Report: iTunes Continues Dominance; Amazon, Rhapsody Gain

Authored by Mark Hefflinger on October 9, 2008 - 10:35am.

New York - While Apple's (NASD: AAPL) iTunes Store continues to dominate the digital music market, Amazon's (NASD: AMZN) MP3 store and RealNetworks' (NASD: RNWK) Rhapsody made strides in terms of brand awareness and user preference over the past year, according to a report from market research firm Ipsos. Among users who were aware of more than one source for digital music purchases, 57% preferred iTunes -- an increase of 7% from a year ago. Meanwhile, 9% favored Amazon MP3, which has only been around a year, and 7% preferred Rhapsody, a 3% increase from a year ago.

"Amazon -- unique for offering DRM-free downloads from the catalogues of not one, but all four majors -- has done quite well in its first year, easily establishing a place for itself among the other top brands operating in iTunes' shadow," said Karl Joyce, lead author of the Ipsos study.

"Rhapsody is a success story in how to build a brand's power through increased awareness. Yet despite this strengthening among key competitors, iTunes' dominance remains unchecked."

Among other services, declines in popularity were seen at Best Buy's (NYSE: BBY) recently-acquired Napster, as well as at Yahoo (NASD: YHOO) and MySpace (NYSE: NWS), and the catch-all category of all other services -- which were preferred by just 9% of those surveyed.

"A dedicated or small digital music brand trying to break into this space will not be able to sustain market share unless its offering is truly unique," Joyce added, while noting that "new models, especially those based on ad-supported streaming, are sure to bring new brands into the space."