iTunes Revenue Model

iTunes Revenue Model

Introduction

Today, in the age of emerging era of smart technologies services, such as iTunes, are very poplar and easy to recognize. Any application, which can manage applications on iPad, iPod, iPhone and iPod, should be a revenue generating engine. However, internet application has failed to generate a revenue stream for the e-commerce firm. iTunes is popular media player application which is used by customers for organizing, downloading and playing digital video and music files.

Users can connect their iTunes application to iTunes store to download and purchase range of online products such as ringtones (iPhone and iPod Touch 4th Generation), movie rentals, movies, podcasts, audio-books, iPod games, television shows, music videos and so on. Users of the iPod Touch, iPad and iPhone, can use iTunes application to download software for these gadgets. One weakness of iTunes is the inability to transfer music to other portable devices.

Business Model

Apple Inc. introduced iTunes in January 2001. The current version (10.5.2) is downloadable free for Windows and Mac operating systems. A new privacy policy was released by Apple, in June 2010, addressing the collection of location information of real time users (Apple.com, 2011). This policy was not originally included in Apple's public policy.

The online retailing business is quite mature, but, things started to change from 2003. The music industry, its processes and perceptions, started to take a new, successful flight. iTunes have just been introduced by Apple which was a proprietary digital media player app. This launch accompanied a launch of iTunes online music store to provide digital service.

It will not take long, and within five years, the iTunes initiative became the leading music vendor in the US. Taking stats of seven years, the online store sold around 10 billion songs, and it would continue to make headways.

Online business already existed, and so did the online music retailers and these retailers used subscription revenue model. The model was based on charging a fee per month and providing catalog access to subscribers. Rhapsody is an example of such a retailer which was initiated in 2001. Rhapsody was successful in obtaining licenses for main record labels including Universal, Sony, Warner, BMG and EMI. This indicated the feasibility of subscription revenue model in online music retailing (Thevlyhouse.com, 2011).

However, iTunes use a different revenue model. It is called à-la-carte model. Although À la carte is a French phrase to order from a menu and normally used in ...