Why I Pod Is Successful

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Why I Pod Is Successful

  1. 1. Why iPod Is Successful? Wesley Shu
  2. 2. What is an iPod? <ul><li>Not only a product, but service & Lifestyle! </li></ul>
  3. 3. What is an iPod?
  4. 4. What is an iPod?
  5. 5. Reason 1: the Product
  6. 6. Reason 1: the Product
  7. 7. Reason 2: iTune <ul><li>Music Industry </li></ul><ul><li>New Wave of Music Distribution </li></ul>
  8. 8. Reason 2: iTune <ul><li>Before iTune: 113K iPod per quarter </li></ul><ul><li>After iTune: 733K </li></ul><ul><li>Reverse razor-and-blades business model </li></ul>
  9. 9. Traditional Music Industry <ul><li>Creation -> Marketing -> Distribution </li></ul><ul><li>Creation: musician, lyrists, singers … </li></ul><ul><li>Marketing: Producers (labels), e.g. Sony Music, BMG, EMI, Universal, & Warner </li></ul><ul><li>Distribution: </li></ul><ul><ul><li>Level 1: distributors, clubs </li></ul></ul><ul><ul><li>Level 2: retailers </li></ul></ul>CONTROLLED BY LABELS!
  10. 10. Labels <ul><li>Intermediaries add costs </li></ul><ul><li>Binding artists to long-term contracts </li></ul><ul><li>85 to 90% profit from music sales </li></ul>
  11. 11. New Wave of Music Distribution <ul><li>Internet: online stores & Streaming audio </li></ul><ul><li>Napster </li></ul><ul><li>Before Napster was forced to shut down, another generation of file trading coming into fruition </li></ul>
  12. 12. New Breed of File Trading Sites <ul><li>Peer to peer software, ex. Kazaa </li></ul><ul><li>Music industry’s responses only backfired </li></ul>
  13. 13. Apple iTune Solution <ul><li>30-second preview </li></ul><ul><li>Pay per song, $0.99 </li></ul><ul><li>No subscription </li></ul><ul><li>Low profit $0.17 per song </li></ul><ul><li>Digital Rights Management (DRM) </li></ul><ul><li>Guarded both labels’ IP and the proprietary technology inside the iPod – Win/Win situation </li></ul><ul><li>While iTune’s profit margin is low, iPod is high – 100% </li></ul>
  14. 14. Apple’s Success <ul><li>iTune: 80% market share compared to 3% of Napster </li></ul><ul><li>iPod: 75% </li></ul><ul><li>39% of Apple total revenue </li></ul>
  15. 15. Apple’s Challenge <ul><li>3G cellular phone – direct download to wireless devices </li></ul><ul><li>No longer DRM? </li></ul>

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