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Apple iPod & iTunes, Part of a Bigger Strategy

According to ABI Research, the Apple 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."

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