Скачать презентацию Downloadable Music Industry Ryan Herring Jinghua Luo Kevin Скачать презентацию Downloadable Music Industry Ryan Herring Jinghua Luo Kevin

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Downloadable Music Industry Ryan Herring Jinghua Luo Kevin Mack Shahram Rezaei 1 Downloadable Music Industry Ryan Herring Jinghua Luo Kevin Mack Shahram Rezaei 1

Standards n Downloadable music files are generally available in three formats: n n n Standards n Downloadable music files are generally available in three formats: n n n MP 3 (MPEG-1 Audio Layer 3) AAC (Advanced Audio Coding) WMA (Windows Media Audio) 2

MP 3 n n Became ISO standard in 1993 Supported by a large variety MP 3 n n Became ISO standard in 1993 Supported by a large variety of software and hardware Popular in peer-to-peer file sharing, but not in commercial downloads Thomson Consumer Electronics, which controls MP 3 patents, decided to charge licensing fees for MP 3 encoders and decoders in 1998 n Potential lock-in led to proprietary alternatives 3

AAC n n Designed as an open-source successor to MP 3 and became an AAC n n Designed as an open-source successor to MP 3 and became an ISO standard since 1997 Less widely supported than MP 3 n n Apple’s market share: n n Apple: i. Pod and i. Tunes Sony: Play. Station Cell phones from Nokia, Motorola and Sony Ericsson i. Pod: 74% i. Tunes: 85% Dominant standard in commercial music downloads Apple has developed proprietary extension to the AAC format, leading to interoperability problems 4

WMA n n n Proprietary format developed by Microsoft to avoid the licensing issues WMA n n n Proprietary format developed by Microsoft to avoid the licensing issues associated with MP 3 patents Widely supported by a large variety of portable players and online music stores Direct competitor against Apple’s AAC but is still the minority 5

Prospects n Standards war between Apple’s AAC and Microsoft’s WMA Key Assets: Apple Microsoft Prospects n Standards war between Apple’s AAC and Microsoft’s WMA Key Assets: Apple Microsoft Control over an installed base of customers X Intellectual property rights X X Ability to innovate X X First-mover advantage X Manufacturing abilities X Strength in complements X X Reputation and brand names n X X MP 3 continues to dominate peer-to-peer file sharing until a winner from the standards war emerges 6

Pricing n Downloading a song costs $0. 99, almost everywhere legal on the web. Pricing n Downloading a song costs $0. 99, almost everywhere legal on the web. n n Wholesale music price is ~65 c/song. n n Cheaper for album Originally set artificially low in a bid to stimulate demand. Apple sells 84% of all songs sold online. n Plus 75% of all music players 7

Subscription n Apple competitors trying subscription base music downloading 8 Subscription n Apple competitors trying subscription base music downloading 8

Switching Cost n n In order to increase switching cost, providers ask for annual Switching Cost n n In order to increase switching cost, providers ask for annual subscription. In addition, users require installing music engines. n The music engine: 5 MB, 11 MB and 32 MB for Yahoo!, Napster, and i. Tunes, respectively. 9

Apple, One Year after i. POD n n n Apple’s revenue was $2 billion Apple, One Year after i. POD n n n Apple’s revenue was $2 billion at end of 2003. The company's net income grew to $63 million, compared with a net loss of $8 million last year. i. Pod and i. Tunes represent roughly 9 percent of revenue, they are expected to eventually account for more than 50 percent of Apple's revenue. 10

Apple, Present (Source: CNN, October 12, 2005) n In the last fiscal quarter, about Apple, Present (Source: CNN, October 12, 2005) n In the last fiscal quarter, about 6. 5 million i. Pods were sold. n n n Accounting for nearly a third of Apple's revenue. 75 percent revenue gains on its i. Pod and record profits The company's net income rose to $320 million, up from US$61 million in the year-ago quarter. 11

