In response to the growing popularity of digital downloading worldwide, Apple launched online music store iTunes in the U.S. in April 2003. iTunes Music Store offered a range of possibilities, including being able to download a single song for 99 cents, rather than having to purchase the whole album. This saw a sudden peak in single hits, which completely undid the concept of the album.
Charles Goldsmith reiterates this point in his 2005 article Apple’s IPod Success Isn’t Sweet Music for Record Company Sales on Bloomber.com, stating, "In the digital era, the "unbundling'' of CDs through the purchase of individual tracks lets consumers pay far less to get a few of their favorite songs rather than buying an entire album.”
One of the first legal methods of accessing music online, iTunes offered investment plans for record companies, who could then receive royalties when their music was downloaded. iTunes also offered quality recordings produced by the artist, rather than recordings illegally downloaded from a program such Napster that were often of poor quality.
iTunes, however, soon proved to be more beneficial to Apple than any of the record labels with whom it associated. According to Goldsmith, Apple soared while music stocks declined. iTunes Music Store accounted for only $265 million of Apple’s $3.68 billion sales in 2004, meaning that the majority of the profits Apple were receiving were from other avenues such as iPods and iPod accessories – these all went straight to Apple. In addition to this, record companies were only receiving 65c per track, from the initial 99c iTunes selling price. And selling 10 digital songs on iTunes meant a loss of 20% for record companies than if they sold an album wholesale at $10.
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