Business model of Apple's iTunes

Introducing I Tune:

Apple iTunes® was introduced in year 2001 by Apple Inc, at the Macworld Expo in San Francisco. It is basically a media player application used for playing and organizing music and video files. It allows the user to look for song tracks and let them download it directly to their PC or iPods and can use to burn in form of digital CDs. This is offered at cost range of 0.99 to 9.99 $, for song to album. Access to I tune store and online catalog is embedded on iTunes .The iTunes Store is the world's most popular online music, TV and movie store with a catalog of over 11 million songs, over 50,000 TV episodes and over 7,500 films including over 2,000 in stunning high definition video. Apples iTunes software which now includes a music player, CD ripping and burning tools, acts as an interface to the iPod, free Internet radio stations, and a limited streaming audio feature called Rendezvous. With the introduction of iTunes® 9, the latest version of the world's most popular software application to purchase, manage and play media, packed with innovative features such as iTunes LP, Home Sharing and Genius Mixes, as well as a redesigned store and improved syncing.[i]

"That's entertainment" the watch word of I-Tune is now home for everything. It is no more than a man made code but it is a hub for more uniquely defined features. Never less to say iTunes is not just an ordinary entertaining hub it's a fully loaded high definition future system. For many Apple users iTunes will be a treat to watch, share and play media with iTunes. iTunes by its revolutionary features inhales the tune of new generation.

From its original form of being acting as a media platform, it also encompass more business add ups that make this ordinary programme in to multiphase business machine. iTunes consist of four main stakes which supports the business process Partners, Content providers, Companies and Organization.

I Tune Business Model ecosystem

In the current scenario, IT is an integral part of any business. Since internet is the basic platform for iTunes, there is involvement of IT in all the aspects of iTunes. Say if u download or upload a song or playlist, buy an album online, etc IT plays a major role. The aspects where IT is involved in the iTunes ecosystem is explained below in detail.

The iTunes business model can be described in the form of an ecosystem. The ecosystem is broadly classified under four main categories, which includes users as primary consumers and content providers as primary producers. In the secondary level of the ecosystem, encompassing business organizations and co product is the most important level of this ecosystem. It widely supports all other producers and consumers by the way of supporting and distributing the product variety.

In the tertiary level of the ecosystem, the available sources are fully utilized by the iTunes features. The features include music, videos, app store, TV, Pod cast and Gift card. Apart from this features, iTunes also includes catalogs and music store, where user can look for their choice of song and download them at a very low cost ranging from 0.99 $ to 9.99$. Depending on the demand cycle of the particular album or artist the cost variants are suitably modulated to fit for current market needs and demands.

In the following part all features of the iTunes ecosystem are more clearly explained:

iTunes content Provider

As a registered iTunes content provider, we can reach millions of music, movie, and TV show lovers and take advantage of marketing programs designed to help the iTunes store with maximizing sales and marketing position.

iTunes 360

iTunes 360 cofounded by iTunes and content providers to promote music, TV shows, and movies is a marketing and advertising program. It is one of the good ways of maximizing the sales and leveraging advertising budget. More information can be gathered from iTunes label representative.

iTunes Link Maker

This facility helps the User to place links on their personal website that takes visitors directly to an artist, song, video, or other media available on the iTunes Store. With iTunes Link Maker, the User can very easily search for the item he is looking to link and select it. The HTML code is generated for that with a small iTunes badge. The User have to just paste the code into the web page.

iTunes Badges

Tunes badges are Apple-designed graphics that the User can place on their website. They're available only to iTunes Affiliates.

Custom Codes

The iTunes Custom Codes program is a tool that allows the User to distribute music and video to fans and industry influencers. It connects particular content to an iTunes Custom Code and distributes it with complete flexibility with the help of email, cards, flyers, or other media.

iTunes Links

As the name implies, it provides an easy access link to the user to find one's content in the iTunes store.

Companies and Organization:

Companies and organization can make use of the iTunes to advertise and market their content on iTunes store. Company's can directly link to the customer by iTunes.

iTunes Affiliate Program

iTunes is a hub of world's largest music library-— more than 8 million songs from major music companies and more than 1,000 independents. By joining iTunes affiliated programs we can make easy for the customers to find music file they are looking for. It also adds value to our personal web site by the way of compelling content to our website with special promotions from the iTunes Store.

iTunes Gift Cards

When we want our team to be gifted for their special effort in bringing something to existence or to appreciate for their special performance, the most preferable way could be by gifting an iTunes Gift Cards which will always please. The receptionist could be our customers or a person. It's just a different way of being thankful.

