The RIAA gives up on finding a competitor to iTunes

The RIAA today announced it is giving up on suing individual users for distributing music over the Internet.  Although they still will serve notice to ISPs which have customers who are big offenders, they have effectively stopped trying to put up walls around music.

More news will be coming up in the next few weeks, perhaps at Macworld:  Apple is finalizing the deal which will see all record labels distributing their music on iTunes (which owns over 70% of the US and a majority of the global market in digitally distributed music) DRM-free.  There have been many hints that this is coming and a few false starts.  Interestingly, Steve Jobs won't be there to present it at Macworld, which makes me think the announcement won't happen at the event, but at some time after.

Apple had foreseen this and even posted a "Thoughts on Music" letter to the industry stating that DRM-free was the best policy for consumers.  Two years later, the rest of the industry is realizing that they can't create another reality in which they control the flow of information.

In any case, the bigger story is that the record companies are basically giving up on finding a competitor to iTunes in the music space.  They had originally looked to Amazon to be the major US competitor to Apple.  They gave Amazon DRM-free MP3s at discounted prices so that Amazon could gain marketshare against Apple.  Only the smallest of the big four, EMI, had provided Apple with DRM-free music, and originally, that was at a higher price.

Although many (myself included) think that DRM-free high quality MP3s you get from Amazon at often discounted prices are better than the product Apple offers through iTunes, they've only managed to capture about 10-15 percent of the market, depending on who you ask.  Amazon isn't going to be a realistic competitor to iTunes anytime soon.

iTunes's complete ecosystem, exciting delivery, better branding and superior community are likely the reasons that Apple is keeping ahead of the competition.  It doesn't hurt that part of their ecosystem, the iPod, is far and away the most popular portable music player in the world.  AppleTV is a convenient way to put music on home theater systems as well.

So, even with this open ecosystem and more competitive pricing by Amazon and others in the DRM-free space, will Apple be able to keep its huge lead on the industry?  The numbers seem to state that it will.