Music provider Omnifone operates a product business model. It sells its primary product, MusicStation – a cloud-based music streaming application – to makers of consumer electronics products (e.g., Sony), internet service providers, and telecommunications companies. Omnifone enters into licensing agreements with music labels to obtain the rights to stream the labels’ songs online, and then sells access to these songs to its customers. The customers then use the cloud-based music service for their own commercial music platform.
In 2003, Rob Lewis, Phil Sant and Mark Knight established Omnifone in U.K. The company spent 4 years developing its flagship product, ‘MusicStation’. Currently, the company has customers in more than 40 countries including most of the EU, the U.S, and Japan. It employees more than 200 people, and in 2014, it recorded revenue of £38.5 miliion, with a gross profit of £14.8 million.
CUSTOMERS – WHO THEY ARE:
Omnifone is a B2B company – selling its products to companies, rather than individual consumers. Customers are primarily telecommunications service providers, internet service provider, and consumer electronics companies. The company recently lost its biggest clients, BlackBerry and Sony.
ENGAGEMENT – VALUE CREATION PROPOSITION:
Omnifone provides a suite of cloud-based music streaming products to its customers. Omnifone enters into licensing agreements with music labels, and then sells access to the music labels’ songs to its customers via cloud-based streaming. In this way, Omnifone’s customers do not have to enter into licensing agreements with individual music labels, since purchasing Omnifone’s products gives them access to a variety of different labels’ music libraries. In addition, Omnifone’s music streaming products are cloud-based, meaning customers do not have to develop or download software. Finally, Omnifone’s products can be used on smartphones, tablets, computers, and video game consoles – which means Omnifone’s customers can provide their consumers with access to streaming music across a variety of devices.
DELIVERY – THE VALUE CHAIN:
Omnifone enters into licensing agreements with a variety of music labels (the company currently has licensing agreements with many major music companies including Universal Music Gorup, Sony Music, Warner Music Group and EMI Music), and develops in-house its cloud-based products. Omnifone purchases server space from third parties, which it uses to host its cloud-based products. Omnifone’s customers access these products via the Internet.
MONETIZATION – VALUE CAPTURE:
Omnifone’s customers pay a subscription fee for the use of its cloud-based products, with the fee varying by type of product (which differ, essentially, by number of songs and associated services like search, offline listening, ability to create playlists, etc.).
Written by Sungu Ahn and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2016
Published 21 April 2016