Apple playing catch-up on iPhone music, says analyst

Apple is talking to music labels about expanding the iPhone's ringtone selection and letting users download tunes over carriers' data networks.

Apple is talking to music labels about expanding the iPhone's ringtone selection and letting users download tunes over carriers' data networks, according to a report in the New York Times Monday.

An analyst, however, said the negotiations, if true, are "last year's news" and illustrate how Apple is playing catch-up with other handset makers.

The New York Times report, posted on its "Bits" blog early Monday, cited unnamed record company executives who said Apple is discussing expanding its inventory of ringtones sold through iTunes for the iPhone; adding "ringback tones" tracks the caller hears; and whether it will be allowed to send purchased tunes straight to the iPhone via the mobile service provider's data network.

Currently, iPhone owners can directly download tracks from iTunes only when they're in range of a wireless access point, such as a home Wi-Fi network or a public hotspot like those at Starbucks coffee shops, Barnes and Noble bookstores and airport terminals. Apple added that feature, as well as ringtone downloads, to the iPhone in early September 2007.

Although the Bits blog noted that the "stakes are significant," Aram Sinnreich, an analyst with Radar Research, downplayed the importance of the rumored talks. "This is last year's news," said Sinnreich. "Apple's still playing catch-up."

While Apple is talking with labels about ringtones, ringback tones and over-the-air downloads, other handset makers have moved on, said Sinnreich. Nokia, for instance, offers a service dubbed "Comes With Music" that provides users of selected models a year's access to tracks from the Universal Music Group and EMI catalogs.

But while Apple has reportedly talked with music labels about bundling a subscription service linked to its iPod music players and/or the iPhone, those conversations have not yielded any public announcement. Nor is Sinnreich optimistic one is forthcoming. "Apple's been in talks about a subscription plan over the last year, but they're not about to announce anything anytime soon," he said.

And the Times report didn't make him any more upbeat about what Apple is doing in the mobile music arena. "This just isn't very ambitious. Ringtones, for example, have been around for most of the 21st century."

To simply be competitive, Sinnreich said, Apple has to hustle, but only a real subscription service that's tied to the iPhone would get Apple where it wants: to be seen as an innovator. "The future of music [sales] is wireless, but I'm skeptical that Apple can make a go of it. Success in wireless depends on service, not on hardware. Apple's known for its hardware, but it's certainly not as a service provider. iTunes is really just an excuse to sell iPods."

That doesn't mean Apple won't continue to reap profit from the iPhone. "Apple could bump up the memory by just two gigabytes and offer it in pink, and people would still gush," he said. "Apple has a lot of good will among consumers."

That good will might be tested, however, if Apple doesn't solve a pair of problems that block it from doing substantial business in mobile music. One is faster downloading, which will be available soon, if pundits are on the mark and Apple rolls out one or more 3G-based iPhones next month.

The other is digital rights management (DMA), the anti-copying technology added to most tracks Apple sells that limits where users can play or store their audio collection. "People will want to be able to transfer music [from their iPhones] to laptops and other music players," said Sinnreich.

"Apple has a lot of hurdles before it's where it's just competitive," he said.

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