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Example: Apple iPod/iTunes Business Model 47

In 2001 Apple launched its iconic iPod brand of por- How did Apple achieve such dominance? Because it
table media player. The device works in conjunction competed with a better business model. On the one
with iTunes software that enables users to transfer hand, it oΩered users a seamless music experience by
music and other content from the iPod to a computer. combining its distinctively designed iPod devices with
The software also provides a seamless connection iTunes software and the iTunes online store. Apple’s
to Apple’s online store so users can purchase and Value Proposition is to allow customers to easily
download content. search, buy, and enjoy digital music. On the other hand,
to make this Value Proposition possible, Apple had to
This potent combination of device, software, and negotiate deals with all the major record companies to
online store quickly disrupted the music industry and create the world’s largest online music library.
gave Apple a dominant market position. Yet Apple was
not the first company to bring a portable media player The twist? Apple earns most of its music-related
to market. Competitors such as Diamond Multimedia, revenues from selling iPods, while using integration
with its Rio brand of portable media players, were suc- with the online music store to protect itself from
cessful until they were outpaced by Apple. competitors.

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