, most of which were Mini models.

Image: 04ipodmini.tif

Caption: The iPod Mini became a breakthrough product, and it only came to market because of a runner’s pulled-down shorts.

Jobs was wrong this time, as his colleagues later pointed out, because he didn’t run and couldn’t appreciate the new iPod Mini. By the end of the year, Apple had become the undisputed leader in the MP3 player market, and in January 2005, it had captured over 60% of the US market share.

Apple later introduced the second generation of the iPod Mini with higher capacity, but eighteen months after the Mini’s launch, it replaced it with the Nano series, where flash memory took over the role of the hard drive (paradoxically Microdrive, remember it?), The tiny iPod Nano was sold in capacities of 1 and 2 GB ($199 and $249, respectively) from September 2005. The first million iPod Nanos sold in seventeen days, and it was Jobs who pushed for the accelerated launch of the flash memory-based player. Competition in the flash player market was growing, demand for small players was evident, and so Apple reserved substantial supplies of flash memory for its own use.

Image: 05ipodnano_blk_frontbuds.tif

Caption: The first generation iPod Nano sold a million units in seventeen days and contributed significantly to the company’s billion-dollar profit in 2005.

Apple has planned international expansion for its iPods for mid-2004. Until then, it did not support or sell them outside the US, although they could of course be purchased, even in Czechia. From June 2004, it is launching the iTunes Store in the UK, Germany, and France, with other countries to follow by the end of the year. However, Czechia and Slovakia will have to wait until the fall of 2011.

2004 was the year of the iPod’s definitive victory in the field of MP3 players, when it surpassed a 50% share in key markets and the iTunes Store platform became virtually the only sufficiently large venue for electronic music sales. Critics, however, are quick to point out that Apple’s dependence on the success of the iPod is too great, too obvious. The company is unable to revive sales of its own computer platform, and there are reports that Apple should actually give up on Mac OS X and quietly migrate its users to Windows, whose sales have been booming since the release of XP.

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And what happened to Musicmatch?

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