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How iTunes crushed music sales
http://money.cnn.com/2013/04/25/technology/itunes-music-decline/index.html?section=money_topstories&utm_source=feedly&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+(Top+Stories)
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Alan Stein <alanjstein@gmail.com>
A decade of iTunes singles killed the music industry
@CNNMoneyTech April 25, 2013: 6:09 PM ETAfter Apple's iTunes Music Store debuted on April 28, 2003, sales of 99-cent digital singles surged. But that had a disastrous impact on overall music revenue.
NEW YORK (CNNMoney)
Believe it or not, Apple's iTunes Music Store turns 10 this weekend. Although iTunes has in many ways been a godsend to fans of digital music, it has been a source of endless frustration for the music industry.
Since the introduction the iTunes Music Store on April 28, 2003, music sales have plummeted in the United States -- from $11.8 billion in 2003 to $7.1 billion last year, according to the Recording Industry Association of America. When adjusted for inflation, revenue has been more than halved since Apple (AAPL, Fortune 500) launched the iTunes Music Store.
Interestingly, during that same time, people have been buying more music than ever. How is that possible? It's because the iTunes Music Store popularized the cheap digital single.
After manhandling the major record labels during a series of now-legendary negotiations, then-Apple CEO Steve Jobs was able to initially offer digital albums for $10 and any individual track off that album for 99 cents.
That changed the music industry forever. When music sales reached their peak in 2000, Americans bought 943 million CD albums, and digital sales weren't even a blip on the radar. By 2007, however, those inexpensive digital singles overtook CDs -- by a wide margin -- generating 819 million sales to just 500 million for the CD.
Related: See iTunes' evolution from the early days to iTunes 11
Last year, there were 1.4 billion digital singles sold, dwarfing CD sales by a factor of 7. More than three-quarters of all music-related transactions were digital singles last year, according to the RIAA.
Apple's iTunes is behind that sea change. According to NPD estimates, iTunes is currently responsible for 63% of all digital music sales. Even after the emergence of competition from Amazon and Google.
The popularity and ease of downloading cheap digital singles has transformed the industry. Not since the vinyl era has the single been this popular. The smaller, cheaper "45" record dominated music in the 1950s and '60s, but the music industry wised up in the '70s.
Vinyl, cassette and CD singles were always cheaper for consumers, but manufacturing costs were not. Nor was the space required to house them in stores. Thus, the single became harder and harder to come by.
Related: How iTunes crushed music sales
The reality is if singles were as available a decade ago as they are now, they would have been just as popular. Music nerds notwithstanding, the average music listener has really only cared about a few tracks off an album at most.
So how was it that the iTunes Music Store, with its proprietary file format and limited device support, that led this charge?
By the time the iTunes Music Store arrived, the iPod was well on its way to becoming a run away success, which meant that Apple already had an installed base of customers using iTunes.
Competitors, such as Rhapsody, were mostly concerned with streaming music. Most crucially, their files weren't designed for use on the iPod, let alone most other MP3 players.
Without the iPod, iTunes and its music store were seemingly innocuous. But the magical combination of buying a song instantly and taking it with you anywhere gave music lovers a good reason to ditch the CD.
Can music sales ever come back? Likely not, says NPD analyst Russ Crupnick. He believes musicians will have to increasingly rely on touring, merchandise sales and endorsement deals to make up for lost album sales.
The subscription streaming services of Spotify and other music apps could help bolster the business, Crupnick says, but the thought of those bringing the industry back to its former peak seems lofty.
Ironically, it could be Apple that is in danger of losing its grip on the music business. Whether or not Apple can maintain its relevance in digital music could very well depend on its ability to transition to the streaming subscription model, which is rapidly adding users.
Nevertheless, the iTunes Music Store's effect on the way people buy music over the past 10 years has ensured that the music industry will never again be the same.
Alan Stein <alanjstein@gmail.com>
Thursday, April 25, 2013
http://www.rallydev.com/community/agile/using-economics-prioritize-your-backlog?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+agilecommons%2Fcommonsblog+%28Agile+Blog%29
http://www.rallydev.com/community/agile/using-economics-prioritize-your-backlog?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+agilecommons%2Fcommonsblog+%28Agile+Blog%29
How do you prioritize your features? Is it a gut-feel kind of thing? Is it based on who's yelling the loudest? Is it based on what drives your next big sale? Do you do it collaboratively or alone?
