iPods and iTunes

Jobs’ Next Challenge Roller Coaster Moon, Sung Jin Hong, Eun Soon Park, Ji Hong

1. Company Overview 2. Diagnosis of Problems 3. Alternatives 4. Recommendation 5. Q & A Team: Roller Coaster 2

2006, MacBook with intel chip 2003, iTunes 2001, iPod 1998, iMac 1996, Acquisition with NeXT, rehiring Jobs 1994, PowerMac family 1991, Powerbook 1987, MacII 1985, First ever quarterly loss, laid of one-fifth of employees 1985, Resignation of Jobs 1984, Macintosh 1983, Apple Lisa 1977, Apple II April 1, Foundation The early Lisa and The “golden Attempts at New The intel Macintosh age” reinvention beginnings partnership years 1976 1980 1985 1989 1991 1993 1995 1997 2005 Team: Roller Coaster 3

Unit Sales by Product Line($M) Sales and Profits($M) Source: http://www.reghardware.co.uk/2008/11/18/apple_25_year_report_card/print.html Team: Roller Coaster 4

Worldwide recorded music revenue Symptoms  Digital download $40,000 Napster, Wal-mart  Virgin, Sony   Device Medion  $20,000 Smart Music Phone   Illegal hacking of DRM Millions RealNetwork  DRM was not infallible  $ Causes 2004 2005 2006 2007 2008 2009 2010  Attractive Market  Low Entry Barrier Physical CDs Digital(Mobile & Broadband)  Walled Garden Strategy Source: http://www.isuppli.com/Abstract/P8183_20061127142035.pdf (Own DRM Restriction) Team: Roller Coaster 6

Opportunity & Strength  Potential growth in digital content market  Favorable brand Image, Loyal Customer Obstacle  Content Copyright vs. Piracy  High substitution products  Lack of compatibility Decision  What’s Apple’s Next? Digital Music vs. Beyond iPod Team: Roller Coaster 7

PRO • Contents & Service • Broaden customer’s selection • Benefits & Easy Access channel differentiation • Keep customers loyalty • Various payment tool CON • Combine iPod with WIFI • Cost Burden • Price diversification • Possibility of profit diminish • Agreement with music labels Team: Roller Coaster

PRO • Extension of contents • Deliver many types of contents • Keep consumer-centric brand • Expansion of device • Another innovation for Apple • Higher customer accessibility • To provide Hardware & software CON & installation services • To connect key product • Intense competition • High cost on R&D & services -> iLife • Lack of experience Team: Roller Coaster

PRO • Expansion of • Direct relationship • More control over the end-user devices and industry • Market imitative • Develop a mobile phone - iPod + Smartphone CON • Wireless network provider • High entry barrier • Uncertainty of leasing network • No experience Team: Roller Coaster

Pros Cons • DRM is not perfect • Prevent illegal copies or piracy • Disturbing a user cause of lack of DRM compatibility • Achieving interoperability • Disclosing some secrets of tech. License DRM • Charging a licensing fee • How to quickly repair the Technology • No worry about infringing damage caused by such a leak • Any player can play music • The best alternative for consumers • No longer guarantee to protect DRM free • Apple customers not willing to buy the music from third party services Team: Roller Coaster

Criteria Alt .#1 Alt. #2 Alt. #3 • Leverage core competence • Transit iconic brand Strategic fit • Create new market • Cost for R&D, Alliance, Content Copyright • Expected Revenue Profitability • Time for achieving BEP • Market Competition • Market initiative Market • Not matured Market Growth • Provide convenience and new experiences Customer • New technology acceptance value Team: Roller Coaster 14

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iPods and iTunes

by Eric Moon on May 13, 2009

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iPods and iTunes — Presentation Transcript