The Current I Tunes Business Model
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The Current I Tunes Business Model

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The Current I Tunes Business Model The Current I Tunes Business Model Presentation Transcript

  • The Current iTunes Business Model
  • The Current iTunes Business Model
    What are the main sources of revenue for iTunes?
    Music
    The App Store
    Movies/Televison Shows
    Other Revenue Areas
  • The Current iTunes Business Model
    Music
    Over 13 million songs (Apple.com, 2010, Purchasing Music)
    Introduced three tiered pricing structure in April 2009, to have tracks priced at either 69 cents, 99 cents and $1.29 depending on popularity of the song (Adegoke, 2009)
    Breakdown of a 99 cent iTunes download:
    Retail Price: 99 cents
    Wholesale cost: 69 cents
    Network fees: 5 cents
    Transaction fees: 10 cents
    Operating expenses: 5 cents
    Ergo: Operating profit per song: 10 cents (Savitz, 2007)
    On 25/2/2010 iTunes celebrated 10 billionth song download (Apple.com, 2010, iTunes Store Tops 10 Billion Songs Sold)
    They also have music videos and mobile phone ringtones available for purchase.
  • The Current iTunes Business Model
    The App Store
    Over 200,000 apps made by over 100,000 registered developers (Apple.com, 2010, Apps for iPhone )
    Individual iPhone App developers pay $99 per year for a developer license, enterprises pay $299 per year (Elmer-Dewitt, 2009)
    In December 2009 App Store users downloaded an average of 4.8 apps each,one quarter were paid
    Average price for a paid app is $2.70
    Each App Store user spends an average of $4.37 a month (Gigaom, 2010)
  • The Current iTunes Business Model
    There are over 58 million App Store users divided into two groups:
    (Gigaom, 2010)
  • The Current iTunes Business Model
    In December 2009 280 Million apps were downloaded generating $250 million in revenue of which 30% goes to Apple and 70% goes to the developer (Gigaom, 2010)
  • The Current iTunes Business Model
    Movies/Televison Shows
    Over 8,500 movies (over 2,500 in high definition) and over 55,000 television shows (Apple.com, 2010, iTunes Store Tops 10 Billion Songs Sold)
    Buy movies in standard or high definition – standard definition at $9.99, high definition at $19.99 (Apple.com, 2010, Purchasing Movies)
    Rent movies in standard definition - $2.99 for library titles and $3.99 for new releases (Apple.com, 2010, Renting Movies)
    Buy television shows prices range between $1.99 and $2.99 (Apple.com, 2010, Purchasing TV Shows)
  • The Current iTunes Business Model
    iTunes is the market leader in both movie and television show downloads
    (Dilger, 2008)
  • The Current iTunes Business Model
    Over 200 million television episodes sold (Apple.com, 2008, ABC, CBS, FOX & NBC Offer Incredible Lineup of Programming in Stunning HD on the iTunes Store)
    Over 33 million movies purchased/rented (Starrett, 2009)
    (viziononline.com,
    2010)
  • The Current iTunes Business Model
    Other Revenue Areas
    Audiobooks – including best sellers in fiction and non fiction categories and have a wide price range from bargain books to prices comparable with traditional books in bookstores
    iTunes Affiliates Program – Link to your favourite iTunes content through your webpage and earn 5% commission on all qualifying revenue (Apple.com, 2010, Affiliates: Frequently Asked Questions)
  • The Current iTunes Business Model
    iBooks – a new application available for iPad, iPhone and iPod, iBook is a virtual bookshelf containing all the books you have downloaded. Choose a book and flip through the pages with a simple tap of the finger.
    (iBook image
    • Apple.com,
    • 2010)
  • The Current iTunes Business Model
    The Current iTunes Business Model
    iTunes is a Bit Vendor - “a merchant that deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web” (Rappa, 2010)
    iTunes may only account for a small percentage of Apples revenue but was designed for the purpose of making the main profit earners (hardware) more attractive (Hansell, 2008)
  • The Current iTunes Business Model
    Breakdown of Apple Revenue:
    (Schramm, 2010)
  • The Current iTunes Business Model
    iTunes has very low marketing costs as iTunes software is required to work with all of the iPod, iPad and iPhone therefore has a ready made audience. (Hansell, 2008)
  • The Current iTunes Business Model
    References
    Adegoke, Y (2009). iTunes Tiered Pricing Goes Live. Retrieved July 5, 2010 fromhttp://www.wired.com/techbiz/media/news/2009/04/reuters_us_apple_itunes
    Apple.Com (2010). ABC, CBS, FOX & NBC Offer Incredible Lineup of Programming in Stunning HD on the iTunes Store.Retrieved July 6, 2010 from http://www.apple.com/pr/library/2008/10/16itunes.html
    Apple.Com (2010). Affiliates: Frequently Asked Questions. Retrieved July 7, 2010 from
    http://www.apple.com/itunes/affiliates/faq.html
    Apple.Com (2010). Apps for iPhone.Retrieved July 6, 2010 from
    http://www.apple.com/iphone/apps-for-iphone/
     
