Competitive Analysis of Apples iPod and iTunes - PowerPoint PPT Presentation

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Competitive Analysis of Apples iPod and iTunes

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iTunes Music Store and Peripherals. Year to Date Revenue Increase of 252% over 2004 ... iLife suite ( iTunes, iPhoto, iMovie HD, iDVD, GarageBand) 21. Recommendations ... – PowerPoint PPT presentation

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Title: Competitive Analysis of Apples iPod and iTunes


1
Competitive Analysis of Apples iPod and iTunes
2
Todays Program
  • Music as a Revenue Source
  • Apple iPod and Apple iTunes
  • 5 Force Analysis
  • Summary and Recommendations

3
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4
Generating Revenue from Music
  • Background - Before Recorded Music
  • Musicians and Composers
  • Instrument Makers, Concert Halls, and Sheet Music
    Scribes

5
Generating Revenue from Music
  • Background - After Recorded Music
  • Recording Companies
  • Wholesale/Retail Companies
  • Distribution - Media and Equipment
  • Electronic Playback Device Companies
  • Software Companies
  • Computer Companies

6
Evolution of Technology
  • Devices and Media
  • Analog Devices
  • Edisons Cylinders
  • Vinyl Recordings
  • Tape Reel to Reel, 8 Track, Cassette

7
Evolution of Technology
  • Digital Devices and Media
  • CD/DVD
  • Flash Memory MP3, iPod

8
Previous Customer FocusBefore the MP3 Player
  • Pre-recoded Music
  • Buy the Entire Album (no 45s from the 70s)
  • Buy the Entire Album at Record Store
  • Limited Selection
  • Limited Shelf Life
  • Limited Quality of Originals and Copies

9
Current Customer FocusWith the MP3 Player
  • Buy Devices On-Line or in Store
  • Buy Individual Songs On Line
  • Hundreds of Song per Device
  • Seemingly Limitless Selection of Songs
  • Excellent Quality of Originals and Copies

10
Apple iPodThe Leader in MP3 Music
  • Provides Complete Music Program
  • iPod, Shuffle, mini, nano MP3 Players
  • iTunes Music vs. Subscription Services
  • Software and Peripherals

11
iPod Sales
  • Since Introduction in 2002 21 million sold
  • First 3 Quarters of 2004 2.4 million sold
  • First 3 Quarter of 2005 16 million sold

12
iTunes Music Store and Peripherals
  • Year to Date Revenue Increase of 252 over 2004
  • 0.99 per Song Downloaded
  • 9.99 per Album Downloaded
  • iPod 60GB Capacity to Store up to 15,000 Songs
  • iTunes Revenue to Surpass Power Macintosh
    Revenue

13
Internal Rivalry
  • Industry expansion
  • Price Sensitivity
  • Switching Barriers
  • Audio books, Videos etc.
  • 0.99 Song Downloads
  • Digital Rights Management, Preference Tracking

14
Threat of Entrants
  • Apple is Vertically Integrated

Entrants could be music providers
Entrants could be digital music device
manufacturers
15
Availability of Substitute and Compliment Products
  • Substitutes
  • Digital Music Devices
  • Walkman type devices
  • CD Players
  • Flash Memory Devices
  • Legal Downloads
  • Piracy
  • Subscription services
  • CDs
  • Compliments
  • Digital Music Devices
  • FM Radio tuners
  • Speaker Systems
  • Carrying Cases
  • Legal Downloads
  • Videos
  • Audio Books
  • Pod Casts

16
Power of Suppliers
  • Suppliers Have Other Customers
  • Flash Memory
  • Hard Drives
  • TFT-LCD Screens
  • Lithium-ion batteries
  • Greed of Content Suppliers
  • Want Larger Share of Profits
  • Ultimate control over distribution channels

17
Power of Buyers
  • General Public is the Buyer
  • Apple must continually innovate and increase
    content to maintain market share
  • Apple must maintain low price point avoid the
    publics return to piracy

18
Summary and Recommendations
19
Strategy Canvas for Apples iPod
20
Underpinnings of Apples Strategy
  • Product design squarely focused on consumer
    experience
  • Design innovation through deep collaboration
  • Accelerated innovation through seamless
    integration
  • Strong partnerships with suppliers and
    manufacturers
  • Rapidly expanding business environment
  • Entertainment Computing Hub of the digital
    home
  • iPod, Mac mini, iMac, Airport Express
  • Mac OS X, QuickTime, iChat, iWork, Safari, .Mac
  • iLife suite ( iTunes, iPhoto, iMovie HD, iDVD,
    GarageBand)

21
Recommendations
  • Diversify supplier base for critical components
    like flash memory, LCD panels, backlight LEDs,
    micro disks
  • Keep a close watch on the subscription model and
    explore launching a similar service as complement
    in the future
  • Tone down the rhetoric against music industry
    content providers
  • Add an FM tuner to Nano and video iPod

22
Conclusion
  • Apple dominates the digital music market
  • Consumer focus, superb design and continuous
    innovation are the keys to Apples success
  • A healthy ecosystem has helped expand iPods use
    and spurred its rapid growth and adoption
  • Content providers and competitive offerings pose
    a serious threat to iTunes but Apple has leverage
    to deal with it
  • Apple is well positioned to become the
    Entertainment Hub

23
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