Question

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 amends with the industry with a new online record store called iTunes. 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 99¢ 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 iPods. 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?

(b)Are consumers concerned enough with the legality and ethicality of the “music pirates” to pay for songs rather than downloading for free?

(c)If consumers would pay for the tracks, how much would they pay?

(d)Are current online sites enough of a hassle to warrant a new competitor in the market?

Answer 1

A. Yes this situation would demand market research. To know whether customers want another music website, to know how much they would be willing to pay, to know the possible market penetration etc., we need to do market research. And all of these questions must be answered before making a business plan.

B. From a personal standpoint, no the customers are not that concerned about the legality of it. These sites mostly work in a grey area and there are no clear laws and punishments and hence most customers are not concerned about it.

C. Customers are far more willing to pay for subscriptions that give them unlimited access to songs (ala Spotify) than paying per song. And is paying per song, they are not willing to pay more than 10 cents a song, on an average.

D. The current sites are indeed an hassle. Legality is one problem, but another is to find which site is safe to visit and which sites are fake and install spyware, viruses etc on your computer. Another is to find songs which and downloading. Not all songs are available on all sites. Many of these websites often shut down due to legal issues etc and then one has to look for another similar website.