The survey by market research firm NPD Group found that approximately 1.7 million U.S. households downloaded a song from iTunes in March, 2005. On NPD's list of the top 10 digital music services, iTunes was ranked ahead of file-sharing companies such Kazaa and iMesh. Other paid online music services such as Napster and RealNetworks' RealPlayer store also edged onto the list. Apple’s iTunes Music Store clearly dominates the authorized digital marketplace today. The reasons why iTunes has been so successful were:
1. Leverage of iPod’s success – As a device manufacturer, Apple’s business model was predicated on the success of the iPod, which was introduced before the iTunes Music Store as an open MP3 player. Apple subsequently leveraged the icon status reached by the iPod, and made it a major control point in the iTMS business model by providing a more streamlined content supply channel to the device via the iTunes proprietary software. The integrated aspect of the iTunes + iPod experience is generally regarded as a key success factor. In effect, the easiest way to fill an iPod with digital music is through the iTunes Music Store.
2. Huge Content & Unique Pricing Strategy – By April 2003, iTunes offered around 200,000 songs from all five major music companies. While individual songs were priced at $0.99, the entire album cost $9.99. This was a good strategy for users who specifically wanted a single song, as now they wouldn’t have to shell money out for an entire album. It was highly economical compared to average price of $13 of a CD, if purchased from a brick-and-mortar store. iTunes users pay no monthly subscription fee and were not subjected to complicated download usage restriction.
3. Easy to Use – The process of obtaining content, an important part of the experience. ITunes provides a unified interface that seamlessly integrates the location, purchase, and consumption of content. Users of p2p networks, on the other hand, must navigate a complex environment and endure varying levels of congestion that hinder the quality of the process. iTunes certainly has the upper hand in this area.
4. Fast Downloads – One of the most important comparative advantages of iTunes is that it offers fast downloads because the client-server model allows the operator to manage congestion by simply adding more servers.
5. Portability – Apple was the first major business to understand that consumers want music purchased on the Internet to have the same properties as music they bought at a CD store. Consumers want to be able to make MP3 files, CD's or even cassettes of the music they buy. iTunes offers such portability.
2 Digital Music Distribution by Natalie Klym
3 RealNetworks Rhapsody by Thomas R. Eisenmann, Steven Carpenter
4 Delivering the Digital Goods: iTunes vs. Peer-to-Peer by: Sean Silverthorne