A Jupiter Research Report found that on average “only 5% of the music on an iPod will be bought from online music stores. The rest will be from CDs the owner of an MP3 player already has or tracks they have downloaded from file-sharing sites”, as reported in a 2006 BBC article titled “iPod fans ’shunning iTunes store’” . So Rita’s comment above about the contents of her iPod reflects the behavior of many consumers.

In response to “Norway’s Consumer Council” Apple could stop selling music with DRM and continue selling DRM-free music in Norway. Alternatively they could close down iTunes completely in Norway. Most of their revenue comes from hardware such as iPods and iPhones. Steve Jobs has claimed in the past that he wants to sell DRM-free music on iTunes but has not been able to get tracks from all the major music companies. For example in 2007 he said:

For Europeans, two and a half of the big four music companies are located right in their backyard. The largest, Universal, is 100% owned by Vivendi, a French company. EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company. Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.”

But the situation has changed since 2007. The four “major” record labels now sell DRM-free music MP3s at stores like Amazon. So why doesn’t iTunes offer the same music DRM-free? The excerpt below from a New York Times article suggests that the record labels may not be offering DRM-free music to Apple:

“The major music companies feel that Apple’s foot is on their necks, and they would like to get it off,” said Bill Rosenblatt, president of GiantSteps Media Technology Strategies, a consulting firm. “They are looking to destabilize Apple’s dominant share, and they see Amazon as their best shot.” …

Nevertheless, the development is not necessarily a bad one for Apple, said Richard Greenfield, an analyst at Pali Capital. “My guess is that Apple doesn’t care,” he said. “The reality is, everyone will now start downloading their songs more cheaply someplace else and using them on their iPods.”

Call iTunes bluff, the store is a huge moneymaker and they won’t close it.

Of course they could raise prices behind the guise of a quality improvement by raising the bit-rate quality of the songs to 256kbps…

Apple are totally bluffing. Close the iTunes Music Store? Are you serious? Only a fool would do that.

They’ll keep it as a loss leader in worst case scenario for them, since it gives them so many opportunities.