Why just i. Tunes & i. POD? n Success of i. Tunes Music Store Why just i. Tunes & i. POD? n Success of i. Tunes Music Store (i. TMS) is due primarily to: n n n Great digital rights management (DRM) The 99¢ per track song price. i. POD’s success because of: n n Great Physical Design Software & Syncing Music Store One source for all kind of supports 12

Download Price Going Up? n CNN, February 28, 2005: labels The major record (Sony Download Price Going Up? n CNN, February 28, 2005: labels The major record (Sony Music, MEI Group, Warner Music, Universal are in talks to raise the price they charge online retailers. Music, Bertelsmann) n n Similar increase rumored last spring Apple disagrees! 13

Network Effects and Lock-In n n i. Pod's large market share means recording industry Network Effects and Lock-In n n i. Pod's large market share means recording industry forced to sell through i. Tunes. Access to most songs means consumers attracted to the i. Pod over other players. 14

Apple's Competitors n Subscription based music downloading n n Real. Networks (Rhapsody) Napster Yahoo! Apple's Competitors n Subscription based music downloading n n Real. Networks (Rhapsody) Napster Yahoo! Generic MP 3 players n n n Creative Samsung Others. . . 15

Complements n n Large, cheap supply of content available through i. Tunes means increased Complements n n Large, cheap supply of content available through i. Tunes means increased sales of i. Pods Large, cheap supply of generic portable players means more potential customers for other content providers (Napster, etc. ) 16

Microsoft, Real. Networks Partnership n Microsoft increases number of Windows Media Player users n Microsoft, Real. Networks Partnership n Microsoft increases number of Windows Media Player users n n Real. Networks obtains access to MSN customers n n Microsoft can more easily control piracy Can increase subscription orders Good example of “Co-opetition” 17

“All-in-one” Devices n n Cell phone, PDA, music, video, email, internet all in one “All-in-one” Devices n n Cell phone, PDA, music, video, email, internet all in one device Industry consolidation n Apple now providing video on i. Pod, i. Tunes on cell phones Microsoft, Palm create the Treo 650 Companies can't be one dimensional 18

Intellectual Property n Copyright is the primary protection for musical works n n n Intellectual Property n Copyright is the primary protection for musical works n n n Protects original works of authorship fixed in a tangible medium Copyright owner has the exclusive right to reproduce the copyrighted work Copyright protection extends to two elements in a sound recording: (1) the contribution of the performer(s) whose performance is captured and (2) the contribution of the person or persons responsible for capturing and processing the sounds to make the final recording. 19

Online Piracy n n n When a user downloads copyrighted music without permission, the Online Piracy n n n When a user downloads copyrighted music without permission, the user is violating the exclusive right of the recording company and the artist to reproduce the copyrighted work. The Recording Industry Association of America (RIAA) estimates that each year the music industry loses $4. 2 billion to piracy worldwide. Availability of low-cost downloadable music and threat of lawsuits are primary means of combating online piracy. 20

The No Electronic Theft (NET) Act of 1997 n n n Sound recording infringements The No Electronic Theft (NET) Act of 1997 n n n Sound recording infringements (including by digital means) can be criminally prosecuted even where no monetary profit or commercial gain is derived from the infringing activity. Punishment in such instances includes up to 3 years in prison and up to $250, 000 fines. The RIAA is planning to use the Act to prosecute illegal music downloaders in the near future. 21

Digital rights management (DRM) n n n DRM, often referred to as copy protection, Digital rights management (DRM) n n n DRM, often referred to as copy protection, limits what functions a user may perform with digital media. Apple, for example, reserves the right to change at any time what you can do with the music you purchase at the i. Tunes Music Store. For instance, in April 2004, Apple decided to modify the DRM so people could burn the same playlist only 7 times, down from 10. Microsoft, similarly, utilizes Microsoft's Windows Media Audio (WMA) DRM. The future: Sony has announced that it plans on shipping CDs with DRM built-in. DRM has become and will continue to be an essential element to control access of downloadable music. 22

Conclusion n n n Apple Microsoft Online music stores Music labels Consumers Generic MP Conclusion n n n Apple Microsoft Online music stores Music labels Consumers Generic MP 3 players 23