IT

1
IT Industry Transformation

• Bus 119B
• Spring 2008
• Roldan

2
Music Distribution Industry Transformation

• Apple Itunes has 19 of Market vs WalMarts 15
• Itunes has sold 4 billion songs, has 50 million
  customers and has the largest music catalog at 6
  million songs
• But Limewire has 26 of the market
• New entrant -- MySpace -- possible change in
  music distribution experience?
• CD Sales declined by 15 in 2007

Source NPD MusicWatch Survey quoted in Levine,
B. (2008) Apples Itunes Store becomes Number 1
in Music Sales. Available at
http//www.sci-tech-today.com/news/iTunes-Store-No
--1-in-Music-Sales/story.xhtml?story_id010001801P
AA Dalrymple, J. (2008) Report Itunes more
popular than illegal filesharing. available at
http//www.macworld.com/article/132116/2008/02/fil
esharing.html Taylor, P. Music downloads
speed decline in CD sales. Financial Time, Jan
4, 2008 p. 16
3
The Value Chain - Traditional Music Distribution

Inbound Logistics obtaining raw materials and
labor
Operations transforming raw materials into
products and services
Outbound Logistics delivering the products and
services to customers
Marketing Sales promoting the products and
services
After-Sales Service service after the sale of
products and services
4
The Value Chain - Digital Music Distribution

Inbound Logistics obtaining raw materials and
labor
Operations transforming raw materials into
products and services
Outbound Logistics delivering the products and
services to customers
Marketing Sales promoting the products and
services
After-Sales Service service after the sale of
products and services
5
The Value Chain for Apple Itunes
Inbound Logistics obtaining raw materials and
labor
Operations transforming raw materials into
products and services
Outbound Logistics delivering the products and
services to customers
Marketing Sales promoting the products and
services
After-Sales Service service after the sale of
products and services
Billboards Major Press TV Ads Online
Ads The Steve Jobs Show Etc.
Customer Service Recommendations
Making Songs Available On Itunes Music Store
Delivering Songs Via Itunes Music Store
Content Provider Contracts
0.65
0.25
6
The Value Chain for Itunes Ipod
Inbound Logistics obtaining raw materials and
labor
Operations transforming raw materials into
products and services
Outbound Logistics delivering the products and
services to customers
Marketing Sales promoting the products and
services
After-Sales Service service after the sale of
products and services
Billboards Major Press TV Ads Online
Ads The Steve Jobs Show Etc.
Customer Service Recommendations
Making Songs Available On Itunes Music Store
Delivering Songs Via Itunes Music Store Ipods
Content Provider Contracts
Profit Sources Itunes 0.10Ipods 175
0.65
0.25
7
Benevolence or Good Business?
8
Iphone Business Model
9
Trends to Watch

• Potential industry transformation or bust?
• 1 millionth iPhone sold 9/10/07 -- ahead of 9/30
  target -- 4/23/08 second q results -- expected at
  1.4 million units (although 2 million possible)
• Itunes Movie Rentals started in early 2008 --
  small catalog -- about 600 movies available for
  rent
• DRM Free Music -- under 3 of the music on the
  average iPod, is purchased from the iTunes store
• IpodItunes business model changes?
• Webbifying online music distribution?
• Potential of MySpace Music Service?

Jobs, S. (2007, Feb. 6). Thoughts on Music.
http//www.apple.com/hotnews/thoughtsonmusic/ Di
gnan, L. (2008, Apr. 23) Apple Earning Cheat
Sheet Its all about the Mac Units.
http//blogs.zdnet.com/BTL/?p8583 Wolverton,
T. (2008, Apr. 21) Multi-Tasking with Apple TV.
SJ Mercury News. http//www.siliconvalley.com/news
/ci_8999745?nclick_check1
10
What about Video?

• How might the TV/Movie industries webbify their
  offerings?
• What business models might bring the most profits
  to
• Production/content industries
• Broadcasting/distribution industries
• Advertisers
• Consumers/Content providers