Apple Prepares to Take on China Pirates 苹果开始接受人民币付款购买应用软件

The latest signals from Apple (Nasdaq: AAPL) indicate it may be preparing to tackle the China piracy machine by offering legal music online, hoping to succeed where years of government effort from both the West and Beijing have largely failed. According to media reports, Apple has just begun accepting payments in yuan for apps downloads from its Chinese iTunes store. (English article; Chinese article) The move should provide an instant boost to Apple’s China business, as millions of Chinese who use iPhones and iPads will now be able to easily download apps for both devices. But from my perspective, the much more interesting and intriguing question is whether Apple is using this move as a precursor to making its core iTunes music store available to Chinese consumers. Techies will recall that Apple’s original iTunes store dealt a major blow to online music piracy in the United States several years ago when it began offering a wide range of legally-obtained tunes from most major music labels for reasonable prices of about $1 per song download. Apple’s breakthrough was followed by the opening of similar online stores, resulting in a sharp reduction in illegal online music swapping as consumers opted for better quality, reasonably priced legal copies of their favorite music. If Apple does indeed launch an iTunes music store in China, the big question, of course will be whether or not it can succeed. The answer in my view would be “probably,” with perhaps a 70 percent chance of success. Like their American counterparts, most young Chinese do have some spending money that they regularly use to buy the latest trendy clothes and personal care products and go to the movies. There’s no reason they wouldn’t spend some of that money on music downloads as well if the situation was right. The key to success a China iTunes store will be pricing. The $1-per-tune price tag may be a bit high for the average Chinese youngster, meaning Apple may have to accept a reduced amount for any China iTunes offering. But the big music labels would no doubt be happy to get any money they can from the China market, and I could see iTunes offering Chinese music downloads for 3-4 yuan each, or 40-60 cents, which could easily prove acceptable to consumers.

Bottom line: Apple’s new acceptance of yuan for its China apps store looks like a precursor for the opening of an iTunes music store, which would have a good chance of success.

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