In his book Principles of Product Development Flow, Don Reinertsen suggests using calculated economic models to decide what work to do first. Specifically, he advocates an approach called Weighted Shortest-Job-First, or WSJF. All other things being equal, the shortest job will deliver value soonest, so you should do that one first.
But all other things are not equal - some projects reduce risk more than others, some enable other opportunities, and some are more important to your customers. So you weight the scores - roughly, value over job size.
This approach is gaining popularity in part because the SAFe framework suggests you use it. And it sounds great on paper. But how does it work in the real world?
At Rally, we recently held a roadmap planning meeting with one of our product lines, and we tried a collaborative game to incorporate this economic technique into our planning session.
We started by estimating relative job size. Our group of 14 tech leads, product owners, and other leaders started with a bunch of stickies on a whiteboard representing value we wanted to deliver. I asked the team to sort them by size - smallest items at the top of the board; largest at the top. As they moved the items, they discussed each move. People took turns, and asked clarifying questions.
"Why do you think that one is so huge?" asked Greg, a product marketing director.
"Because I have no idea what it means! It could be anything!" replied Ryan, a dev manager. Together, they were able to clarify some details and get it sized, and we processed about 40 items in about 20 minutes.
As the movements slowed down, I stepped in and forced the stickies into 5 clusters. I asked the team to correct my clustering if I had made mistakes, and they adjusted a few stickies.
We then translated them into rough cost.
I then asked the group about the smallest cluster. "Do we think each one of these on its own could be completed by a team in significantly less than 3 months?". They said yes. "How about the next group? Is that still less than 3 months?" Yes. "How about this next group? Is it about 3 months, or is it more?". I did some simple math to figure a rough loaded cost for a team for a month, and used that to put rough dollar amounts on each size - $100k, $150k, $250k, $750, $1M+.
A couple of things about this:
- You don't have to be very accurate about this. You just need a rough sense of relative size.
- The dollar cost went up steeply for the larger items. I wanted a dollar amount on the bigger items that would prompt fear, and then conversation about how it could be broken down. Beyond 3 months, you have no idea how big these items really are. But, if they're valuable, you can break them down more.
Value Scoring
Once we had our jobs roughly sized, we used a Google spreadsheet to value score them. To strictly follow Reinertsen's approach, you'd actually calculate relative scores for user value, time value, and risk/reduction opportunity enablement value for each item. But I had 14 people in the room and I figured across the group I could get similar results a quicker way.
I went with Johanna Rothman's suggestion to let people distribute value points across all the items any way they wanted, and then explain their rationale.
Here's how it looked:
It's not a 'buy-a-feature' activity. Rather, each person got 10,000 points (enough to feel rich) to distribute however they wanted across all the items. After 5 minutes, each person talked through their rationale.
This was the important part.
If Tom and Alan are using completely different rationales to prioritize, and then we just use a formula to rank our items, and that formula happens to put Alan's favorites at the top of the list, Tom doesn't feel heard. The reality is that each person has a very good reason for the scores they offered. The goal of this meeting is to have a really rich conversation about value. I want to go beyond Reinertsen's goal of getting our priorities right.
I want the whole team bought in to our decisions. The conversation about the rationale helps us get there.
Then we sorted the list, highest value score first. This was interesting - we saw a lot of obviously important items bubble to the top. Some of them were very large. We talked about how people felt about the results - what was missing that they felt should have been higher.
The magical calculation
Then Michael, an internal coach, spoke up, and suggested we try a weighted-shortest-job-first score. To do this, we divided our total value score by the cost (the value/cost column in the picture above). A number of items that were small but valuable jumped higher up in our list. This led to another valuable conversation
So we're done, right?
Does the WSJF scoring solve all prioritization problems? Do you work on items in exactly that order? Not exactly. We did another activity to lay out our work into our roadmap, and this led to further conversations about the capabilities of different teams, dependencies with other groups, and the like. It's not a perfect technique, but it was an incredibly valuable input for us.
For more on managing a portfolio, tracking and prioritizing work according to its value, and effectively aligning business strategy with development work, join our Portfolio webinar series.
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