"If you look at what is happening to the CD and the growth of the digital side, it's a pattern that is going to hold," he said.
Apple launched iTunes in 2003, creating an online business model for a music industry that was struggling with plummeting CD sales and online piracy. In addition to selling albums, iTunes offered hundreds of thousands of individual songs for 99 cents each. That was ideal for customers who wanted to buy hot singles or old favorites without buying the whole album.
Apple doesn't disclose financial results for iTunes. But in the first fiscal quarter ended Dec. 29 it reported $808 million in revenue for a category that includes iTunes store sales, a 27% jump from the same quarter the previous year.
The Cupertino, Calif., company has pushed into other entertainment markets in the last few years, offering downloads of TV shows and movies for sale and rent. It's trying to capitalize on the digital transition that's sweeping through those industries, albeit more slowly than the music industry.
Like other TV networks, CBS has put many of its shows on the Web and sells them through iTunes and other download stores. Quincy Smith, president of CBS Interactive, said he believed that the DVD market wasn't going to vanish any time soon, but he added that the network could cater to a different demographic by offering shows through iTunes and Wal-Mart.
"I think it's a sign of things to come, if you believe in evolution," Smith said.
Consumers already are making the shift. In the first 18 weeks of the fall TV season, Disney-ABC Television Group said viewers watched more than 124 million episodes of its shows on the Web -- an increase of 178% over the same period a year earlier.
In 2007, 9% of all broadcast and cable network viewers watched TV shows on their computers, up from 6% the previous year, according to Convergence Consulting Group. The Toronto-based market research firm predicted that 23% of TV viewers would watch episodes online by 2010.
Advertisers haven't flocked to the Web as quickly as viewers. Their spending online last year was only 2%, or $1.4 billion, of the total spent on all broadcast and cable TV advertising, Convergence said.
That highlights the central challenge facing many media companies -- the switch to digital does not generate the same revenue as traditional means.
