Mobile Apps for Music: Look Out iTunes?

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"Tip of the Iceberg"

Record label EMI Group and application developer Tapulous recently released a music game called Tap Tap Dance, which offers 10 dance tracks from artists such as Moby and Sunny Levine and an exclusive track by Soul Magic Orchestra. A feature-rich version of the app costs $4.99. "I see expanding musical opportunities in this way as a big boom for the music business," Sexton says. "I do believe it's going to grow very quickly. Every game or application deserves to have great music attached to it. This is the very tip of the iceberg."

Analysts concur that the market for music apps is likely to grow. "It could get very big," says Mike McGuire, research vice-president at consultant Gartner (IT). "It could be a very powerful marketing and awareness tool." In the coming months, other mobile app stores are expected to gather steam or come online. Google (GOOG) is pushing Android Market, a store similar to Apple's but serving users of different smartphones. BlackBerry maker Research In Motion (RIMM) is due to launch its revamped mobile storefront in March. Microsoft (MSFT) is expected to launch an app store for Windows Mobile devices this spring as well.

Not all music apps will come with a price tag. Some artists will give music away in hopes of converting freeloaders into paying customers. Death Cab for Cutie's free iPhone and iPod touch app features nine full songs, videos, photos, and a tour schedule; it recently reached the ranks of the top 20 free app downloads on iTunes.

Tuning Out Radio?

Some analysts question whether the music apps could grab sales or users from higher-priced music downloads or subscription services like Rhapsody (RNWK), radio stations like Pandora or those owned by Clear Channel, or even social networks like News Corp.'s (NWS) MySpace. Some cheapskates may end up downloading the apps and forgoing the more expensive physical or digital albums. "We think it's great for bands to stream music onto Apple devices and that it provides a great way for the band to expose people to their music," Apple said in a statement.

Radio, historically one of the primary means of discovering new artists, could lose luster. After all, free iPhone apps could allow phone owners to sample new artists when they want, without extra cost. But Jonathan Sasse, senior vice-president for marketing at Slacker, which offers thousands of artist-specific digital radio stations, sees opportunity instead. He believes that the apps will eventually become intertwined with online radio: After listening to an artist's song on an app, a user may be offered to click on a link to a radio station for more. "If they compete with anything, it would be MySpace pages for the band," says Sasse, who adds that Slacker is talking to labels about creating artist-specific cell-phone applications. "It could start to limit the other places you might visit."

Less Competition at the App Store

The music apps have yet to prove themselves. In its first week on iTunes, the PUSA app has been selling in the high hundreds a day, on par with the band's full music tracks.

Independent musician Riley Weber has not been so lucky. His Romance Jukebox app, a collection of two original songs, has sold fewer than 10 copies. Undeterred, he is now preparing to release a $1.99 app that contains 50 original and humorous birthday songs. At the end of each song, the nifty app will display a birthday cake. The users can blow into the iPhone's mike to blow out the candles. Currently, the same songs are selling on iTunes for 99¢ apiece.

In his mind, he's more likely to get noticed at the app store, where only a few dozen of the more than 15,000 apps are related to music, than on iTunes, which boasts more than 10 million tracks. "There's a lot better chance of people learning about [me] through apps," Weber says. "I am building awareness of who I am."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.