Thursday, January 15, 2009

Business models are changing in the music industry

Apple is now changing Itunes' business model selling songs at three different price levels instead of one, getting rid of the Digital Rights Management and enabling downloads over the mobile network. The changes are of course a response to the increasing competition with Amazon, that is already providing DRM free music and companies such as Spotify with the option of ad-financed streaming of music or subscription based ad-free streaming. (I believe Steve Jobs might very soon regret his statement that people want to own their music, not rent it). Apple and the music labels have been forced to leave DRM as a control mechanism to protect profitability and Itunes will have to rely on other mechanisms such as good device-store synchronization, switching costs for users, low price for songs etc.

Nokia, as one of the early mobile phone manufacturers focusing on services, recently released its “Comes with Music” only allowing music to be transferred between Nokia devices. With Apple's change in Itunes' business model and music streaming probably soon fully available over the mobile network, Nokia will definitely need to reinvent its business model.

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