Apple iTunes : Changing the Face of online Music Retailing Industry (Page 2)

Abstract

The case deals with iTunes, an Internet-based music retailing service launched by Apple Computers in early 2003. It provides detailed information about the changing dynamics of the music industry and analyzes the circumstances that led to the emergence of the online music distribution business. It also examines the impact of online music services on the industry in light of the problem of growing music piracy. The efforts made by several companies to launch legal services, and the reasons for their failure, are explored. The case then describes how Apple’s iTunes provided a viable solution to the problems faced by the music industry and the customers. Finally, the case discusses the challenges facing iTunes, and its future prospects, in light of Apple’s decision to launch its Windows version.

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Commenting on how iTunes had shown that selling music over the Internet was viable and safe, David Goldberg, General Manager for Music, Yahoo, said, "Apple's service shows there is consumer demand, and it shows they have built a great product." Roger Ames, Chairman and CEO of Warner Music Group, said, "Everyone in our industry is looking for a solution, and Apple is leading the way with the iTunes Music Store."

The business of music involves many intermediaries between artists (creators) and customers (end users). Each intermediary adds to the final cost of the product. Therefore, some record companies like Bertelsmann combine the roles of multiple intermediaries to reduce overall costs by selling music directly to their club members at low prices. Another way to reduce the cost of promotion and distribution was to sell music in the form of albums containing many solos . Companies such as EMI, Warner and BMG have been doing this for a long time.

Record companies have always been a dominating force in this industry since they control major marketing and distribution channels. They exert their might by binding individual artists to long- term contracts. Most of the artists bound themselves to record companies lured by the latter's financial muscle, experience` and marketing prowess - all of which were necessary to succeed in the business, and none of which the artists had. This also meant that emerging artists could not compete on their own as they did not have access to big companies. Therefore, they either had to be 'lucky/resourceful enough' for a record company to spot and sign them, or they had to be content with operating in niche markets. Due to the clout labels wielded on the industry, they reportedly took away a huge share (around 80%-90%) of profits.........

        Case Code   BSTR070
   Case Length    15 Pages
              Period    2003
 Organization     Apple Inc.
        Pub Date     2003
Teaching Note    Not Available
     Countries    USA
      Industry    Software

Issues

Understand the structure and functioning of the music industry and analyze the evolving dynamics of the same.

iTunes, music retailing, Apple Computers, 2003, changing, dynamics, emergence, online music distribution, music services, music piracy, Apple’s iTunes, Windows version