THIS late in the internet revolution, it should not be possible to make a splash with the launch of a new website.

Yet the European debut of Apple’s iTunes last week attracted extensive coverage from television and most national newspapers. It helped that Alicia Keys, the R&B singer, turned up at the London launch to provide a celebrity endorsement — even bowdlerising a Ray Charles number to sing: “Night time is the right time . . . to listen to iTunes.”

Of course, iTunes is no ordinary website and Apple is no ordinary technology company. Ever since the first Macintosh computer 20 years ago, Apple has displayed a design savvy and understanding of consumers that few rivals can match.

This flair is epitomised by the iPod, its digital music player that has virtually defined the category, its sleek design taking more than 50% of total sales.

For the music industry, the success of iTunes is even more important. When iTunes was launched in America just over a year ago, record companies were reeling from the loss of sales to illegal downloads over the internet. By charging just 99 cents a song, and by offering easy access to good quality recordings, Apple and iTunes quickly proved that consumers were willing to pay for legitimate internet music. The record companies rejoiced in relief.

Almost 14 months on, iTunes has sold more than 85m songs. Although the model was quickly aped by others, Apple claims it has held on to 70% of the legal downloading market.

Similar services exist on the Continent, most of them powered by OD2, a digital music firm founded by the rock star Peter Gabriel. But even with big retailers such as Coke, HMV and Microsoft’s MSN, the number of downloads has remained modest.

Steve Jobs, Apple’s chief executive, said: “So far legal downloading has been very nascent here. I believe it’s been running at about 50,000 songs a week on Napster and OD2, which is pretty tiny. We do about 2.5m songs a week in America. I think (Europe) is poised to take off, but we will find out.”

Britain’s version of iTunes is selling songs at 79p, and most albums at £7.99, undercutting most of its local rivals. “We are trying to compete with piracy and trying to offer a much better product at really compelling prices,” said Jobs.

Some experts question the sustainability of these prices, which give Apple little in the way of profit.

Norman Crowley, co-chief executive of Inspired Broadcast Networks, a British company with big plans for digital music, said: “Apple loses money on every track — iTunes is just a way of selling iPods.”

Alan Giles, chief executive of HMV, said: “The customers’ expectation is that they should be able to buy intangible digital music much more cheaply than the amount they pay for a physical collectible like a CD. But the physical cost (of making and packaging the CD) is a tiny part of the product cost. It’s going to be difficult to persuade customers to pay a price that is sustainable in the long term.”

For all its high profile, iTunes remains a small business. Those 85m downloads have generated only $85m (£48m), not much for a company that turns over almost $8 billion (£4.6 billion) a year.

Apple clearly enjoys a halo effect on iPod sales, now running at $1 billion a year. iTunes is designed to work elegantly with the iPod, enabling songs to be transferred quickly and easily to the portable device. However, few iPods are used in this way. Most music fans use them to store and carry around their CD collection.

Jobs stressed that it was still early days. He estimated that 10 billion songs are sold on CDs in America each year, and that iTunes and its smaller competitors “are at a run rate of about 200m tracks a year — so that’s 2%. It’s gone from zero to 2% in America in the first year. That’s not so bad, and the trajectory is good. Maybe it will cross 5%, maybe 10%.”

The eventual size of the digital music market is the big question. In America, where music downloading is much better established, hundreds of record stores have closed.

Crowley sees a fundamental problem with the current state of digital music. “It’s suggested that music downloading is coming to the common man except that it’s not. I have an iPod and I love it to bits. But it’s an expensive item; so are all the other digital music players. And to download music, you need a credit card.”

Crowley draws a parallel with the mobile-phone market before the advent of pay-as-you-go. Although mobile useage was growing rapidly, customer growth was restricted by the need to demonstrate a good credit record. The introduction of pay-as-you-go opened the market to millions more people.

Inspired, which already supplies digital jukeboxes to pubs and clubs, hopes to introduce a pre-paid version of digital music in the next two months. It will install its terminals in a big music retailer.

Users of iPods and other popular digital music players will be able to download songs onto their machines. More innovatively, customers without players will be able to buy or rent a small player capable of storing 150 songs. As long as customers make a commitment to buy further songs, they will not have to find the full cost of the player.

Crowley said: “If retailers have a way of allowing consumers to buy digital music with cash it will hugely succeed.”

Another limitation on digital music is the continuing importance of the physical medium cherished by collectors.

Philip Ranger of Sanctuary Records, an established record company, said: “One of the things that keeps books alive is the joy of having a book in your hand. Records are the same. A CD is a small piece of hard product but it is a collectible.”

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