SIGNALS

The plan was straightforward. Founded on the overwhelming popularity of the iPod, and then boosted by the dominance of the iPhone, iTunes was ready to own audio and video downloads and streaming. The executives in Cupertino probably had a calendar on the wall, with the exact date of achieving world domination circled in red. That hasn't worked out.

Back in the old days, people bought plastic things that had music and movies encoded on them. Youngsters won't believe this, but there were actually entire stores with names like Tower, Peaches, Sam Goody, and Blockbuster where you could buy or rent those pieces of plastic. That abruptly ended when people started to illegally download the content, skipping the plastic altogether. Apple smartly anticipated that downloading, made legal, was the future and that it would go hand in hand with their hardware business. The executives were smart, and they were correct. The iPod, along with iTunes, changed the music business forever.

It was only a small step for Apple to add streaming and transition from dedicated iPods to multipurpose iPhones, and also to add video. Surely with its fingers in all these pies, and having a solid presence in both the hardware and content sides, Apple was poised to own the music retail market.

As it turns out, although iTunes is huge, its presence is far from dominating. There's nothing particularly wrong with iTunes, it's just that now there's lots of competition. Music listeners can turn to any number of sources for their daily fix. As a result of this, and other market conditions, Apple's share of the music market is shrinking.

Things are even tougher on the video side. Amazon and Comcast are going all PacMan on the digital-movie business, gobbling up chunks of Apple's market share. Five years ago, Apple owned about half of the movie rental/purchase market; now it's estimated to be down to 20% to 35% (there is no reliable tracking data for this market share).

Is Apple in danger of losing the battle for the digital movie business? Could a company with such a head start on the competition, with such a reputation for forward thinking, and with such vast resources, wind up being second or third fiddle in a business that it surely had already taken for granted? Maybe.

Perhaps the problem is that Apple has too many internal warring factions, competing for attention. For example, last month Apple announced that iTunes would be getting 4K HDR movies. Yippee! But, they are only for Apple TV streaming, not for downloading. Well, that might help sales of the new Apple TV, but won't really help the iTunes Store gain market share. Yes, previously purchased Full HD content will be upgraded to 4K HDR, but only for streaming.

It is certainly true that 4K HDR files are huge, and not really suitable for storage on most Apple devices. And, it's not clear that iPhones and iPads can play HDR either (Apple TV 4K can, with the right format). Or maybe this is the issue: reportedly, Hollywood studios wanted 4K movies to cost $25 to $30 on iTunes, but Apple is selling them for the same price as Full HD movies. Maybe Apple agreed not to allow downloading in return for this pricing strategy.

In any case, high-res video downloading on iTunes is lacking, and this is a problem because sometimes, for whatever reason, you just want to watch a movie offline. And this deficiency gives other content providers the opportunity to keep gobbling up market share.