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Thursday, February 10, 2005

Napster Vs. iTunes: Winning Business Model

It is generally beleived that the fight between enteprises are essentially fight between respective business models - all other things being equal. In the emerging entertainment industry there are unrelated business strategies being pursued by Apple and Napster. John M. Moran writes about interesting comparison between napster and iTunes business model.
On one side was Apple's iTunes digital music service, far and away the most popular place to buy songs over the Internet. Pay 99 cents for a song and then download it to your personal computer or iPod portable music device. Apple is promoting iTunes by teaming up with Pepsi to give away thousands of free songs. What makes the contest between iTunes and Napster truly fascinating is the different approaches to selling music online that they represent. Napster takes a radically different approach that essentially says: Why buy a little music when you can rent much more of it instead?Consider that it costs about $15 for 15 iTunes downloads. But that same $15 would buy a month's worth of unlimited access to Napster's giant music collection. In short, for the cost of a single audio CD, Napster gives you access to thousands. But unlike iTunes, you can't burn these songs to a CD and they will play only as long as your Napster subscription remains active.

And with its "Napster To Go" service, Napster has managed to offer digital music lovers the same kind of portability that has made the iPod a household word. The question now is whether consumers are ready to shift their way of thinking about how music is acquired and used.The iTunes approach - pay for the music and it's yours forever. But the vision promoted by Napster argues that if you love music, really love music, you're better off leasing it. And there's some pretty compelling logic to support that view.
Even if you buy a new CD every month, in five years you will still only have a modest collection of 60 CDs. That's hardly enough to satisfy even casual listeners, much less hard-core music lovers.For that same expenditure, Napster says, you could have one of the biggest music collections in the world. Thousands of titles by hundreds of artists, all just a mouse-click away. Such a collection would cost tens of thousands of dollars to buy, putting it out of the reach of all but the most dedicated - and richest - music fans. At $15 a month, it's affordable by almost anyone. The buy-vs.-rent calculation only leans in favor of people who listen to a lot of different music. Music fanatics, families with diverse and changing musical tastes, and even people who just want hassle-free variety might decide that renting music beats owning it after all.

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