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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/