Apple Inc Ipod and Itunes

Case summary:

Intro: Ipods became apple’s bestselling product in 06’ ever since being introduced in 01’. IPod is losing market share rapidly in past 6 years from 92% to 62%. Apple needs to find ways to ensure iPods and apple’s success in the future.

Music industry is an entertainment industry that is widespread around the world. But music sales are dropping. Music Sales in 2005 is estimated at US$10.5 billion, down from $13 billion in 1999. Largely due to online piracy. Meanwhile legally purchased digital music rose from $183 million in 2004 to $504 million in 2005. Record labels singing less artists and the number of new albums produced each year dropped from its peak in 1999. Not seen as an attractive industry for investors.

Recording companies like SONY BMG, Warner Music Group, Universal Music Group and EMI are responsible for the development and distribution of recorded music and together these four produce 85% of all music recorded. Their task is to sign recording artists, develop, produce, market and often distribute the recordings. Only 10% of all artists are profitable.

Thousands of New independent labels are arising due to improvement of technology. Availability of advanced music recording software and hardware, and lower costs of computers, and CDs allowed these recording artists to release independent CDs and market them through websites like YouTube, and Facebook.

Distributors then sell the product from record companies to retail chains, earning about 10% of retail price in the process.

Mass merchandisers like Wal-Mart and Target account for 65% of music retail sales and the rest being sold in specialty and online stores. Music is a very small proportion of these stores sales so they carry a limited selection of music. Production costs of blank CDs dropped and yet music CDs prices continued to stay the same. Also if a customer likes one song they would have to buy the whole CD.

Threats -Advancement in technology and going from...