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Apple Inc. (NASDAQ: AAPL) has created a five day, five night iTunes music festival which will run for the five days of SXSW. It will run from March 11 to March 15.  The event will be free to iTune users.

Apple announced:

Featuring Coldplay, Imagine Dragons, Soundgarden, Pitbull, Keith Urban, and more, iTunes Festival at SXSW is bringing the biggest names in music to the legendary music conference in Austin, Texas.

As iTunes tries to hold its own against new services like Spotify which have invaded both the paid download and free, commercial supported music business, it needs to be on the leading edge of innovations, and services will drive customer loyalty. Apple clearly used its leverage to get several of the most widely followed musicians and groups in the world. It is likely the event will cost Apple several hundred thousand dollars to compensate the artist. The artists, on the other hand, get the benefit of increased exposure.

The performances can be viewed live, or from the iTune archives. They will be held at the ACL Live at the Moody Theater, where Austin City Limits is held.

iTunes has ruled the music media download industry for years, to the extent that record labels, studios, and artists complained about the leverage Apple has over what they are paid for their work. The iTunes dominance has been a double edged sword. Many artists did not have large enough fan bases to ever have access to the tens of millions of  iTune customers.

The SXSW  concerts have another advantage to Apple. They have been created as a promotion to get new  customers for the iTunes app and service, the gateway to Apple’s media strategy.

Apple’s promotion for iTunes is “You’re just a few steps away from downloading music, HD TV shows, movies, and more from the iTunes Store.” And, with that a bundle of large profits for Apple, and a reason to continue to buy Macs, iPods, iPhones, and iPads.