Pakman MIT Sloan Lecture 091508
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David Pakman's lecture to Erik Brynjolfsson's "Economics of Information" Class on 9.15.08
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Pakman MIT Sloan Lecture 091508
- 2. Why aren’t there entertainment retailers who cater only to the tastes of adults?
- 4. eMusic Snapshot • Online Entertainment “Club Model” focused on adults 25+ • Music, Books, more • High-margin subscription business (44% GMs) • Recurring revenue streams (monthly/annual subs) • 425,000 paying members • Download model focused on value and discovery • Songs as low as 25c, audio books for $10 each Monthly Price Songs/Books Price Per $9.99 1 Book $9.99 $11.99 40 songs $0.30 $19.99 75 songs $0.27 • …and more eMusic 20 Oct Confidential 2005
- 5. Subscriber Growth Subscribers 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
- 6. 40% Of all music was purchased by adults in 2001 Oct 20 eMusic Confidential 2005
- 7. 73% Of all music was purchased by adults in 1H2007 Oct 20 eMusic Confidential 2005
- 8. N o2 Digital music retailer in the world Oct 20 eMusic Confidential 2005
- 9. Strong Number Two Market Position A La Carte Download Market Share – The NPD Group Service 2007 iTunes 71% eMusic 10% Amazon 5% MSN Music 3% Real/Rhapsody 3% Napster 2% Yahoo! Music Less than 1% MTV Urge Sony Connect
- 10. 425,000+ Subscribers Oct 20 eMusic Confidential 2005
- 11. 225,000,000 Songs sold in last four years Oct 20 eMusic Confidential 2005
- 12. 4,300,000 tracks 400,000 titles 35,000 labels Oct 20 eMusic Confidential 2005
- 13. MP3 no DRM Oct 20 eMusic Confidential 2005
- 14. Own Your Music Don’t rent it. Oct 20 eMusic Confidential 2005
- 15. How is eMusic Different? • Value • Bundled subscription • Lowest price in the market per track • (But much higher per customer spend) • Compatibility • Works with every device • Ownership vs rental • Discovery • Long-tail service truly sells non-mainstream music • Opposite sales profile from hit services
- 16. Advantages of marginal cost model • Price flexibility unrivaled in physical world • More consumer choice • Add value through services eMusic Confidential
- 17. The consumer is now in control.
- 18. RShare ANts P2P Gnutella P2P Ares Tor eMule Grokster Bit Torrent Free is everywhere. Entropy Kazaa Morpheus Limewire Freenet Blogs eDonkey GNUnet Azureus
- 19. Their life is on-demand and self-programmed • TiVo • Blogs • Pandora • Netflix • iPod + iTunes • YouTube • Facebook • Twitter
- 20. In music, DRM... • Built Apple’s dominance • Allowed iPod to be closed ecosystem • Discouraged legit buyers from buying • Slowed digital adoption • Placed competitors at disadvantage • Lotsa roadkill • Sony Connect • Yahoo! Music • MTV Urge • Musicmatch • AOL Music • Didn’t stop or slow piracy
- 21. In five years, there will be no more... • DRM on digital media • Release windows • 24 hour viewing requirements • Arcane restrictions on how consumers consume • Labels as they exist now