Not a bad proposition for Apple with earns any where around 30 % commission on the sale.
Apple itunes has a catalog of more than 700,000 songs, this includes music from all major labels. The original idea of the launch of stores in iTunes was to give liberation to the customers which felt they can’t download the music under subscription model. The services available were not very convenient as Internet speed was that good and also the customers can mix and match the music.
How did Apple achieved all this. Firstly, the content was of high quality. Apple signed up with all big five music label. Universal, Warner, BMG, SONY and EMI. Stickiness to the software and programs are maintained by providing more new content like video, movies etc.
Secondly, Pricing- à la carte pricing make the music store feel like P2P in certain ways. At a price of $ 0.99 you get numerous options and great flexibility that offer unparalleled value to the customers.
Thirdly, timing. The back drop was of Napster P2P so big music labels were also willing to create more outlets for customers to opt for legal purchase. They were also willing to negotiate flexibility in terms of contracts with music vendors.
Competition, Apple used this opportunity to stiffle competition with its own version of accessibility control. The Apple’s DRM Fairplay was fair only to its own products, particularly iPod. No doubt the iTunes software and iPod interface created new benchmarks for ease to use and flexibility for the music customers. This kind of integrated model was no where available in the industry. The right match of hardware and software made apple march several miles ahead of competition
However, competition is catching up. Real networks operates operates its à la carte Music Store as well as its subscription service, Rhapsody. Nokia offers unlimited music with it models labeled as comes with a music. However, Apple has an advantage of vast library that is not matched and die hard fan which are difficult to come by.