IPods Will Be the New CDs

Big changes are afoot for the iPod in the wake of the Beatles settlement -- the iPod is about to become the new CD. On Monday, Apple Inc. and the Beatles' Apple Corps announced that a 15-year legal spat over the "Apple" trademark had been settled in Steve Jobs' favor. But the biggest news wasn't mentioned at all in the joint press release: The new contract clears the way for Jobs to sell iPods loaded with music. We sure wish we'd seen this one coming...

So who cares, you ask. Well, the iPod could become the new CD, especially if Apple starts offering cheap shuffle iPods pre-loaded with hot new albums or artists' catalogs. Imagine a whole range of inexpensive, special-edition iPods branded with popular bands containing a new album, or their whole catalogs.

Flash-memory drives are now so cheap, software companies are starting to use them to ship software. H&R Block, for example, is selling the latest version of its tax-preparation software on a flash drive for $40 -- the same price as the CD version. How much would it cost Apple to add a few music chips and some cheap earbuds?

Apple was prevented from doing this until now by the 15-year-old contract between Apple Corps, the Beatles' music company, and Apple Computer. This contract precluded Jobs' Apple from acting as a music company and from selling CDs or "physical media delivering prerecorded content ... (such as a compact disc of the Rolling Stones' music)."

Apple has been selling music as downloads for years, of course, but thanks to this clause, the company couldn't sell an iPod with music already loaded onto it.

That's why the U2 special-edition iPod ships with a voucher for downloading the band's catalog online. The Beatles contract prevents Apple from pre-loading the U2 iPod with U2's music.
That is undoubtedly going to change. Apple will soon offer a range of iPods pre-loaded with tunes.

First off will likely be the widely rumored Beatles special-edition Yellow Submarine iPod, tipped to be released in just over a week on Valentine's Day. Beatles fans are hoping that the Fab Four's entire catalog, currently being remastered, will be available in uncompressed format. What better way to deliver it than preloaded onto an iPod, instead of forcing fans to download gigabytes of data from iTunes?

Apple will also start loading sample tunes onto all new iPods, just like Microsoft's Zune currently does. This will be extra cash for Apple, and possibly quite lucrative -- the labels will pay to play. Getting a band's new single loaded onto a hot-selling iPod could prove so desirable that a new type of payola could be a-borning

Think of it: there’ll be all kinds of new limited-edition iPods, branded by artist, band or genre. Boxed sets are a natural: the Rolling Stones Sticky Fingers iPod, the Motown iPod, the British Invasion iPod.

But most exciting, there may be a whole range of dirt-cheap iPod shuffles branded by artist, containing their new albums or portions of their catalogs. The biggest risk for Apple is excess inventory. What if the new Kevin Federline special edition bombs? But that's easily solved: Make the skin a peel-off and overdub leftovers when the next hot band comes along.

These cheapo album iPods could be sold at bus stations and airports: instant music, no computer required. Bands could sell pre-loaded iPods at concerts, maybe containing the concert they just played. There could be Broadway show iPods, movie soundtrack iPods and iPods burned at retail stores with custom play lists. It's going to be the biggest change to the iPod since the iTunes online store debuted in 2002.

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