iTunes to Shake Up Israeli Music Industry

Article Summary
The Israeli music industry lags behind in the field of digital sales. The introduction of iTunes will create enormous changes for both music lovers and artists, writes Omer Kabir.

“Apple’s iTunes can wake up the Israeli music industry," a high-level member of the Helicon Records company was quoted as saying. He claims that now, when the world’s largest music store has landed in Israel, service providers can abandon streaming and users can abandon their illicit downloads. By contrast, singer Yahali Sobol is less optimistic.

In other countries in the world, headed by the United States, iTunes succeeded in leading a revolution and causing a large number of people to max out their credit cards to pay for songs. Therefore, it is no wonder that copyright holders, artists and even operators of competing services bless the fact that the iTunes store just became available in Israel.

“It can wake up the entire industry,” says Alon Farid, digital repertoire manager at Helicon. Although Israel’s digital market constitutes a marginal proportion of overall sales, it includes four main services: Cellcom and Orange cellular companies offer isolated songs for sale, Pelephone operates a streaming service for a monthly subscription and the Walla site offers a combination of both — streaming service as well as a download store, similar to the iTunes model.

However, these services have not yet become mainstream. Musix, the oldest and probably most successful Israeli service of this type, has 100,000 subscribers. While this is a substantial number, it does not begin to approach the potential of Israel’s music-fan pool.

One of the reasons for this is historic. “For many years, there was a black hole in Israel in the digital field,” explains Farid. “The iTunes store was never available in Israel because of the objections of the publishers. The only ones to rise to the challenge were the mobile-phone companies.”

Israel bypassed music stores and went directly to streaming

The absence of iTunes stores led to a unique situation in Israel.

“Since iTunes was not available and other services developed instead, there was an evolutionary leap,” says Farid. “Instead of services similar to iTunes becoming available, Israel jumped directly to streaming models — Israel is one of the first countries in the world to adopt that model.” Motti Cohen, Pelephone’s director of its content division, agreed with this claim and even cited an additional unique characteristic. “All the music services here are local. This does not exist anywhere else in the world.”

People in the field anticipate that the iTunes entrée will give the digital-music field a major push.

“We in the industry lose buyers of physical media, and digital sales will not completely compensate for that,” Farid says. “The services in Israel have not succeeded in gaining a good enough foothold, and we are not happy with that. Most of Israel’s digital market is in the mobile-phone world. But even when a mobile-phone company offers music services, it can only market the product to its users, and that is its weak point. Cellcom can only talk to Cellcom users, and Pelephone to Pelephone users. There is no true pan-Israeli awareness of the existence of these kinds of services.”

Cohen adds, “Musix has more than 100,000 clients. Out of a market of seven million residents, that is a market share of 1.5%. That represents one of the highest penetration percentages in the world for streaming services. But can we say that the service has captured the entire Israeli state and that everyone is talking about it? No. The digital world is foreign to a large segment [of the population]. These people will not download songs illegally because that is complicated, but once they are offered a simple service such as the iTunes store, there is a good chance that it will catch on.”

Artists are still skeptical

The ones who were most affected by the situation that existed before Apple’s service became available in the country were the artists.

“What is certain is that currently, there is no good-enough model in Israel for online sales,” says singer Yahali Sobol of the Monica Sex band. “There have been a few beneficial, welcome attempts, but musicians have more or less forgotten this income-producing channel. Their earnings are from performances or royalties from songs played on the radio. I am not closely familiar with the existing services. They are marginal and not significant enough for me to track them. I keep track of performances and royalties, but everything connected to the new media is still not substantial enough.”

Sources say that iTunes penetration into Israel will bring about an essential change in the situation. Farid said, “It can create a new, healthy discussion among the local service providers regarding ways in which the Israeli user can consume content legally. It can wake up the market and give it a kick in the pants. When you create discussion, you raise the public consciousness and when there is more awareness, then people start to consume.

"iTunes is American, and Israelis want to be like America.”

Even Cohen, who would normally be wary of the entrance of a large, strong competitor, blesses the initiative. “The entrée will be good for the music industry in Israel. Once a serious player with a good reputation enters the field, by definition that’s a good thing. You need market education, but I'm sure it will be good for Israel’s music industry.”

Sobol, in contrast, is less optimistic about iTunes having a positive effect on artist revenues.

“Anything that will improve the situation today is good for the musicians,” he said, “but we don’t count on it. Today, music sales have become marginal; a new album serves to promote performances and increase chances of being played on the radio. If music sales will bring money to the artists, it is welcome. But there is the concern that when these giants enter, the last thing they care about are my interests. It is not at all certain that the profits will reach the artists, because large corporations exist to make money and not to give money to you.”

And there is, of course, the million-dollar question. Will music services for a fee be able to succeed in a “one-disc country” (in which friends tend to copy from one legal disc)?

“This question is relevant in almost every country of the world,” answered Cohen. “It is a long, complex process of market education that has not been resolved on a massive scale in almost any country. What can win out in the end is variety, simplicity and correct pricing. When a service provides something the consumer wants and how he wants it, the consumer will agree to pay for it. And Apple, with all the buzz and awareness it creates, may add another, very important layer to market education in Israel.”

Found in: itunes, apple, songs, online shopping, music, israel, internet

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