Music:

iTunes store provides millions of high quality, DRM-free songs for just 69¢, 99¢, or $1.29. iTunes recommends music based on customers choice, so the customers can always find something new to enjoy. So they can browse and find what's new and what's hot and also they can find what the other fans are listening to. When customer downloads the selected albums they will experience iTunes LP which is an interactive system well designed right in iTunes library. Many are created by the artists. While listening the favorite songs on Mac or PC, customers can drive in to the lyrics and liner notes, they can view photos, watch videos, movies, and enjoy other bonuses as well.

There is a daily addition of new songs to the iTunes catalog, while the iTunes Store is updated every Tuesday. Apple also releases a 'Discovery Download' on Tuesdays and usually a 'Single of the Week' in both English and sometimes Spanish, which are available for free for one week.

Audiobooks

iTunes is the largest encyclopedia for music, where ever you are, if which to have your loved music you can have it. It ever growing stock of music file treats in all the horizon of music whether it pop or jazz everything is available for you here.

App Store

App store also houses not only music but also a variety of associated funny and interesting application. iTunes also make your ipod or iPhone more interesting than before. Starting from business to games, education to entertainment, finance to health and fitness, productivity to social networking, there is an application for everything and it is for free of cost.

Movies

iTunes Store provides movies in all categories such as comedy, drama, romance, classic, independent, thriller and many more. User can browse a number of releases from all major Hollywood studios. They can be bought or rented in standard or high definition. They can download to their computer, iPhone, iPod touch, or television via Apple TV. The customers will find a bunch of special features while selecting a movie called iTunes Extras. iTunes library provides more features such as watching interviews and trailers, viewing photos and many more on their Mac or PC.

TV Shows

Customers can view their favorite TV shows, uninterrupted, whenever they want, with the help of iTunes. Even in HD. They can own the latest episodes a day after they are telecasted or purchase past episodes missed by them. Users can choose from a list of commercial-free episodes. A Multi-pass allows the Users to watch and enjoy episodes which are a month's worth, for the shows that are telecasted every day. Like all other items on the iTunes Store, customers can download and watch from their computer, iPod touch, iPhone or television via Apple TV.

Podcasts

A podcast is a digital audio or video file that is episodic; downloadable; programme-driven, mainly with a host and/or theme; and convenient, usually via an automated feed with computer software. It's like a radio or TV show, it's a video or audio series about anything and everything. Customers can source more than 150,000 podcasts with the help of iTunes stores. The dictionary's front page shows high-profile podcasts from commercial broadcasters as well as independent podcasters; they can select podcasts from independent creators and also from big names such as HBO, NPR, ESPN, The Onion, CBS Sports, and The New York Times. For listening from the podcast directory, the User can select podcasts, to which anyone can submit their podcast for placement. Users can also browse the podcasts by category or popularity, and to submit new podcasts to the directory.

iTunes U

iTune U the most latest development in iTune that help us to learn and discuss lessons and Lectures all from top universities, educational and other cultural institutions across the world. So whether you are in or out of your class room, you can learn. Learning is a never ending process with iTune U.

iTunes and its competitors:

According to the new report produced by Ipsos, The iTune Store is rated as the best fee-based music sieves by downloaders in the United States. It is continuously widening its lead when compared to all other top competitors. In this survey, the 82% of the downloaders were aware of the iTunes and its features which took the top stop followed by Napster with 76%. All other competitors such as MySpace, Yahoo Music, Rhapsody, and Wal-Mart didn't score much. But when asked about the best in the business, iTunes came out with a mammoth lead with 50% votes in 2007, which is 9% more than that in the year 2006. Napster captures the second spot with 10% votes, followed by Walart.com, MySpace, Rhapsody and Yahoo! Music.

Another survey conducted by NPD Music watch, shows that Apple has surpassed all its competitors in Music retails in 2008, mainly because of iTunes. Apple over took Wal-Mart first time ever with 19% votes, which is 4% more than that of Wal-Mart which took the second plot. Best Buy took the 3rd spot followed by Amazon and Target with 6% of the votes each. The Gift cards provided by iTunes, Wal-Mart and Best Buy are an important reason for the downfall of Amazon which took Apple to the top spot. The survey results can be seen in the chart below.

iTune Vs other Tune:

Based on its strength in both distribution and ease of use, Apple should get out to an early lead in music downloads. Here are the comparisons of prospects for the other recently launched or soon to be launched music services with iTunes:

Vs Musicmatch

Musicmatch must convert and expand its base to match up with iTunes. Musicmatch has a healthy head start with 37 million existing users for its jukebox. Its music service, integrated into the jukebox, excels at music recommendations. To match up with iTunes, Musicmatch must develop closer relationships with portable players and develop a high-traffic portal like Yahoo!

Vs Napster

A better distribution is needed in case of Napster. When compared to Apple's easiness, the closest competitor is Napster with its new service, including a simple system for CD burning. It's integrated with a new portable player from Samsung. In addition to this feature CD ripping will also be included in the next release. But despite the Napster name, it needs to boost awareness. The relationship with the Windows Media site will not be sufficient. Napster should also try to make itself the default music choice of broadband suppliers like Comcast and Verizon.

