Where can I store music files on the Internet?

Internet Economics, value creation, & apple iTune's music store

• How is value created in the Internet econmics? - how does lock in effect influence value creation? - What is/are the definition(s) of Information goods? - What is the role of the Internet in the music industry? - Business models of online Music stores? - How is the competitive and operation strategies of Apple iTune's music store going to sustain its survival in the Internet age?

• Answer:

  Hello there, cloudust-ga! I have compiled some interesting information which should help to provide answers to the series of questions you have asked. If anything is unclear or you need further clarification, please don't hesitate post a clarification request. I will try to help in whatever way that I can. Otherwise, I hope this information will help you to understand the current status of the online music industry and Apple's position with iTunes. **************************************************** 1. How does Lock-In effect influence value creation? **************************************************** The purpose of Lock-in is to create an atmosphere which encourages repeat business and customer loyalty. A successful lock-in program will certainly enhance and create product value. Lock-in ---------- * "The value creating potential of an e-business is enhanced by the extent to which customers are motivated to engage in repeat transactions. It is also increased by the extent to which their strategic partners have incentives to maintain and improve their relationships with customers. These value-creating attributes of an e-business can be achieved through lock-in." "Organizations have adopted several ways to retain customers. Some have adopted loyalty programs rewarding repeat customers with special bonuses. barnesandnoble.com?s rewards program in collaboration with Master card is one such instance. Some firms develop dominant design proprietary standards for business processes, products and services. For example Amazon?s patented shopping cart. A number of firms try to nurture a trustful relationship with customer. Consodata, a European direct mailing firm, for instance, demonstrates this ideal by promoting in-house systems to protect data from misuse by accommodating regular stringent inspections. If relationships can be well nurtured, customers can be made to remain loyal to the site." Lock-in * Loyalty programs * Dominant design * Trust * Customization From "WINNING IN THE E-BIZERA." The Economic Times. http://www.etgmr.com/gmrapr-jun2/art6.htm == Lock-In: * "This refers to the ability of a business model to prompt users to engage in repeat transactions. "Lock-in can be enabled, for example, by creating switching costs that customers would face if they were to switch to a different service provider. Switching costs are created through loyalty programs (beenz.com), by providing transaction safety and creating the perception of trust, through familiarity with the site, and also through customization and personalization. One simple example of a company that uses lock-in effectively is Amazon.com, which has developed an extremely simple "one-click ordering system" for customers who order books, videos, CDs or other products. This ease of use-as well as the fact that Amazon?s database has credit card information on file for its customers that can be used for transaction after transaction-locks in buyers who return for more purchases. Another instance of a company that developed an effective lock-in strategy is Hotmail, the e-mail service that now belongs to Microsoft. Hotmail grew rapidly by offering free e-mail services to clients. Once these customers had signed up to receive their e-mail through Hotmail, the inconvenience of having to change e-mail addresses represented the switching cost that kept them loyal even after other providers began offering free e-mail." From "Creating Value Through E-Commerce Business Models." Strategic Management.(2000) http://knowledge.wharton.upenn.edu/articles.cfm?catid=7&articleid=254 ************************************************ 2. What is the definition of Information Goods? ************************************************ Some definitions of "Information Goods" follow: "A number of authors have provided definitions of the term information good. Phetig (1988, p. 463), for example, defines an information good as 'a set of information pieces which is well-defined in its contents, its quantity and its specific presentation.' "Information goods have evolved from goods that had to be instantly consumed (because storage was not possible) to the current digitized version, that can (in principle) be sent simultaneously, costlessly and in no time whatsoever to anyone in the world." From "Information goods, definition and history in a nutshell." http://www.cpb.nl/nl/pub/werkdoc/119/gf/3.html = "Let us first seek a general characterization of the ICE economy. The basic unit that is transacted is what I call ``information goods.'' I take this to be anything that can be digitized--a book, a movie, a record, a telephone conversation. Note carefully that the definition states anything that can be digitized; I don't require that the information actually be digitized. Analog representations, of information goods, such as video tapes, are common, though they will likely become less so in the future." From "Markets for Information Goods," by Hal