The Itunes Brazil online Music Store Feasibility Study

INTUNES IN BRAZIL

THE ITUNES ONLINE MUSIC STORE FEASIBILITY STUDY

TABLE OF CONTENTS

TITLE PAGE 1

TABLE OF CONTENTS 2

INTRODUCTION 3

MACRO ENVIRONMENTAL FACTORS 7

MARKETING MIX 5

HOFSTEDE MODEL ANALYSIS 6

BEHAVIORIAL IMPLICAITONS 7

CONCLUSION 8

INTRODUCTION

The landscape of music industry sales has changed within the last 5 years with the changing technology innovations of computers and the dependency on the Internet. The issue of competition has leveled out due to the ability of services ands products being marketed globally using the Internet. Most importantly, the distance between "buyer" and "seller" has shrunk. Therefore, the "buyer" has gotten more choices and quality when it comes to music. Issues still do exist in the music sales industry. As technology has changed from the 8-track, to cassette tape, to CD, and now, to the music download, the industry has dealt with the issue of piracy. While it is easier to sit down and download music illegally on your computer (with the ramifications of criminal recourse), there are services currently out there that provide legal alternatives for customers to download their favorite music from the Internet. The objective of this study is to determine the feasibility of introducing and selling the iTunes Music Store (iTMS) in Brazil. Macro environmental factors will be analyzed, the marketing matrix will be put into perspective and the Hofstede data will be put into detail.

The iTunes Music Store is an online music service run by Apple Computer through its iTunes computer application. Opened on April 28, 2003, the Store proved the practicality of online music sales. As of February 2006, the Store had sold over 1 billion songs, or more than 80% of worldwide online music sales. Downloaded files come with restrictions on their use (as stated above to combat online music download piracy), enforced by FairPlay, Apple's version of digital rights management. Debuting on April 28, 2003, the iTunes Music Store was the first online music store to gain widespread media attention. Unlike previous services such as Rhapsody and MusicNet, Apple's store allows the user to purchase songs and transfer them easily to the iPod through iTunes. The iPod remains the only digital music player that works with the iTunes Music Store, although some other digital music players work with iTunes (as well as Motorola cell phones). The store began after Apple initiated deals with all four major record labels, EMI, Sony BMG (which at the time was still the separate Sony Music Entertainment and BMG), Universal and Warner Bros. Music by more than 600 independent label artists were later added. The total offering includes more than 2,000,000 songs, including exclusive tracks from more than 20 artists. Each song can be downloaded for 99 US cents. Free 30-second previews are available of every song. Most albums are priced at 9.99 US dollars, although some longer-than-average albums cost more, and others less. The user can burn downloaded songs to an unlimited number of compact discs, and specific playlists up to seven discs.

Currently, the iTMS, is available to consumer whose billing address is in Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, and United States. On June 15, 2004, the iTunes Music Store was launched in France, Germany, and the United Kingdom. Songs were priced at 99 Euro cents (Ђ0.99) for France and Germany, and 79 pence (Ј0.79) for the United Kingdom. According to an Apple Press Release, the European iTunes Music Stores sold a combined total of 800,000 songs in one week, with 450,000 of those songs sold in the UK. On October 26, 2004, nine more countries were added to the iTunes Music Store in a large EU store expansion: Austria, Belgium, Finland, Greece, Italy, Luxembourg, the Netherlands, Portugal, and Spain. This extended availability to all countries in the Euro-zone except for the Republic of Ireland, where the iTMS became available on January 6, 2005. These countries also pay Ђ0.99 for songs, and all these stores share the same catalog and are available only in English. The French, German, American, and British stores are localized for their respective countries and have different catalogs. On December 3, 2004 the British Office of Fair Trading referred the iTunes Music Store to the European Commission because it prevents consumers in one EU country from buying music from stores in other EU countries, in violation of EU free-trade legislation (the immediate cause of the referral was because the Ђ0.99 price charged in the Euro-zone equates to 68 pence in sterling, rather than the 79 pence actually charged there). The iTunes Music Store was launched in Canada on December 3, 2004 (where Canadian customers pay $0.99 (CDN) per song). In May 2005, the iTunes Music Store was launched in Norway, Sweden, Switzerland and Denmark, after about two weeks of speculation about these countries (and Australia) receiving the store. A major crowning achievement was in August 4, 2005, where Apple officially launched the iTunes Music Store in Japan on, with 1 million songs available, and 90% of songs are priced at 150 yen. This marked the first time the iTMS was introduced outside the US and Europe). In the next four days after the store had sold one million songs (which out paced that of the U.S. store). This opening to the world's second largest music market, where iPod controls about 30% market share, came after a long delay. In addition, Apple failed to have one set price for singles. Pundits have speculated that this may indicate the introduction of new price structure to the rest of the stores in future, in favor of record labels who would like to see higher prices for new songs. The iTunes Music Store was launched in Australia on October 25, 2005, where Individual songs were priced at AUD$1.69 per track, and album prices varied but are generally priced at $16.99. The recent release of video-capable iPods also saw the store launch with music videos and short films