Ipod Case Study

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  • Published : September 2, 2007
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When Apple first entered the mobile music market in September 2005 with their partnership announcement between Motorola and Cingular Wireless to produce the ROKR, Apple’s strategy was to tap into the potentially huge market for mobile music devices and services. Apple’s contribution to the partnership was to offer access to their highly successful iTunes music service, allowing Motorola to design and develop the physical handheld mobile device and Cingular to provide the wireless data services. At this point in time, this was the best strategic approach to break into the market because it provided Apple with an opportunity for continued expansion of the iTunes user base. Though a loss leader for Apple, the widespread adoption of the proprietary platform opened the market for sale of the iPod where Apple enjoyed an average margin of 25%. The Motorola-Cingular partnership allowed Apple to gain some exposure and experience in the mobile aspect of the digital music ecosystem without cannibalizing the rapidly growing sales of iPod (a 600% increase between 2004 & 2005). Despite the failure of ROKR, their early entry gave Apple invaluable knowledge to plan for future design innovations ahead of their competitors. Although 2006 projections indicated that iPod would continue as the leader in portable music devices (50% by 2010), the mobile device market was maturing and annual growth rates had slowed. Apple recognized the introduction of the iPhone as a key to maintaining sales volumes and sustaining their dominant position in the portable music device market. By handling the design of the iPhone in house, Apple was able to capitalize on the successful design of the iPod, already well received by their customer base, and to exercise their strength in innovation. Apple was now in a prime position to capitalize on the predicted rapid growth in the retail digital music space and mobile music market. What are the benefits and risks of partnering with Cingular in an...
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