Apple iTunes: Changing the Face of Online Music Retailing Industry

            
 
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Case Details:

Case Code : BSTR070
Case Length : 16 Pages
Period : 2003
Organization : Apple Inc.
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : Software

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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EXCERPTS

The Debate on Online Music Distribution

By 2000, two kinds of services took shape in the field of online music distribution: free to share and subscription based. Free to share services such as Napster ran on peer to peer (P2P) technology wherein, using file sharing networks, it became possible to swap music files from one system to another. Such services became extremely popular because of the ease of use and the availability of a wide selection of songs. But above all, their popularity was due to the fact that they were entirely free. Napster, launched in mid-1999, became extremely popular with 1.6 million people using its services during the height of its popularity in early 2000. However, these P2P services gave rise to music piracy since they violated music copyrights and intellectual property rights of music companies...

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iTUNES Provides a Solution

Aware of the shortcomings of the existing models of online music retailing, Apple's CEO Steve Jobs (Jobs), reportedly, said that though free services offered a vast selection of songs for unlimited downloads, their quality was poor and performance unreliable.

Also, subscription-based services were not popular due to the limitations they imposed on downloading songs - many even suspended access to songs when the subscriptions expired. Jobs believed that the problem of music piracy was a behavioral one and technological solutions could not tackle it. He felt that users resorted to piracy because they were not offered any viable alternative for buying music at a reasonable price. Peter Lowe (Lowe), Director, Marketing Consumer Application, Apple, said, "In future the real sea-changes in our industry will be driven by things that truly empower users, rather than tech-fads." Commenting on the belief that Apple could offer a solution to change this behavioral pattern, Lowe said, "We fundamentally believe that most people are honest...

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