Mouzon,+C++Strategy+Report

Mouzon, C

TO: Proximity Music Team FROM: Carl Mouzon DATE: February 19, 2010 SUBJECT: iTunes Strategy Analysis

The following report represents a brief strategy analysis for Apple’s iTunes company. For Apple, iTunes brings in a substantial amount of revenue; however, it is not from the just music but from movies, television shows, books, and the Apps for the iPhone mobile device. The profit iTunes gains from digital copies of music have risen over the years substantially; it is now the leading competitor in selling digital media. But it must be remembered that iTunes works as a compliment to the iPod, Apple's mp3 player, and all of its versions.


 * Profile**

“Apple Inc. (Apple) designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers…Tunes is an application for playing, downloading, and organizing digital audio and video files, and is available for both Mac and Windows-based computers. iTunes is integrated with the iTunes Store, a service that allows customers to find, purchase, rent, and download third-party digital music, audio books, music videos, short films, television shows, movies, games, and other applications. (Reuters, 2010)


 * Competitive Landscape**

Digital music is readily available on the internet for free, so iTunes appeals to those who prefer a simple interface for music browsing as opposed to searching online for digital music. It has to compete with other companies, such as Amazon, in selling digital copies of tracks. However iTunes also has to compete with other business models that deal with digital media-sharing. Rhapsody allows for consumers to pay a monthly fee to download and save their music to a "playlist" as it were that can be accessed anywhere there is Internet access. This means it can be streamed on smartphones as well. iTunes has to compete with the relative ease that consumers can download digital music for low prices, or no price at all, and their desire to use it on various electronic devices, from their computers, their mp3 players, and their cellphones.


 * iTunes Strategy**

iTunes purchases the rights to media (music, television shows, movies, books, etc) from respective providers in the entertainment market. With this purchase of digital media, iTunes then sells digital copies of music tracks to consumers for profit. The price of a digital track is common 99-cents, though newer and more popular tracks can be $1.29, and older tracks at times can be 69-cents. iTunes manages to be the dominating retailer of digital media because of the iPod and the iPhone. Consumers are encouraged to use iTunes as their main source for digital media, but they are not obligated and can easily obtain media from other sources such as Amazon, Rhapsody, Pandora, or Napster. Consumers can also download media illegally and put it into their iTunes playlist with relative ease. Apple receives a small percentage from each sale of a track or other digital media, with most of the profit given to the entertainment industries and companies.

This brings in considerable profit for iTunes. Onlinemedia, overall grew 20% in 2008, rising from 61.5 billion dollars to 74-billion dollars. iTunes was the top contender in the market, growing 32.7% that year (M2 Presswire, 2009). Still, Apple gains more from the sales of the iPhone and the iPod, with the iTunes store being a compliment to these devices (Schwartz, 2009). iTunes has to keep their prices low to compete with other companies and also has made iTunes available for the consumer even off the net with selling of giftcards. Advertisements and Company-sponsored sweepstakes also offer iTunes gifts as prizes. Everyone who isn't as tech-savvy or knowledgeable has access to iTunes in some form or fashion. Amazon, Rhapsody, and Pandora do not have such access at the moment.


 * Gen-Y Implications**

Gen-Y could cause problems for iTunes if it is not careful; it has to pay attention to what the consumer wants. For example, when consumers choose to purchase competing devices, such as the Android phone or the Zune mp3 player, iTunes can be difficult to use with these devices leaving consumers little choice to but to choose other competing retailers for digital media. Gen Y may not be so easy as to forget that when they choose other electronic devices how difficult iTunes is to use between them and may choose to cut the services out entirely.

Even with iTunes stubbornness against other competing devices, it is learning that the consumer does not want to pay a price for each track they have. They have now began a business relationship with Lala.com, a digital streaming service, that will soon allow consumers the ability to 'rent' their digital media and access it anywhere an Internet connect is provided. Soon iTunes will have the same capabilities as Rhapsody and Pandora, although there is still no idea if this will change the prices of single tracks or not. (Harvey, 2009)

The fact is that iTunes will most likely be a top contending provider for digital media for years to come, just as long is there is a top contending device that goes along with it.


 * References:**

Profile: Apple, Inc. Reuters. Retrieved Feb 25, 2010 from http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=AAPL.O

Harvey, M. (2009, December 11). Apple acquires digital streaming service ahead of an expected revamp of its music retailer. //The Times.// Retrieved Feb 26, 2010 from the LexisNexus Database.

Schwartz, R. (2009 November 28). Apple of their Eye. Billboard. Retrieved Feb 26, 2010 from LexisNexus Database.

M2 Presswire (2009, March 20).