1. Why iPod/iPhone Is Successful? Wesley Shu 1

2. Is iPhone a Cellular Phone? 2

3. Is iPhone a Product? 3

4. What is an iPod/iPhone? Not only a product, but service & Lifestyle! 4

5. What is an iPod/iPhone? What’s more, it is a Platform. 5

6. What is an iPod? 6

7. What is an iPod? 7

8. Managerial Features of iPhone Design driven innovation Business model innovation Platform as a service Peer to peer sharing/production Web2 8

9. Reason 1: the Product 9

10. Reason 1: the Product 10

11. Reason 2: iTune Music Industry New Wave of Music Distribution Music Timeline 11

12. Reason 2: iTune Before iTune: 113K iPod per quarter After iTune: 733K Razor-and-blades business model – that’s it? 12

13. Labels Intermediaries add costs Binding artists to long-term contracts 85 to 90% profit from music sales In the music industry, a record label is a brand and a trademark associated with the marketing of music recordings and music videos. 13

14. Traditional Music Industry Creation -> Marketing -> Distribution Creation: musician, lyrists, singers … Marketing: Producers (labels), e.g. Sony Music, BMG, EMI, Universal, & Warner Distribution: Level 1: distributors, clubs Level 2: retailers CONTROLLED BY LABELS! 14

15. New Wave of Music Distribution Internet: online stores & Streaming audio Napster Peer to peer software Music industry’s responses only backfired Now Spotify - Spotify Video A peer-to-peer, commonly abbreviated to P2P, is any distributed network architecture composed of participants that make a portion of their resources (such as processing power, disk storage or network bandwidth) directly available to other network participants, without the need for central coordination instances (such as servers or stable hosts). 15

16. Apple iTune Solution 30-second preview Pay per song, $0.99 No subscription Low profit $0.17 per song Digital Rights Management (DRM) Guarded both labels’ IP and the proprietary technology inside the iPod – Win/Win situation While iTune’s profit margin is low, iPod is high – 100% 16

17. Apple’s Success iTune: 80% market share compared to 3% of Napster in 2001 iPod: 75% 39% of Apple total revenue 17

18. Nike+ 18

19. Nike + Video It’s Web 2.0 too. What's happening now in Nike+ Challenge Distance Coaching 19

20. Design-Driven Innovation 20

21. Reason 3: Platform You R Here Wikitude World Browser Numerous applications – developers download its SDK iPhone Development Center 21

22. Platforms always wins over applications Office with Word, PowerPoint, and Excel over WordStar, Harvard Graphics, and Lotus 123 MS DOS BASIC Google over Netscape Browsers became commodity, and thus we needed a new platform to reign the web. 22

23. Platforms always wins over applications Facebook is also a platform Microsoft released its SDK for Facebook’s API – Open Stream 23