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News that Apple’s share of the global PC market has dwindled to 2.1 percent makes yesterday’s launch of the iTunes Music Store loom even larger in significance than it otherwise might have. As its prominence as a player in the PC market continues to erode, diversification may turn out to be the key to Apple’s financial health, or even its survival. The domestic sales picture is almost as discouraging at 2.9 percent for a seventh-place finish, compared with 3.4 percent and sixth place in Q1 last year, and nearly 5 percent two years ago.

I’m cautiously optimistic that the iTunes Music Store will be a success, and integrated as it is with the Mac OS - only iTunes software, it should provide a welcome, although probably not dramatic boost to Mac hardware sales. I think that the non-subscription, pay only for what you buy model was definitely the way to go, and the consumer experience looks like it will be a user-friendly enough.

The iTunes Music Store initially features over 200,000 songs from the “big 5” music companies; BMG, EMI, Sony Music Entertainment, Universal and Warner. Users can search the entire music store to instantly locate any song by title, artist or album, or browse the entire collection of songs by genre, artist and album, listen to a free 30-second high-quality preview of any song in the store, then purchase and download their favorite songs or complete albums in digital quality with one click. The songs you buy are automatically saved in your iTunes library, where you can manage your entire music collection. Create custom playlists, burn CDs — even transfer songs to your iPods and up to three Macs.

The main flaw that I perceive in the picture is that reportedly, the selection of what’s available is a lot thinner than the nominal 200,000 songs sounds, and 99 cents per downloaded song is pretty steep for a music consumer culture that has become accustomed to the price of pirated music downloads. The big question is whether enough users can be persuaded to pay that sort of tariff to make the online music store venture fly?

As rival RealNetworks CEO Rob Glaser commented to FORTUNE magazine, “If you make a really cool playlist of 200 songs on Rhapsody [REALNetworks’ music download service], you pay only $9.95 a month. If you use Apple, it’s $200. Maybe guys like Steve and me can afford that, but I’m trying to run a service for everyone else too.”

And as a reader who prefers to remain anonymous observed:

That’s the conundrum.

There are also complaints about the Music Store service being U.S.-only, but presumably, once the concept is tested and the bugs worked out in the anchor US market, the iTunes Music Store will be expanded into other dlobal markets.

However, even if it proves to be a roaring success, selling music online can’t be more than a hopefully profitable sideline for Apple, and the hardware side, especially professional desktops, needs address in the worst way. We can be sure Apple is working on this, but the worrisome thing is that with sales in that sector down 40 percent, Apple is shedding what have been its most loyal customers at an alarming rate.

Merrill Lynch analyst Richard Gardner was quoted by Reuters commenting on Apple’s second-quarter results:

And once those professional users, who require suites of expensive software, switch to the PC platform, it will be very difficult to convince them to switch back. Online music isn’t likely to help much in that context.

Charles W. Moore

Cool Mac Gear