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Apple's unexpected initial success with its iTunes subscription music service shocked and pleased many in the music industry—and appears likely to prompt a rash of imitators.

Launched May 2, iTunes sold more than a million individual songs in its first week of operation, vastly exceeding the projections of Apple executives and their counterparts in the music industry. It boosted the value of Apple's stock by approximately 50%—the share price closed at $18.30 on May 9, a huge leap from its 52-week low of $12.72 on April 17. It also caused a surge in demand for Apple's sleek iPod portable music player. The Cupertino, CA–based company sold 20,000 third-generation iPods during the first weekend of its subscription music service and took orders for 110,000 more.

Although offered in the beginning to Macintosh computer users only—estimated at less than 3% of the total market—the service's huge catalog, ease of downloading, liberal usage policies, and friendly pricing appear to be the right formula for similar services to follow. Because of their overly restrictive controls over how music fans can use the tunes they have paid for, music industry-backed subscription services pressplay and MusicNet haven't attracted many customers. With those services, downloaded songs expire after a month or are deleted from users' computers once their subscriptions lapse. iTunes subscribers keep the music they buy, just as if they had purchased it from traditional retailers.

Apple has stated that it plans to expand the service to Windows computer users later this year. Meanwhile, existing music services are rushing to adopt Apple's business model, including its 99¢ per song and $10 per album plan. (With licensing deals signed with all the major record labels, Apple reportedly keeps 35¢ for each track sold, with the remainder going to the label.) San Francisco's Listen.com, recently acquired by RealNetworks, said it would begin offering per-song and per-album pricing in addition to its monthly music-streaming fee. Echo, a download service backed by electronics retailer Best Buy, bookstore operator Borders Group, Inc. and Virgin Entertainment Group, Inc. will likely adhere to a similar plan. America Online, Microsoft MSN, and Amazon.com are all "exploring the possibility" of launching music services on the iTunes model, according to a recent report in the Wall Street Journal. "We intend to be a major player in that market," said Jeff Somers, an Amazon music manager.

It's perhaps to early to discuss this potentiality, but the proliferation of services could lead to a price war, increasing the availability and variety of online music and reducing costs for consumers. Unlike cable television services, which are allocated to specific geographical areas and aren't under competitive price controls, online music services are available to all computer users everywhere. Barring some sort of price-fixing agreement among online services—an unlikely and blatantly illegal possibility—consumers will benefit from this scramble for their attention just as they do when taking out magazine subscriptions. (Stereophile's cover price, for example, is $6.99, but a yearly subscription can be had for as little as $12.) Traditional music retailers will continue to lose ground to online services, and will have to make it up with other offerings, such as value-added packages like combo CD/DVD deals not available online. In 2002, music retailers did a better business in audio/video hardware than they did in actual music. (see related story)

One thing is abundantly clear from the iTunes launch. Legitimate online music services are here to stay. Like home copying, illegitimate downloading will never be totally eliminated, but heavy-handed legal efforts by the music industry against egregious violators may keep it contained to an acceptable level. In the month of May alone, four US college students settled a multimillion dollar copyright infringement suit brought by the Recording Industry Association of America (RIAA), and in the southern Germany town of Fuerth, police raided the home of a 25-year-old computer programming student, confiscating eight computers. The student is accused of distributing "over a million MP3 music files daily to some 3000 individual users over a period of weeks," according to a Reuters report. "This sends out the signal that anyone distributing music illegally will be caught, and that they would therefore be best advised to concentrate on legal methods of distribution," said Hartmut Spiesecke, a German representative of the International Federation of Phonograph Industries (IFPI).