OK, here is the break down. People have digital content that they want to sell on the internet. Music, Video, White Papers, eBooks, etc. Apple revolutionized music sales back in 2003 with the iTunes Music Store, later renamed the iTunes Store when they added video content and now of course the App Store to sell applications for the iPhone.
When the iTunes Music Store was first released every independent music producer immediately thought, "wow, this could be a way for me to sell MY music." The problem was that Apple said they couldn't deal with, or WANT to deal with the massive accounting problems when a small indy band wanted to tell say a few singles of one of their songs and apple didn't want to have to make payments to then and have to deal with all the paper work for small amounts. Apple DID however figure out a way to deal with paying just 5 major record labels.
Flash forward to the summer of 2008 and the release of the App Store and now we have thousands and thousands of App Developers selling applications for the iPhone for 99 cents or more and MANY are being distributed for FREE.
Obviously Apple has created an accounting system for these small purchases and obviously they are dealing with MANY more accounts than just the 5 major record labels. So something has changed.
But they still won't let independent content producers sell music or video content.
Well, in the past they said they didn't want to do micro-accounting, but that ship has sailed. So maybe its just a matter of time before indy content producers can sign up somehow and sell their music or video content thru iTunes.
Allow people to go thru a sign up process, much like an App developer has to do. Allow them to submit, content, 'liner notes' (are you too young to know what that is?), product description, album art and screen shots. Then you would sit back and wait for the royalties to come rolling in.
Here is the part where Apple could make a bundle.
If I sell one video a month for $1.99 and Apple takes 30% like they do for an Apps then they would owe me about $1.39 at the end of the month, and writing those checks could be a pain. But what if Apple developed a system for payouts that were on a sliding scale of commission. In other words. If I want Apple to only take 30% then I would have to wait until they owed me, lets say $1000 or more in payments. but if my title wasn't that popular maybe it would take months and months before I could earn $1000 so maybe I want to be paid every time I made $100. if that was the case, maybe I need to pay a larger percentage to Apple. Maybe $100 pay outs were 40% commission. Maybe $25 payouts were 50% commission.
So now I'm on a 30% commission scale and I'm waiting for my $1000 to earn up waiting to be paid by Apple, they be using that money, investing that money, loaning that money... and all of a sudden, iTunes is an entire monetary eco-system.
It may seem like a drag that I'm giving away 30%, 40% or even 50% of my revenue but frankly, they are giving me a way to sell my content that is ubiquitous and very easy to do.
(I do think that for that high return they should actually host my content so in that way its not like posting an RSS feed on iTunes and me hosting my own content on my server, but those details could be worked out.)
So that is my explanation of how iTunes could become an entire eco-system. Maybe one day you'll be able to say you read it hear first.