Boston (CNN/Money) -
Ah yes, the day after the Super Bowl. When we all return to work to pay or collect on our wagers and put in an extra half-hour at the gym to work off the plate of nachos that somehow disappeared on Sunday.
Since I'm actually writing this column before the big game, I can't offer specifics on the Patriots' dominating performance, but I can talk about an ad that ran during the game that has big implications for Apple (AAPL: Research, Estimates) and its investors.
The first-quarter Pepsi advert, titled "I Fought the Law," features 16 of the young Americans busted by the Recording Industry Association of America for illegal music uploads, and serves as the official kickoff for Pepsi's Apple iTunes giveaway. The soda company will label 100 million bottle caps as winners, entitling each lucky consumer to a free song download on Apple's online music store.
You really can't get better exposure than a Super Bowl commercial, and in the developing market that is legitimate digital music, it's all about getting exposure and converting that exposure into market share.
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Just as 20 years ago the launch of the Macintosh brought home computing to the masses, the Pepsi/Apple ad may be looked back on as the point when the masses turned to legitimate digital music services and Apple was right there to serve them.
As such, this quarter could be one that propels the company to an entirely new level. "It's a huge deal for Apple," says Phil Leigh, senior analyst at Inside Digital Media.
Two decades after Apple introduced the Macintosh with a Super Bowl ad, the company again finds itself at a critical juncture, in part as a result of a Super Bowl ad. Twenty years from now, we'll look back at this ad -- and the momentum it provided Apple -- and mark it as the turning point for the company, when it went from an entertainment-focused technology company to a technology-based entertainment company.
The Apple/Pepsi deal is actually the second huge one the company announced this quarter.
The first, announced Jan. 8, was its agreement with Hewlett-Packard (HPQ: Research, Estimates) whereby HP will sell its own brand of Apple's iPod devices and include links to the iTunes Music Store on its computers.
Apple's iPods are already moving well without that boost: Last quarter the company sold almost as many iPods (733,000) as it did Macs (829,000). With the HP deal and the Pepsi promotion, the company has in two moves guaranteed that its iTunes/iPod combination will reach a dramatically larger market.
Needless to say, this is an important quarter for Apple. What are analysts expecting from the company? Not surprisingly, the only analyst action since the HP announcement has been upgrades. Apple's trailing price/earnings ratio is a pretty high 61, but analysts' growth estimates for the company well exceed those for the industry as a whole.
Despite the Pepsi announcement's high-profile flash, it likely won't result in any significant boost to the company's bottom line -- yet. It's no secret that the record labels' licensing arrangements ensure that Apple won't make more than a few pennies a download.
But when Apple moves in to renegotiate (perhaps as early as April, the iTunes Music Store's first birthday), it will bring with it the clout of the biggest player in the legitimate digital-music market. When the first round of contractual negotiations between the labels and Apple took place, the labels held all the power: They had the artists.
Now, that power has shifted: Apple has the customers.
If you're bullish on the prospects of digital music, this may be the time to go long on Apple.
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