Bus 277 - Apple Corperations and Itunes
Autor: Tim • March 5, 2018 • 1,147 Words (5 Pages) • 534 Views
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As Apple decides on the decision to implementing a more sophisticated pricing system, they need to look at the potential risks and cost of making this adjustment. One risk is that in making this adjustment, they will increase the price of some songs. Apple wants to keep the cost of downloaded songs low because when people buy more of their songs, Apple acquires a second revenue from the purchasing of iPods. By increasing the price, Apple will lose purchases of the songs and IPods. The other risk is that millions of music buyers are using unauthorized networks to swap music without paying for it. If Apple increases the price, the cost would be that more people would have the incentive to not buy the music and acquire it by trading with others. Both of these outcomes in creating a more sophisticated pricing system could cause Apple to lose revenue.
When Apple is pricing its music, its objective is to increase its music revenue and to increase the revenue of its devices that download music. These two revenues are connected because when people want to buy more music from Apple they will end up buying more of Apple’s devices that download music. When determining the price of its songs, Apple has to consider that if they make the songs too expensive to raise the music revenue then they will lose revenue from the sale of its devices. So apple has to consider both revenues when changing the price of the songs. The record companies also want Apple’s revenue to increase because the more revenue that Apple gets, they will get (respectively because Apple pays them for the songs).
Though Apple has possessed the most control over the pricing for downloaded music since 2003, it is very likely that they will lose that control in the near future. The reason why it is likely that they will lose control is because of the increased competition. More companies are creating online stores to download music, and companies such as amazon and other digital network companies are creating ways for customers to play music on their phones. With the increased completion, Apple will not be able to hold onto their control for long.
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