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Apple's Tuneful Launch

April 29, 2003|Joseph Menn and Chuck Philips

Apple Computer Inc.'s new online music service allows people to transfer songs to as many as three computers and an unlimited number of iPod music players.

All five major record labels are supplying content to the service, which offers free 30-second samples and purchases with a click of the mouse.

What it doesn't do is help the overwhelming majority of personal computer users who rely on Microsoft Corp.'s Windows operating system.

The Music Store is available only to the sliver of users whose machines run on Mac OS X, Apple's latest operating system, although Chief Executive Steve Jobs promised a Microsoft version by the end of the year.

"If you're a member of the Apple faithful, you're very happy," said Gartner G2 analyst P.J. McNealy.

Jobs initially envisioned a service with fewer restrictions on song sharing, sources said. But Apple built in a number of security features to satisfy music firms. The first record executive Jobs met with in March 2002 was Roger Ames, chairman of AOL Time Warner Inc.'s Warner Music Group. In May, Ames notified Universal Music Group Chairman Doug Morris about Apple's project. Within a month, executives at EMI Group and Bertelsmann Music Group also were apprised of the service. Then Sony Music Entertainment came on board.

Executives at Vivendi Universal were so impressed with Jobs' vision of the future of music they approached him in December about purchasing one-third of Universal Music Group. By March, Jobs was weighing the possibility of buying the entire music division and hired Morgan Stanley to conduct due diligence, sources said.

Jobs hasn't made a bid but could be willing to pay about $5 billion -- far short of what Vivendi hopes to get, sources said. Apple shares rose 51 cents to close at $13.86 on Nasdaq.

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-- Joseph Menn and Chuck Philips

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