iTunes and iPods

As I was reading HMF this weekend, I kept thinking of iTunes and iPods and the market dominance that they've had. At the start of the year, iTunes sold about 80% of legally downloaded music according to Wired magazine. iPods, meanwhile, accounted for about 70% of mp3 players sold by units and 84% when measured in dollar volume according to Fortune magazine. Clearly they have huge market shares which are relatively close to being monopolistic. They blow the concentration ratio measures out of the water.

In section 7.2.1.1 of the HMF reading, we learn that if the sum of the percent market shares of the 4 largest companies are greater than 50% (CR4 >/= 50%) or the sum of the percent market shares of the 8 largest companies are greater than 50% (CR8 >/= 75%), then the market is considered highly concentrated. According to the Wired and Fortune numbers, then, even if iTunes and iPods were divided up between 8 different companies, they would still compose a highly concentrated market. (This is untrue, of course, for the unit sales of iPods, however, the fact that even this number is close to making this statement true in part proves my point.) the Hirschman-Herfindhal Index can't be applied to this case because I don't have the market shares for all competing companies readily available.

There have been some questions, as mentioned in the Wired article, of whether iTunes will lose market share as other services are able to offer more Digital Rights Management free files, songs, music and albums. So far, Apple says that iTunes market share has only gone up since the release of more DRM free songs by other services, but I find it interesting that the New York Times article doesn't include any specifics; Perhaps Apple didn't go into substantive details?

Also, I wonder exactly how these markets would be characterized? Are mp3 players and digital music monopolies or oligarchies? (Or maybe neither?) There is really only one firm to speak much of in each market but in reality there are a relatively large number of not so well known firms as well. Also, there are barriers to entry in that it's hard to break into Apple's market share and well known state. Which is it? (Apologies if the text addressed this question at some point, my eyes started glazing over at the game theory section. I haven't had good experiences with game theory.)