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The Current I Tunes Business Model

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The Current I Tunes Business Model

  1. 1. The Current iTunes Business Model<br />
  2. 2. The Current iTunes Business Model<br />What are the main sources of revenue for iTunes? <br />Music<br />The App Store<br />Movies/Televison Shows<br />Other Revenue Areas<br />
  3. 3. The Current iTunes Business Model<br />Music<br />Over 13 million songs (Apple.com, 2010, Purchasing Music)<br />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)<br />Breakdown of a 99 cent iTunes download:<br /> Retail Price: 99 cents <br /> Wholesale cost: 69 cents <br /> Network fees: 5 cents <br /> Transaction fees: 10 cents <br /> Operating expenses: 5 cents <br /> Ergo: Operating profit per song: 10 cents (Savitz, 2007)<br />On 25/2/2010 iTunes celebrated 10 billionth song download (Apple.com, 2010, iTunes Store Tops 10 Billion Songs Sold)<br />They also have music videos and mobile phone ringtones available for purchase.<br />
  4. 4. The Current iTunes Business Model<br />The App Store<br />Over 200,000 apps made by over 100,000 registered developers (Apple.com, 2010, Apps for iPhone )<br />Individual iPhone App developers pay $99 per year for a developer license, enterprises pay $299 per year (Elmer-Dewitt, 2009)<br />In December 2009 App Store users downloaded an average of 4.8 apps each,one quarter were paid <br />Average price for a paid app is $2.70<br />Each App Store user spends an average of $4.37 a month (Gigaom, 2010)<br />
  5. 5. The Current iTunes Business Model<br />There are over 58 million App Store users divided into two groups:<br />(Gigaom, 2010)<br />
  6. 6. The Current iTunes Business Model<br />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)<br />
  7. 7. The Current iTunes Business Model<br />Movies/Televison Shows<br />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)<br />Buy movies in standard or high definition – standard definition at $9.99, high definition at $19.99 (Apple.com, 2010, Purchasing Movies)<br />Rent movies in standard definition - $2.99 for library titles and $3.99 for new releases (Apple.com, 2010, Renting Movies) <br />Buy television shows prices range between $1.99 and $2.99 (Apple.com, 2010, Purchasing TV Shows)<br />
  8. 8. The Current iTunes Business Model<br />iTunes is the market leader in both movie and television show downloads <br />(Dilger, 2008)<br />
  9. 9. The Current iTunes Business Model<br />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)<br />Over 33 million movies purchased/rented (Starrett, 2009)<br /> (viziononline.com, <br /> 2010) <br />
  10. 10. The Current iTunes Business Model<br />Other Revenue Areas<br />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<br />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) <br />
  11. 11. The Current iTunes Business Model<br />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.<br />(iBook image <br /><ul><li>Apple.com,
  12. 12. 2010)</li></li></ul><li>The Current iTunes Business Model<br />The Current iTunes Business Model<br />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)<br />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)<br />
  13. 13. The Current iTunes Business Model<br />Breakdown of Apple Revenue:<br />(Schramm, 2010)<br />
  14. 14. The Current iTunes Business Model<br />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)<br />
  15. 15. The Current iTunes Business Model<br />References<br />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<br />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<br />Apple.Com (2010). Affiliates: Frequently Asked Questions. Retrieved July 7, 2010 from<br />http://www.apple.com/itunes/affiliates/faq.html<br />Apple.Com (2010). Apps for iPhone.Retrieved July 6, 2010 from<br />http://www.apple.com/iphone/apps-for-iphone/<br /> <br />Apple.Com (2010). iTunes Store Tops 10 Billion Songs Sold.Retrieved July 5, 2010 from<br />http://www.apple.com/pr/library/2010/02/25itunes.html<br />
  16. 16. The Current iTunes Business Model<br />Apple.Com (2010). Purchasing Movies. Retrieved July 6, 2010 from<br />http://www.apple.com/itunes/features/#purchasingmovies<br /> <br />Apple.Com (2010). Purchasing Music. Retrieved July 5, 2010 from<br />http://www.apple.com/itunes/features/#purchasingmusic<br /> <br />Apple.Com (2010). Purchasing TV Shows. Retrieved July 6, 2010 from<br />http://www.apple.com/itunes/features/#purchasingtvshows<br />Apple.Com (2010). Renting Movies. Retrieved July 6, 2010 from<br />http://www.apple.com/itunes/features/#rentingmovies<br />Apple Logo. Retrieved July 7 from<br />http://www.viziononline.co.uk/blog/<br />Dilger, D.E (2008) Three Barriers Holding Up Apple TV. Retrieved July 7, 2010 from<br />http://www.roughlydrafted.com/2008/05/30/three-barriers-holding-up-apple-tv/<br />
  17. 17. The Current iTunes Business Model<br />Elmer DeWitt, P (2009). How Apple Profits from the App Store. Retrieved July 6, 2010 from<br />http://tech.fortune.cnn.com/2009/05/14/how-apple-profits-from-the-app-store/<br /> <br />Gigaom (2010). The Apple App Store Economy. Retrieved July 6, 2010 from<br />http://gigaom.com/2010/01/12/the-apple-app-store-economy/<br /> <br />Hansell, S (2008). The iTunes Store: Profit Machine. Retrieved July 7, 2010 from<br />http://bits.blogs.nytimes.com/2008/08/11/steve-jobs-tries-to-downplay-the-itunes-stores-profit/<br /> <br />iBook Image . Retrieved July 7 from<br />http://www.apple.com/ipad/features/ibooks.html<br /> <br />Rappa, M (2010). Business Models On The Web. Retrieved July 7, 2010 from<br />http://digitalenterprise.org/models/models.html<br />Savitz, E (2007). Apple: Subscription Music Service Seems Inevitable. Retrieved July 5, 2010 from<br />http://seekingalpha.com/article/33231-apple-subscription-music-service-seems-inevitable<br />
  18. 18. The Current iTunes Business Model<br /> <br />Schramm, M (2010). iDevices Making Up More and More of Apples Revenue. Retrieved July 6, 2010 from<br />http://www.tuaw.com/tag/graph<br />Starrett, C (2009). HD movies now sold in iTunes Store, iPod versions included. Retrieved July 7, 2010 from<br />http://www.ilounge.com/index.php/news/comments/hd-movies-now-sold-in-itunes-store-ipod-versions-included/<br />

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