Digital Music Services
Core-Edge Working Group Semi-Annual Workshop
May 13, 2005
Natalie Klym
Core-Edge Working Group
MIT Communications Futures Program
[email protected]
Outline
•
Evolution of digital music research
•
Overview of today’s digital music services
•
Control points
•
Control point constellations
Evolution of digital music research
•
September 2004
– Scope of research limited to online PC-download services (P2P and Web)
– Analysis focused on centralized (client/server) vs decentralized (P2P) services and the tension between authorized and unauthorized services
•
January 2005
– Scope expands to include online streaming services and mobile (cell phone) services
•
May 2005
– Scope expands further to include multi-channel (Internet + cellular) offerings – Control points & constellations have changed
Computer Portable Music player Digital music
Overview of today’s digital music services
Computer Portable Music player Digital music Cell phone
Overview of today’s digital music services
Fixed Internet download/stream + Portable players
+
Cel
l phon es
Cell phone Computer Portable Music player Digital music Cell phone
Overview of today’s digital music services
Fixed Internet download/stream + Portable players
+
Cel
l phon es Mobile carriers offer music services
Cell phone Computer Portable Music player Digital music Cell phone
Overview of today’s digital music services
Fixed Internet download/stream + Portable players
+
Cel
l phon es Mobile carriers offer music services
Control points
Access to the service provider’s “storefront” via a Web browser, proprietary P2P software, or embedded in playback software Aggregation and distribution of authorized (or “available”) digital files in the appropriate format. (This is the actual Digital Music Service, or “Product Creation”) Production of music by labels or individual artists for distribution
Making of the computers/ cell phones for accessing communication networks and playing files.
Making of the jukebox (playback) software for playing music on the 1ary device
Making of the portable players/ cell phone
Making of the portable player jukebox (playback) software for playing music
Distribution of portable player jukebox software Communication network
for connecting to service provider (Internet, cellular networks or ad hoc P2P)
Dist. of computers/ cell phones
Transfer connection (USB, Bluetooth, etc.) Distribution of jukebox
software for the 1ary device Distribution of portable players/ cell phone
digital music store
network connection
sourcing device & software
transfer connection
portable device & software Co ntent crea tion Co ntent Dist ribution (The sto re fr ont) 1ary device crea tion 1ary Device distribution 1ary jukebox + DRM so ft ware cr eation 1ary jukebox + DRM sof tware dist ribution 2ary Device crea tion 2ary Device distribution 2ary jukebox + DRM Software cr eation 2ary jukebox + DRM Software dist ribution
1ary device (Network)
Co nnectivity Storef ron t inter face
1ary device OS crea
tion 1ary device OS dist ribution 2ary device Co nnectivity
2ary device OS crea
tion 2ary device OS dist ribution Creation of computer/ cell phone OS Dist. of computer/
cell phone OS Creation of computer/
cell phone OS
Dist. of computer/ cell phone OS
Content creation iTMS music Internet Connectivity Mac OS Creation/ distribution Mac distribution iTMS Storefront interface Mac/ creation USB Connectivity iPod OS creation iPod distribution iTunes for iPod iPod creation FairPlay DRM FairPlay DRM FairPlay DRM Online product Portable product iTunes player for
Mac or Windows distribution PC distribution Windows distribution PC creation
iTunes player for Mac or Windows
Windows Creation
Content creation iTMS music Internet Connectivity Mac OS Creation/ distribution Mac distribution iTMS Storefront interface Mac/ creation USB Connectivity iPod OS creation iPod distribution iTunes for iPod iPod creation FairPlay DRM Online product Portable product
The iPod is the centerpiece of the iTMS strategy. In 2004, the iPod had 92% of the
high-capacity device market. iTunes is free
iTMS is free iTMS is a loss leader
to sell iPods. In 2004, iTunes had 70% market share. Project >80% by end of 2005.
$25-45 per iPod
52% of revenue
low volume, high margin
iTunes player for Mac or Windows distribution PC distribution Windows distribution PC creation
iTunes player for Mac or Windows
$0
Windows Creation
Control point constellations – e.g., iTunes Music Store
Value annotation (preliminary)
0-4¢
(high volume,low margin)
FairPlay DRM
FairPlay DRM
Mac sales driven by iPod sales (6% of iPod users switched from PC to Mac in 2004.)
Online sourcing
Mobile sourcing
DRM-free content DRM’d content
iTunes Music Store MS-based Music stores Mobile Carrier services
Control point constellations
Key categories
P2P networks & Indie Web sites
• Wireless carriers build their own music stores
• MS-based stores supported by the Windows Media Player • DRM ties music to WMP, which
is tied to the Windows platform • Services provided by device
manufactures like Apple (iTMS) and Sony (Connect)
• Dominated by iTunes
• Proprietary DRM (FairPlay) ties music to iPods
User-controlled networks and independent artists/ labels support “free” and/or untethered music models
Demand
Relative Coreness of Digital Music Services
Scarcity
iTunes Music Store MS-based Music stores Mobile carrier services Unauthorized P2P networks Indie Web sites(tightly-coupled components)
Triggers – threatening the iPod model
•
iTunes + iPod model dominates (authorized) digital music today
•
The model is based on the dominance of the iPod as the destination device
•
Two key triggers threaten the popularity of the iPod
1. MS PlaysForSure initiative
• WMP-supported online stores and devices are endorsed with the PlaysForSure logo
• Brings an end-to-end perception to MS-based services
• PlaysForSure stores + PlaysForSure devices
• iPod may lose some market share to MS-PFS devices
• Related trigger – MS Janus enables portable subscription services
2. Device convergence
• As handsets improve, expect the cell phone to replace the iPod as the primary device for mobile playback
• As networks improve, the cell phone may also replace the computer as the primary device for mobile sourcing
• Related triggers – ringtones (& radio) help transform the phone into a musical device
Scenarios – how will Apple respond?
1. license FairPlay DRM
• to other handset manufacturers
• iTMS music playable on other portable devices
• to handset manufacturers
• Apple has licensed FairPlay to Motorola
• Without mobile sourcing, carriers are resisting
2. Create an iPhone
• Apple makes its own phone that replaces the iPod
• The smaller iPods are marketed as a complementary device (not a substitute) for music only
• Without mobile sourcing, carriers would resist this too
3. Create an iPhone + mobile network
• Apple bypasses carriers
• iPhone + Apple MVNO
