Billion Dollar Deal

If the New York Post is right, Apple's Music Store is just about to get a huge shot in the arm. McDonald's is said to be entering a deal with Apple (similar to the Pepsi music give away through the Music Store) that will give away one billion songs from the music store. And they're paying full price.

The story notes that McDonald's will be unlikely to actually have to purchase the billion songs as not all customers will redeem their free tunes, but the cost will still be impressive.

Arango notes that McDonald's is unlikely to actually outlay a billion dollars to Apple for the privilege, since not all of its customers are likely to take advantage of the deal. But he estimates the company's actual spending will be "in the hundreds of millions of dollars."

If it comes to fruition, Apple's deal with McDonald's -- which has yet to be substantiated by either party -- would be Apple's second major cross-marketing win for the iTunes Music Store, and by far a bigger potential windfall for the company.

Apple has already announced plans to work with soft drink maker Pepsi-Cola North America to give away 100 million songs beginning next year, kicking off with an advertisement that's expected to run during the Super Bowl.

This is a great thing for Apple, of course. More than that, though, what effect could it have on Pepsi products and McDonalds sales? I'm addicted to music, and my junk food dollars will have been diverted from Coke to Pepsi and from Subway to McDonald's.

This will fuel the already growing support for legal downloadable music, as well. As the BBC points out, the sale of downloaded singles has far outstripped the sale of CD singles (although this is misleading in a few ways--both in that download sales are per song and CD singles are very rarely actually single songs, and it may well include people who purchase all of the songs to an album singly).

The digital sales had a "symbolic significance" because they marked the music industry's move to digital operations, Sean Ryan, vice president of music at RealNetworks, said.

"Selling individual songs as an offline strategy wasn't working all that well, but online it can be a huge hit," he said.

Why would people purchase what they could download for free through Kazaa or another P2P network? Fear of potential reprisal if they're caught downloading illegally. The convenience of knowing the quality of the item that's being downloaded--and the knowledge that it won't be tainted by a virus. And the convenience of knowing what you are downloading.

Back in the days that I used to download music from Napster and AudioGalaxy, I remember some interesting surprises from downloaded files. The Screaming Trees song that turned out to be someone from SST records with an interesting message.

It was a man's voice in a slow drawl saying, "You can't download that here, ya son of a bitch." Then it played a song from some other band that they were marketing.

There were the songs that failed to download all the way because the peer closed the connection. There were the songs that were ripped poorly and skipped or failed to play at all. There were the songs that were mislabeled. There were the songs that I could only find in low bit rate versions that sounded crap when played.

Compared to that, having an absolute knowledge of a base level of service sounds pretty good. And, now, faced with the idea of billions of potential free songs, it's sounding even better.

So, I wonder when that McDonald's promo is starting up...

Read about the McDonalds promo
Read about download sales on BBC.

Posted by zombyboy at November 6, 2003 10:01 AM | TrackBack