Martino+Strategy+Report

Martino A.

TO: Proximity music team FROM: Ali Martino DATE: February 17, 2010 SUBJECT: iTunes strategy analysis

Here is my iTunes strategy analysis. According to market research firm NPD, Apple’s iTunes Store continues to be the dominant force of overall retail music sales. With over 25% of purchased music in the US coming from iTunes, it’s hard to imagine iTunes’ market share taking a significant hit anytime soon (Toms Guide 2010). Apple Inc. continues to release new technological devices aimed towards appealing Gen-Y.

ITunes is a digital media player application used for playing and organizing digital music and video files. Additionally, iTunes store can be used to purchase and download music, music videos, television shows, applications, iPod games, audiobooks, podcasts, feature length films, and movie rentals. Apple Inc. introduced iTunes on January 9, 2001 at the Macworld Expo in San Francisco. The most recent version of iTunes was announced September 2009 (Wikipedia 2010).
 * Profile **

ITunes Revenue comes from:  Apple has posted revenues of $16 billion and a net quarterly profit of $3 billion at the end of 2009. Revenue has increased from the $12 billion made last year. ITunes has contributed $790 million to Apples over sales, selling their 10 billionth song this week (T3 2010).
 * 10% on the sale of each song
 * ITunes subscription services
 * Purchase and download of many different applications

Since iTunes works together with iPods, the world’s bestselling portable media players, it's easy to see why iTunes is the world’s largest music retailer. Due to iTunes popularity, there not finding much competition in music sales. Other downloading service are not even close to producing the market sales that iTunes has, even though iTunes is charging up to $1.29 per song. This is because Apple Inc. focuses on developing new products that coincide with iTunes. (AppleInsider 2010).
 * Competitive Landscape **

 http://www.edibleapple.com/itunes-dominates-online-us-music-sales-chart/

**ITunes** **Strategy** Apple Inc. revealed significant pricing and copyright changes to its iTunes Store. The announcement was made by <span style="color: black; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Apple marketing Chief Philip Schiller at the Macworld Conference & Expo in San Francisco. The new changes include a new three-tiered pricing plan for songs, and also plans to drop copy protection from all of the songs in its digital store. <span style="color: black; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">The changes appear to be in response to shifts in the digital-music market. By dropping the copy protection on more than 8 million songs, customers using competing products such as Zune and Sandisk will be able to download and listen to songs from iTunes on their devices.

Apples primary goal is to provide a simple landscape that allows customers to easily connect to iTunes store (AppleInsider 2010).

<span style="background-color: #ffffff; color: #000000; font-family: 'Times New Roman',Times,serif; font-size: 16pt;">**Gen -Y Implications** <span style="background: white; color: black; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Gen-Y is constantly looking for new advances in device technology. So not only is iTunes offering new features in downloading movies, television shows, podcasts, thousands of apps, but is now offering iTunesU, which gives students the ability to download lectures, discussions, ect. By doing this, iTunes is focusing on what generation Y is interested in technology wise. But even if you can download all of these features for free on a different website, iTunes focuses on their new Apple products to keep generation Y coming back for more. <span style="background-color: #ffffff; color: #000000; font-family: 'Times New Roman',Times,serif; font-size: 12pt;">

As long as competition stays at a minimum between Apple and other competitors, it will sustain control over Gen-Y for the future.

Marchetti, Nino, ITunes Dominates U.S. Music Sales. (2008, August 6). TomsGuide.com. Retrieved February 19, 2010 from http://www.tomsguide.com/us/iTunes-Music-Sales,news-2220.html. Marsal, Katie, ITunes Store a Greater Cash Crop than Apple Implies. (2007, April 23). AppleInsider.com. Retrieved February 21, 2010 from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">http://www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_than_apple_implies.html NPD Group, ITunes Dominates Online US Music Sales (Chart). (2009, August 22). EdibleApple.com. Retrieved February 25, 2010 from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">http://www.edibleapple.com/itunes-dominates-online-us-music-sales-chart/ Smith, Chris, Apple Nets up to 790 Million from ITunes Music Sales. (2010, February 26). T3.com. Retrieved February 27, 2010 from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">http://www.t3.com/news/apple-nets-up-to-%C2%A3790-million-from-itunes-music-sales?=43859 Smith, Ethan & Iwatani Kane, Yukari, Apple Changes Tune on Music Pricing. (2009, January 7). Wjs.com. Retrieved February 26, 2010 from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">http://online.wsj.com/article/SB123126062001057765.html Wikipedia. (2010, February 20). Retrieved February 20, 2010 from http://en.wikipedia.org/wiki/ITunes
 * Refrences **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">