R. Varian. University of California, Berkeley. April 1998 (revised: October 16, 1998 http://www.sims.berkeley.edu/~hal/Papers/japan/japan.html#SECTION00020000000000000000 ************************************************************ 3. What is the role of the Internet in the music industry? ************************************************************ The internet is providing a new distribution channel to the music industry. Any new distribution channels will serve to increase sales and promote the music industry to new audiences. The following articles provide some recent statistics: "More than 19.2 million digital tracks were sold online in the last six months, according to Nielsen Soundscan, helping to narrow the music industry's losses last year. Overall North American music sales were down 0.8 percent last year over 2002 while album sales, which includes cassettes and other formats, were down 3.6 percent, says Nielsen Soundscan." "Edgar Bronfman Jr., the former Universal Music chief who last month led a group of investors in the purchase of Warner Music from Time Warner Inc., said he believes digital music sales will eventually help the industry recover - although continued pain will precede the healing." "I think that the industry is going to see continued difficulty for a couple of years," Bronfman told The Associated Press. Bronfman said the music industry has only begun to tap the potential for digital distribution and that it's going to take time for the different business models to develop and grow. "Online Services Give Music Industry Hope," by Alex Veiga. Kansas City Star. (Jan. 11, 2004) http://www.kansascity.com/mld/kansascity/business/7686922.htm (you may not be able to access this article without filling out a free subscription) == "The vast majority of music is still sold in stores, but Internet sales are increasingly rapidly. About 4.5 percent of global music sales this year will come through downloads, subscriptions to streamed music, and online sales of tapes and CDs, according to a report by Informa Media Group, a British consultancy. That figure is expected to rise to 11.9 percent by 2008." From "New business models emerge in Net music," by Chris Gaither. Boston Globe Staff. 10/6/2003 http://www.boston.com/business/technology/articles/2003/10/06/new_business_models_emerge_in_net_music/ == "Last spring, when Apple Computer introduced its iTunes Music Store, the company had the nascent field of legal music downloading mostly to itself. By mid-2004 there likely will be nearly a dozen companies jockeying for the same customers." "Recorded music is "a $30 billion business worldwide, and $30 billion is a lot of money," said Phil Leigh, an analyst with Tampa-based Inside Digital Media, in explaining the rush to set up online music stores. And it hasn't hurt that Apple proved there is a market by selling more than 30 million songs since it kicked off its online service last April." "A variety of factors are contributing to the rush toward online music distribution. Prodded by flagging sales and a surge in illegal downloading, the music industry has become much less restrictive in licensing its tunes to legal download services." "High-speed Internet connections have also become much more common, making downloading faster and more convenient. Consumers, particularly younger music buyers, are now more comfortable with the notion of buying things -- from music to books to cars -- over the Internet." "I think we're witnessing a real gold rush, and there are a lot of streambeds where companies can stake a claim," Leigh said. "But like the Gold Rush of 1849, there will be plenty of big losers as well as winners." ** "We're living through an important juncture in music history," (says Mitch Bainwol, chief executive officer of the Recording Industry Association of America). "Six months ago, people didn't know they could download music legally. Now the whole terms of the debate have changed." From "Sign on, tune in, download," by Clint Swett. Sac Bee. (January 18, 2004) http://www.sacbee.com/content/business/story/8123034p-9055119c.html ***************************************** 4. Business Models of Online Music Stores ***************************************** According to a recent article on CNET, the online music business models now being used include the A-la-carte approach, the Subscription Model and the Streaming Model: The a la carte approach ======================= This approach is employed by companies like Apple iTunes. "Customers can buy individual tracks for 79 cents to $1.20 or albums for $9.99 and up, and buy as few or as many tracks as they want. They can--after downloading music to their hard drives--burn it to CDs, copy it to portable music players or, if they have the right equipment, stream it around the house by way of their existing entertainment centers." The subscription model ======================= "Customers pay a monthly fee and then download a specified number of songs each month. For $9.99 a month, emusic lets its customers download 40 songs and use them in whatever way the buyers want. For $14.99, customers get 65 songs." The streaming model ==================== RealNetworks'Rhapsody is one online company that uses this type of business model. "Music lovers pay a monthly fee, then listen to as many songs a month as they can stand. Downloading is extra, usually under a dollar a track." From "Online music's winners and losers." Knowledge@Wharton. Special