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At this very moment, are you listening to music on your Apple iPod? Most readers very well could be, because the manufacturer and retailer has achieved 74% market share in the MP3 market. Sony, Microsoft, Samsung, and Yahoo are developing products to compete with the iPod, but none have taken off yet.

The Apple iPod became so popular because it is so easy to use. The iTunes Store, iPod hardware, and software all work together in a very simple manner. To date, 100 million iPods have sold. Other great products also exist in the market, including Toshiba’s Zune music player that works with Microsoft’s digital music store and SanDisk’s Sansa e200R that has gained 9% of the market, but Apple still maintains its strong brand with loyal customers.

To challenge Apple’s dominance, Yahoo is designing a slightly different device that offers wireless functionality and uses wireless technology for Internet access, similar to that available in homes, cafes, and other “hot spots.” Users can download songs without being near a computer, and the device requires a $11.99 per month subscription for unlimited songs.

It is easier for a new product to gain customers who have never owned an MP3 player than to appeal to those who already own an Apple iPod, because customers are less likely to switch brands. They already are familiar with the technology of their existing product, and the brand loyalty they feel toward Apple may be strong enough to ward off competitors until the company can develop the next generation of music technology. For example, the newest technological development in this area is a music-playing cell phone, developed, of course, by Apple, which calls its latest device the iPhone.

Discussion Questions:

1. How has Yahoo created valued for its MP3 player?

2. Compare the pricing of an Apple iTunes and Yahoo?

Nick Wingfield, “A New Wireless Player Hopes to Challenge iPod,” The Wall Street Journal, April 09, 2007.

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