ITunes Could Be Apple's ''Trojan Horse'' In The Home Audio-Video Market, Says ABI Research

July 27, 2006

According to ABI Research, Apple's iTunes service has the potential to outstrip its formidable iPod business and may allow it to enter the home audio and video markets ahead of its competitors. Apple released its latest earnings statements last week, and surprised the markets with the continuing depth of its iPod penetration, which exceeded most analysts' expectations. Sales of iPod accessories, both from Apple and from third parties such as Bose and JVC, are booming as well, including high-quality home "docking station" systems. Research director Vamsi Sistla says, "The battle for portable devices has already been won by iPod (unless Microsoft's strategy for its Zune platform succeeds) but in the home and mobile markets, the prize is still up for grabs. iTunes could be a 'Trojan Horse' through which Apple can enter the home market sooner than the competition." The key to this opportunity is consumers' growing interest in digital media connectivity in the home. "I think we will soon see more line-powered consumer audio devices--high-end audio devices with AV receivers, and multi-room audio systems--adding support for iTunes to their current support for iPod," Sistla suggests. With over a billion files downloaded from iTunes so far, computers all over the world are brimming with music, speech and video, often organized by iTunes client software into playlists and catalogues. Leveraging all that content, which users have already paid for and want to hear on a good home audio system or watch on a digital-ready TV, creates a huge opening for consumer electronics vendors. That could happen through a standard personal computer. Or, it could be implemented through a dedicated "media center" PC. Apple offers this already with the combination of its Mac Mini (now Intel-based) and Front Row networking software; and now, Sistla affirms, "The field is wide open for PC manufacturers and other vendors of home CE systems to capitalize on what should be a large and dynamic market." ABI Research's new study, "Home and Portable Audio Device Markets" (http://www.abiresearch.com/products/market_research/AUDI), assesses home audio and portable devices with an emphasis on multi room audio systems, high-end AV receivers, and iPod accessories within the home. Detailed forecasts of shipments, ASPs and revenue are provided. It also features analysis of the portable audio device market, with emphasis on iPod and iTunes, and the future of home and portable audio technologies. The study forms part of the Consumer Electronics Research Service (http://www.abiresearch.com/products/service/Consumer_Electronics_Rese arch_Service). Founded in 1990 and headquartered in New York, ABI Research maintains global operations supporting annual research programs, intelligence services and market reports in broadband and multimedia, RFID and M2M, wireless connectivity, mobile wireless, transportation and emerging technologies. For information visit http://www.abiresearch.com.

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