to CNET News.com (December 27, 2003) http://news.com.com/2030-1027_3-5133561.html ******************************************************************************* 5. How is the competitive and operation strategies of Apple iTune's music store going to sustain its survival in the Internet age? ******************************************************************************* While there are differing predictions concerning which online music business model will eventually be most successful in the future, Apple iTune's model is certainly a success at the present time. Steve Jobs, who is responsible for iTunes, does not hesitate to stress why iTunes business model is poised for continued success. = "Apple's Steve Jobs recently told Rolling Stone magazine that music ownership is an ingrained habit, one that will always prevail: "People don't want to buy their music as a subscription. They bought 45s, then they bought LPs, they bought cassettes, they bought 8-tracks, then they bought CDs. They're going to want to buy downloads." Jobs, of course, is the mind behind iTunes and so could be somewhat partisan. But he may have a point because even with music it is important to remember that people--especially Americans--like to own things." "The possibility that streaming music providers could go out of business, leaving subscribers with "nothing to show for their money," coupled with the prohibitive nature of subscription fees for those on a limited budget, places iTune in an advantageous spot. Furthermore, Apple's iTune customers can "flit from download site to download site to fulfill their varied tastes in music, one track or one album at a time," giving iTune a distinct advantage over other online music business models." From "Online music's winners and losers." Knowledge@Wharton. Special to CNET News.com (December 27, 2003) http://news.com.com/2030-1027_3-5133561.html == In fact, Apple iTune's business model has been so successful that other companies are rushing to hone in on the market. Unfortunately, such imitation will mean more competitors in the dowloadable music marketplace. "The rush of companies offering or working on download services signals that established technology companies believe broad audiences are ready to pay to download songs." "Since Apple Computer Inc. launched its iTunes Music Store, which has sold 10 million songs, established e-commerce and computing players have signaled their intention to follow. The success of iTunes comes in spite of the fact that the service is available only to the 3 to 5 percent of computer users on the Macintosh platform." "The most recent entrant was Dell Inc., the leading maker of personal computers. Following the path set by Apple, Dell said last month that it would soon introduce a digital music player, as well as a music-download service to fill the player with songs. Dell would not reveal details about the service, such as how many songs it plans to offer, or whether it would also allow streaming music." From "New business models emerge in Net music," by Chris Gaither. Boston Globe Staff. 10/6/2003 http://www.boston.com/business/technology/articles/2003/10/06/new_business_models_emerge_in_net_music/ === Apple has recently made a radical departure from it's former policies by announcing a joint venture with Hewlett-Packard to bundle Apple iTune's online music store onto HP's personal computers. This strategy should help the Apple iTune's remain near the top of the online music industry for the coming years. "The partnership is a coup for Jobs, who has gained significant leverage in the past year because of Apple's success in the burgeoning digital music business. The move gives Apple, which has long been pigeonholed as a niche player in the personal computer industry outside the Microsoft-Intel mainstream, access to major marketing channels and retail chains like Best Buy, CompUSA and Office Depot where Hewlett has a powerful presence." "For Hewlett, the alliance provides instant access to Apple's technology and music rights and the opportunity to offer a full range of popular digital products to consumers while gaining newfound independence from Microsoft and a significant advantage over Dell Computer, which sells its own music players only online." * ...the new alliance underscores the feverish deal making now going on as computer makers, consumer electronics companies and content providers all jostle for position in the uncharted territory converging around digital entertainment." "The next big thing isn't the next gizmo or killer app or hot box," Fiorina said. "Customers want all this to work together, and they want a seamless approach. We're very much going to make sure that the Microsoft and Apple worlds work together. That's part of the power we bring to this thing." From "Hewlett-Packard and Apple forge partnership on digital music," by John Markoff. International Herald Tribune (January 9, 2004) http://www.iht.com/articles/124362.html Additional Resources ==================== "Tech titans flex online music muscle," by Kevin Restivo. Financial Post (January 15, 2004) http://www.canada.com/technology/story.html?id=EBC850CA-D3E8-4230-822A-D45C8AC6E2BA == I hope you can put this information to good use! umiat-ga Google Search Strategy "lock in" and "value creation" "business models" online music "information goods" definition information goods online music industry Apple iTune Apple ITune "competitive strategy"