Digital Music Services Core-Edge Working Group Semi-Annual Workshop May 13, 2005
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1 Digital Music Services Core-Edge Working Group Semi-Annual Workshop May 13, 2005 Natalie Klym Core-Edge Working Group MIT Communications Futures Program
2 Outline Evolution of digital music research Overview of today s digital music services Control points Control point constellations Triggers and scenarios
3 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 Analysis is focused on the shift from fixed online to mobile services
4 Overview of today s digital music services Fixed Internet download/stream + Digital music Computer Portable players Portable Music player
5 Overview of today s digital music services Fixed Internet download/stream + Digital music Computer Portable players Portable Music player + Cell phones Cell phone
6 Overview of today s digital music services Fixed Internet download/stream + Digital music Computer Portable players Portable Music player + Cell phones Mobile carriers offer music services Cell phone Cell phone
7 Overview of today s digital music services Fixed Internet download/stream + Digital music Computer Portable players Portable Music player + Cell phones Mobile carriers offer music services and downloads to computers Cell phone Cell phone
8 Control points digital music store network connection sourcing device & software transfer connection portable device & software Content Content Distribution (The storefront) Storefront interface 1ary device (Network) Connectivity 1ary device 1ary Device 1ary device OS 1ary device OS 1ary jukebox + DRM software 1ary jukebox + DRM software 2ary device Connectivity 2ary Device 2ary Device 2ary device OS 2ary device OS 2ary jukebox + DRM Software 2ary jukebox + DRM Software Production of music by Communication network labels or individual artists for connecting to service for provider (Internet, cellular networks or ad hoc P2P) Aggregation and of authorized (or available ) digital files in the appropriate format. (This is the actual Digital Music Service, or Product Creation ) Access to the service provider s storefront via a Web browser, proprietary P2P software, or embedded in playback software Making of the computers/ cell phones for accessing communication networks and playing files. Creation of computer/ cell phone OS Dist. of computers/ cell phones Dist. of computer/ cell phone OS Distribution of jukebox software for the 1ary device Making of the jukebox (playback) software for playing music on the 1ary device Transfer connection (USB, Bluetooth, etc.) Making of the portable players/ cell phone Distribution of portable players/ cell phone Creation of computer/ cell phone OS Dist. of computer/ cell phone OS Distribution of portable player jukebox software Making of the portable player jukebox (playback) software for playing music
9 Control point constellations e.g., itunes Music Store Content Windows Creation Windows PC Online product itms music FairPlay DRM Internet Connectivity itunes player for Mac or Windows itms Storefront interface FairPlay DRM itunes player for Mac or Windows PC Mac Mac OS Creation/ Mac/ USB Connectivity ipod FairPlay DRM itunes for ipod ipod OS Portable product ipod
10 Control point constellations e.g., itunes Music Store Value annotation (preliminary) Content Windows Creation Windows PC Online product itms music FairPlay DRM itms is a loss leader to sell ipods. In 2004, itunes had 70% market share. Project >80% by end of (high volume, low margin) Internet Connectivity itms is free itunes is free itunes player for Mac or Windows itms Storefront interface FairPlay DRM itunes player for Mac or Windows $0 PC Mac Mac OS Creation/ Mac/ Mac sales driven by ipod sales (6% of ipod users switched from PC to Mac in 2004.) $? USB Connectivity The ipod is the centerpiece of the itms strategy. In 2004, the ipod had 92% of the highcapacity device market. ipod FairPlay DRM itunes for ipod ipod OS ipod $25-45 per ipod 52% of revenue low volume, high margin Portable product
11 Control point constellations Key categories User-controlled networks and independent artists/ labels support free and/or untethered music models Online sourcing DRM-free content P2P networks & Indie Web sites DRM d content itunes Music Store MS-based Music stores Services provided by device manufactures like Apple (itms) and Sony (Connect) Dominated by itunes Proprietary DRM (FairPlay) ties music to ipods MS-based stores supported by the Windows Media Player DRM ties music to WMP, which is tied to the Windows platform Mobile sourcing Mobile Carrier services Wireless carriers build their own music stores
12 Relative Coreness of Digital Music Services (tightly-coupled components) Mobile carrier services itunes Music Store Scarcity MS-based Music stores Indie Web sites Unauthorized P2P networks (loosely-coupled components) Demand
13 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
14 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 iphone + WiFi/WiMax
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