    Apple.Com (2010). iTunes Store Tops 10 Billion Songs Sold.Retrieved July 5, 2010 from
    http://www.apple.com/pr/library/2010/02/25itunes.html
  • The Current iTunes Business Model
    Apple.Com (2010). Purchasing Movies. Retrieved July 6, 2010 from
    http://www.apple.com/itunes/features/#purchasingmovies
     
    Apple.Com (2010). Purchasing Music. Retrieved July 5, 2010 from
    http://www.apple.com/itunes/features/#purchasingmusic
     
    Apple.Com (2010). Purchasing TV Shows. Retrieved July 6, 2010 from
    http://www.apple.com/itunes/features/#purchasingtvshows
    Apple.Com (2010). Renting Movies. Retrieved July 6, 2010 from
    http://www.apple.com/itunes/features/#rentingmovies
    Apple Logo. Retrieved July 7 from
    http://www.viziononline.co.uk/blog/
    Dilger, D.E (2008) Three Barriers Holding Up Apple TV. Retrieved July 7, 2010 from
    http://www.roughlydrafted.com/2008/05/30/three-barriers-holding-up-apple-tv/
  • The Current iTunes Business Model
    Elmer DeWitt, P (2009). How Apple Profits from the App Store. Retrieved July 6, 2010 from
    http://tech.fortune.cnn.com/2009/05/14/how-apple-profits-from-the-app-store/
     
    Gigaom (2010). The Apple App Store Economy. Retrieved July 6, 2010 from
    http://gigaom.com/2010/01/12/the-apple-app-store-economy/
     
    Hansell, S (2008). The iTunes Store: Profit Machine. Retrieved July 7, 2010 from
    http://bits.blogs.nytimes.com/2008/08/11/steve-jobs-tries-to-downplay-the-itunes-stores-profit/
     
    iBook Image . Retrieved July 7 from
    http://www.apple.com/ipad/features/ibooks.html
     
    Rappa, M (2010). Business Models On The Web. Retrieved July 7, 2010 from
    http://digitalenterprise.org/models/models.html
    Savitz, E (2007). Apple: Subscription Music Service Seems Inevitable. Retrieved July 5, 2010 from
    http://seekingalpha.com/article/33231-apple-subscription-music-service-seems-inevitable
  • The Current iTunes Business Model
     
    Schramm, M (2010). iDevices Making Up More and More of Apples Revenue. Retrieved July 6, 2010 from
    http://www.tuaw.com/tag/graph
    Starrett, C (2009). HD movies now sold in iTunes Store, iPod versions included. Retrieved July 7, 2010 from
    http://www.ilounge.com/index.php/news/comments/hd-movies-now-sold-in-itunes-store-ipod-versions-included/