Apple's iPod: Digital Entertainment & Music Downloads

Overview of Apple's iPod and digital entertainment options

APPLE POLISHES OFF THE PIRATES Apple's iPod Can Play Thousands of Songs Apple Computer, Inc. wants customers to believe that its Apple computers can be used as digital entertainment centres. One of their steps into the digital entertainment foray was the popular iPod, a portable MP3 player that allows up to several thousand songs to be downloaded from various Internet sources in a matter of minutes. The songs are downloaded to a computer and the transferred to the iPod. Songs can be picked, mixed, and burned on to a CD, saved on an Apple computer or a PC, or transferred to a CD. Several problems with downloading songs have arisen for MP3 users. Some of the downloading sites do not have permission from the recording artists and recording companies to offer the songs; therefore, their legality is questionable. These sites are called "pirate music sites". Other sites have permission but charge subscription fees or limit the number of times a song can be burned onto a CD. Apple Computer itself raised the ire of some in the recording industry with its original marketing slogan for digital users: "Rip. Mix. Burn." In other words, rip off the record companies by downloading songs for free, mix your favourite songs, and burn a CD. Steve Jobs has made amen# with the industry with a new online record store called Tunes. He has won the approval of all five major record labels and believes that his new music store will revolutionize the music industry. iTunes offers more than 200, 000 tracks and charge 990 per song and $9.99 per album. There is no subscription fee; a song can be burned onto a CD an unlimited number of times; and songs can be transferred to an unlimited number of 'Pods. iTunes offers 30-second previews of all songs to allow customers to listen to a song before purchasing it and is integrated into Apple's digital music jukebox software. Users can pick, purchase, download, organize, and listen with one application. This move may launch Apple from computer company to entertainment company. What information did managers at Apple need to have in order to make the decision to offer this service? Consider the following questions. (a) Would this situation justify the use of marketing research? Why? Why not? Because the purpose of marketing research is to `...link the consumer to the marketer by providing information that can be used in marketing decisions," this situation certainly calls for marketing research information. One use of marketing research is to identify marketing opportunities, and this is clearly an opportunity that merits research. One can do the "numbers" to estimate the size of the market, and it will come up in the hundreds of millions of dollars. (b) Are consumers concerned enough with the legality and ethicality of the "music pirates" to pay for songs rather than downloading for free? Here, students may offer their opinions, but the point is that marketing research is needed to determine how users and potential users of iPod view such pirating. There are two questions: Is it legal, and is it ethical? The legality answer is straightforward when one considers copywrite laws: it is illegal to rip and burn. However, most likely the individual ripper will feel that it is okay (ethical) to rip a few tunes now and then. Regardless, Apple needs research to understand how its prospective customers stand on these issues. (c) If consumers would pay for the tracks, how much would they pay? The case does not, explain the pricing of 99 cents a tune and $9.99 oer album. Price sensitivity research is needed. (d) Are current online sites enough of a hassle to warrant a new competitor in the market? Here, research needs to be conducted to determine bith the experiences and perceived ease of difficulties of using the pirate sites. Apple should go forward if a substantial number of potential customers feel that pirating is illegal, or ethical, or a hassle and worth the price of an iPod.