Network economy of iTunes Definition: Traditional marketplace is being replaced by networks and ownership is redefined to access. This is due to the advent of the internet and other innovative technologies. How is it related to iTunes? Being one of the leaders in the online music industry, they benefitted from the network economy’s advantages. The iTunes store shows how effective the network economy is! 2
Network economy of iTunes: What is important to know! Proteans They are the generation that grew up with the internet and can adapt to innovative technologies. Apple mainly target this segment through their online stores Knowledge Economy Apple focuses on its experts and skills they have to provide new technologies constantly PLC Product life cycle of a product is deeply shortened by constant innovation. iTunes has to provide regularly updated software to maintain its monopoly 3
What are the rules of the network economy that affect itunes?
iTunes and the Law of Plentitude iTunes has established itself as the leader in the digital music industry for they have a large amount of users throughout the world. The law of plentitude is easily adapted to the iTunes store for, the greater the number of users, the greater the value of the business. 5
iTunes and the Law of Generosity iTunes’s marketing strategy is to offer their software for free. Through the digital music player, its customers could access all the Apple stores and purchase music, videos, applications and books. They also offer previews of books, parts of songs and downloadable applications or games for free. This ensures the customer’s loyalty to Apple and help in maintaining a long term relationship. 6
iTunes and the Law of Churn With technology innovations and ideas being regularly available, iTunes has decided to focus on the fact that they produce disruptive technologies quite often to ensure that the attention of the customer is kept and that competition is reduced. This law applies evidently well with iTunes for their innovations are effective in attracting customers. Their ability to produce new applications and games adequate for their original products such as the iPad has helped in the success of their online business. 7
Economies of Scale This economical concept explains that the average cost of a company reduces while the sales increases. iTunes can obtain large economies of scale for they do not require a large amount of costs such as rent for the store which is online or additional cost for warehouses as all their products are digitalised. Hence their economies of scale are consequent because of their reduced costs and large number of customers Network effects Though it is not the main factor in iTunes success, it certainly helped the store establish itself as a reference in the music sector. This is especially because, the more iTunes users, the more it became useful to them and to potential customers. Winner-take-all iTunes being online has reduced competition and hence levelled the opportunity of becoming a monopoly. Also, they were one of the first music store to be found on the internet which helped in becoming a multinational. 9