Vs MusicNet

MusicNet and Rhapsody must reach beyond the subscription models. With the help of its relationship with AOL, MusicNet has attracted 140,000 paying subscribers. But now it has to compete with Apple for AOL's music buyers. It must accelerate its next version featuring à la carte downloads and expand distribution beyond AOL for survival. Similarly, RealOne's Rhapsody must expand beyond subscriptions and RealOne subscribers.

Vs BuyMusic

BuyMusic won't make it as a standalone store. In contrast to Musicmatch and Napster, BuyMusic is just a store and it doesn't manage music files. BuyMusic is kept far beyond its competitors in the market because of lack of partners driving traffic to the site and its incapability of managing music files.

Vs Winamp

iTunes comes with an online shop as standard, where as this built in feature is missing in Winamp. The file which is created or played in iTunes is automatically added to the library, but this function is missing in Winamp.

Vs Tesco Digital

Though Tesco Digital cannot match the huge volume of tracks available with iTunes at the moment, it has created an impressive and usable site which offers a decent range of music. It was a creative move to introduce iPod compatible tracks, and once it contains more mp3 tracks available with it, it can be a real competitor to iTunes in the circuit, as it doesn't beast iTunes at the moment on price or range of music.

"We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase," said Apple VP Eddy Cue, before adding:"We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers.

Vs Amazonmp3

An interesting fact as the top 10 list of Amazon is uncomfortably has all these tracks priced at $0.99 (encoded as DRM-free 256kbps VBR MP3). When we go down Amazon's list, there are many tracks (nine in the top 100) that hit the higher $1.29 price. Now, if you believe Steve then it looks that the music labels are charging Apple more for the rights to sell its music than Amazon based on this quote attributed to Jobs.

New and Future Technologies:

Web-based iTunes:

Apple has acquired cloud music service lala.com which is a streaming and music downloading website, to integrate it into the upcoming Web-based iTunes (or Cloud iTunes). This advanced feature stores the purchases online rather than storing it in the computer, which is achieved by hosting the music purchases on its servers. By this acquisition Apple can also sell its music through search engines. The main advantage of Web-based iTunes is to access your music from any computer which runs a browser. The main advantages of this new technology are as follows: Cheaper prices and streaming options, Full song previews, Genius Radio and Speaking of Pandora.

iTunes LP:

iTunes LP is the most amazing and impressive feature of the latest iTunes9, which is considered as an extremely strategic move of Apple. This function helps in experiencing an interactive music purchase. The features of iTunes LP include an entire album with lyrics, liner notes, album artwork, etc. It also gives the fans a glimpse of the behind the scene happenings of their favorite songs with some rare photos and exclusive artist interviews. Apple is promoting this feature with free 'Holiday Sampler'.

Customizable digital iTunes gift cards:

Apple introduces a new feature for the Users to create customizable digital iTunes gift cards via iTunes Facebook page. This feature is currently available for US customers, who can choose from 6 digital gift card designs. They can also include gift messages and specify a delivery date for the recipient to receive it electronically.

Home Sharing:

This feature in iTunes helps the User to share Music, Videos, Movies, TV shoes and many more. It emphasizes the User to browse to the libraries of up to 5 authorized computers, and can also import and automatically add purchases to their own library from any of those computers.

Genius Mixes:

This automatic feature selects songs from the library that go great together and creates multiple mixes. These are similar to channels programmed as per the User's likes.

Improved Syncing:

The latest iTune 9 has made the sync between ipods, iphones and the computers more easy and flexible than before. iTunes syncs the new home screen with iphone or ipod touch automatically.

Possible Potential Market disruption:

In my opinion the potential market disruption has been already started. For Instance, if we take the below statistics it's obvious that the cost per track of itune has been already over taken by other competitors like real one and buy music. And in addition other competitors are also getting the hold of market in new market by offering monthly subscription.

Niche marketing and iTunes:

Apple who enjoyed niche marketing for iTunes can no longer be valid to date. With the entry of e giant amazon on to this market have proven it close follow on iTunes. Amazon by its wide spread nature of market can easily reach and attract existing iTunes users.

iTunes have already seeded to realize this and this can be inferred from their new strategy of varied prizing for downloads.

Dropped Ball Disruption of iTunes

Dropped ball disruption occurs when a killer product of completely new technological with improved future at low cost is being introduced. It's being scattered uniformly over the market and closely associated by the customer for the new product. iTunes by its reach has attained the reach of most pc users around the world, so it's very easy for the user to switch to a product which advanced features at low price.

Though ITunes is known for many other improved features the area of revenue would be sale by downloads and content offering. The cost of labeling iTunes for new song is still the highest of all, which made NBC to leave iTunes.

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