Incumbent Inertia: Ipod
Apple's iPOD arrived in October 2001 as a disruptive technology in the portable audio industry. Sony the incumbent portable music devices leader failed to match Apple. Since iPOD's launch it has sold over 2 million units and captured over 31% market share. The innovators were 'Apple' loyal Mac consumers. Apple then targeted other customer segments, non-Mac MS-Windows users and more recently price-sensitive users with a stripped down iPOD, the iMini.Our paper discusses why Sony hesitated to enter the market -its fear of music piracy and erosion of Sony Music's revenues. We consider the Sony organisation, its effect on Sony's leadership in portable music and Sony's recent actions to catch-up. We look at Sony's soon to be released innovative PSP player and Sony's platform challenge to the iPOD, their technology strategy and their impact on market adoption. The global market for portable music players is valued at US$15.5 billion and has been relatively stagnant for over 10 years. Some country differences exist: China, the largest market has grown consistently during the period, while Japan, the second largest market has been shrinking. Traditional products su
Sony's ResponseSony's response to Apple has been relatively slow. It took a long time for record companies to buy into online distribution, but now that a "paying" model has been proven to work, they will be more open to licensing their music to other online retailers already in existence. Apple has gone after critical alliances, sharing its technology (not licensing it yet - the real test for someone making a play to be the next platform). com, a digital music portal partly owned by Sony's new technology and business development (VC) unit. Its current mp3 players retail at around US$130 and US$299 for 128MB and 256 MB respectively. To ensure comprehensive diffusion, iTunes was made compatible with both Mac and Windows users. ch as Sony Walkman, Discman and portable stereos have dominated, with Mini-Disc (MD) technology gaining traction in the late 1990's, enabling Sony to achieve market leadership with 16% share, followed by Pioneer and Kenwood with 7% each. · Cannibalise your own product - before someone else does: No technology lead is safe; hence incumbents must pursue all opportunities aggressively. iTunes emergence is seen a weapon against online music piracy, having reclaimed the ground lost by the music industry to illegal, free online providers, such as Napster. iPOD Mini offers only 4GB of memory retailing at $249 (compared to the iPOD starting at 15GB retailing from $299). However, as commodity type markets for hardware (mp3 players) and music distribution (mp3 format) develop, cost leadership, distribution and marketing capabilities become increasingly important for the quick win, over and above innovation. Cheap imitators are already beginning to enter the market (eg Dell's Digital Jukebox). Apple has also found niches for its iPOD in lifestyle and fashion. At launch, the Connect service will feature more than 500,000 tracks from major music companies and independent labels and have similar functionality and pricing to iTunes.
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Acceptance Essays
