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    Itunes_network_knowledge_attention_economies Itunes_network_knowledge_attention_economies Presentation Transcript

    • iTunes in the Network, Knowledge & Attention Economies
      Examining Apple iTunes Store Methodologies and the Fundamental Economic Basis of Internet Commerce
    • Apple iTunes Website
    • iTunes Desktop Application Containing Your Personal Album Collection
    • How do New Rules for the Network Economy Apply to iTunes Store?
      Rule 1 - Law of Connection
      iTunes use the Internet to serve content to millions of computers & attached music players
      iTunes Store website content integrated into the iTunes Desktop application, purchase songs etc, easy to use
      Connects producers of 10 million recordings via the Internet to 125 million iTunes Store customers
      Empowers distributed artists & content producers to
      create songs & applications,
      publish songs and
      generate revenue from each download
      Brings manufacturers and customers together
    • iTunes Store Content Integrated into Desktop iTunes
    • Apple Corporation Income & Profit
      Source data Apple.com
    • Rules 2 & 3 - Laws of Plenitude & Exponential Value
      Slow to start, but success occurs
      Success breeds success, more songs, more iPods, more downloads, more songs and so it goes.
      Revenues begin to soar
    • iTunes Store Web Sales
      Source data Apple.com
    • Rule 4 – The Law of Tipping Point
      Tipping point
      Tipping Point – 3 factors
      • iTunes store – Apr 2003
      • iTunes for Windows PC – Oct 03
      • iPod price drop & new models in 2004-5
      iPod price drop
      Add Windows support
      iTunes Store Opens
    • Rule 5 - Law of Increasing Returns
      Apple’s gross margin % has increased over the last 5 years from 29% to 47%
      More Attraction
      More Songs Written
      More iPods Sold
      iTunes Store
      More Commissions Paid
      More Downloads
      More Revenue
    • iTunes Store Downloads & Income Split
      Area Between the lines is the Commission paid back to the artists
    • Rules 6 - The Law of Inverse Pricing
      Moore’s Law: CPUs double in power every 18mths
      Gilder’s Law: Comms Bandwidth triples every 12 mths.
      Metcalfe’s Law: Value of a network increases to the square of the number of nodes.
      iTunes songs are cheap compared to CDs $0.69, $0.99, $1.29 & $2.19 / song vs. $15 - $29 for a CD.
      Price of Knowledge & Creativity Increases.
      Price of H/W drops. iPods got smaller, more features and dropped in price.
      Demand increases, sales increase.
    • Rule 7 – The Law of Generosity
      Free iTunes Desktop Music Catalogue
      Free 30 Sec sample
      Free Pod casts
      Free Song of the week
      Free Samples
      Customers Give iTunes Gift Cards as Christmas Gifts
    • How do New Rules for the Wired Economy Apply to iTunes
      Law of Allegiance
      Passionate Apple devotees
      Apple used ACC (m4a) copy protected music format vs. open mp3 format. A big gamble that paid off.
      Expand to Windows customers
      Law of Displacement
      Increase the digital warehouse
      Add another webserver, hard disk array or switch
      iPods are smaller, hold more songs, play & take videos
      Download more & varied content
      iPod prices dropping, features increasing
      iPod Touch, iPhone & iPad apps
    • iPod Touch Attacks the Handheld Gaming Market – iTunes for Games
    • Rule 9 – The Law of Devotion
      Apple customers are typically arty, fashion & style conscious, and often non-techie where ease of use is important
      Compared to IBM & compatibles, Apple had a small club devotees dedicated to the brand.
      Fan base now covers Windows & Mac customers
      Download customers are devoted:
      Music Fans
      Movie Fans
    • iPod Sales becoming a smaller part of Apple’s revenue
      Zaky, A. 2010
    • Rule 10 - Law of Displacement
      Add another webserver, hard disk array or switch
      iPods are smaller, hold more songs, play & take videos
      iPods run applications, play games & movies
      iPod prices dropping
      iPods are being displaced by iPhones
      Yet iTunes Store continues to grow
      Information is power, digital assets increase in value
    • Rule 11- Law of Churn
      iPods became smaller in size & price
      Now an ever decreasing part of Apple’s revenue stream. iPod wave is crashing. Replaced by iPhone & iPad.
      Whilst iTunes Store continues to grow with expanded range of content, inc.
      Music – all genre
      Podcasts, Talking Books & Education Series
      Movies, TV Shows,
      Applications & iBooks
    • Rule 12 - Law of Inefficiencies
      Apple are releasing new products, iPhone, iPad and soon iTV
      So slow down on building better iPods
      Build new products to compete in other markets
      Develop new market segments that leverage benefits from the iTunes Store.
      Downloadable Applications
      Downloadable iBooks, Movies & Television
    • Manufacturing Economy vs. Knowledge Economy
      Flew, T. 2008.
    • Transition from the Manufacturing Economy to the Knowledge Economy
      Disintermediation of traditional manufacturing and sales processes.
      Knowledge is power.
      Internet distributes information and knowledge flows
      Knowledge is transferred to the customer to make informed choices.
      Removal of wholesalers, distributors and retailers from the sales process.
      Customers deal directly with manufacturers
    • iTunes &the Attention Economy
      World of over saturated media, bombarded by advertising
      Limited spare time to read, relax or research
      Money flows towards attention
      How to get noticed in the Attention Economy
      iTunes & Attention Economy
      6 – 35 year olds love music and video, actively seek it
      Dominant market share, 70% of online music sales
      Artists & record companies provide their own marketing
      Web2.0 end-user feedback, reviews, ratings, social media marketing. Fans selling to fans.
      No lack of attention here
    • Disintermediation Fostering One to one relationships between producers & consumers
      Artists, Record Companies, Movie Cos, App Devs
      See iTunes a friendly & rewarding channel to market.
      A place to build their brand (get Attention)
      70% commission paid to the creator/artist (ensure supply)
      Slows piracy and provides income to the artist
      Happy content providers, produce large amounts of new content, resulting in happy customers & happy artists.
    • Summary
      Network Economy – Connectedness of many
      Knowledge Economy – Creativity of many
      Attention Economy – Multi-Channel Marketing facilitated by distributed marketing,
      Create Fans & get noticed. Wealth flows towards attention.
    • References
      Apple. (2010). Apple Inc. Images & Screenshots. Retrieved July 10, 2010, from http://www.apple.com/
      Apple. (2010). Apple Inc. Financial History: Annual Reports & Financial History. Retrieved July 10, 2010, from http://www.apple.com/investor/
      Brooks, A.(2010). iTunes Continues to Dominate Music Industry. Retrieved July 25, 2010, from http://news.worldofapple.com/archives/2010/05/27/itunes-continues-to-dominate-music-industry/
      Flew, T. (2008). The Global Knowledge Economy Oxford University Press Retrieved July, 10, 2010, from http://edocs.library.curtin.edu.au/eres_display.cgi?url=dc60264108.pdf&copyright=1
      Goldhaber, M. (1997). The Attention Economy and the Net. First Monday Retrieved July, 19, 2010, from http://firstmonday.org/htbin/cgiwrap/bin/ojs/index.php/fm/article/viewArticle/519/440
      Kelly, K. (1997). New Rules for the New Economy. Wired.Com Retrieved July, 10, 2010, from http://www.wired.com/wired/archive/5.09/newrules_pr.html
      Zarky, A. (2010). Special Report: The end of Apple’s iPod era. Appleinsider Retrieved July, 10, 2010, from http://www.appleinsider.com/articles/10/07/02/special_report_the_end_of_apples