Technology of the week: Business models compared Blendle vs. iTunes
Technology of the Week: Electronic Markets and Auctions
The business models of iTunes and Blendle compared
In recent years, information technology and the internet have drastically changed how markets and auctions work. In electronic markets, supply and demand meet by means of an electronic platform. An e-market as market maker provides a new potential source of revenues for all involved participants; namely customers, suppliers and the e-market provider itself, which is iTunes in the music industry and Blendle in the publisher industry. The ones who come up with an innovative idea can have a very disruptive impact in its industry. So were the founders of Blende thinking: ‘Why pay a monthly or even a yearly subscription fee of the newspaper while only interested in just a few articles of the paper?’. Blendle is an electronic market where various individual newspaper and magazine articles can be bought for a small price. This relative new startup has disrupted the publisher’s industry like iTunes has caused a major shift in the music industry. Where traditionally music was bought in whole albums or cd’s, iTunes enabled customers to separately purchase songs. This way, customers are now buying single articles and songs which they might have never bought if they had to buy the whole newspaper or album (Malone, Yates and Benjamin, 1987).
iTunes was the first to disrupt the music industry by providing an online platform where consumers can buy any song separately out of the biggest base of music globally available. This began with a great success which makes it remarkable that it took the publishing industry so long to come up with a comparable platform, because this research has made it clear that the business models have many aspects in common. Therefore, the business model of iTunes seems to be successfully applicable for Blende as well, which might be the reason that investors consider this relatively new startup as extremely promising. It turned out that iTunes missed the technological development of music streaming, which, in spite of the strong positioning of iTunes, has made room for new competitors resulting in a big loss in market share in the music industry (AdWeek, 2015).
A remarkable similarity is that both business models are e-markets that bundles suppliers to make a personalized offer for customers, resulting in an easier way for customers to find what they want as well as a way to offer a customer the broadest offer globally available, the so called long tail principal. This has been made possible by the internet and is the main driver for the success of both business models. They serve the mass market as well as the niche market on a worldwide level. Therefore, this kind of companies tend to be or become very profitable as they both charge a fee for every item sold. In addition, both business models leverage the network effect it has gained as first mover, this includes that their platforms become even more powerful while its customer base increases. Finally, it can be seen as advantageous that the costs are limited to platform maintenance and business development.
iTunes has clearly shown that its business model not necessarily has to hold on regardless of the strong position gained by both companies. As a result of technological developments, namely music streaming, iTunes suffered from a huge loss in market share. This technology has made it more attractive for customers to offer unlimited consumption of music for a monthly fee, enabling new entrants to develop more advanced options with the collected data. So far Blendle competes only with physical publications as there are no signs of technological developments that could disrupt the industry again. Although the possibility of giving customers unlimited access for a monthly fee seems to be preferred by customers, looking at what happened with the music industry, Blendle might be aware of the impact that a new entrant introducing this business model could have. Apple has introduced Apple Music in an attempt to fix the incurred loss in market share. Blendle could avoid being forced making such a strategic move if they timely investigate what kind of business model its customers prefer. Some argue that only the Spotify-model will work in the long run, other think that publishers will only do business with Blendle as a Spotify-model would be destructive for publishers own businesses, since consumers would not have an incentive to subscribe for a newspaper or magazine if they contribute to a Spotify-model (De Nieuwe Reporter, 2013).
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