Executive Summary (This is a document excerpt)

Rumors abound about which steps Apple will take next in its music business, but none of the rumors have so far hit on a significant opportunity that we see ahead of Apple: rebuilding the home audio market. Once a large, multifaceted industry, the home audio business has fragmented into a high-end component market and a cheap market for iPod docks. Apple has the opportunity to recreate a home audio market by introducing a new audio device that brings three of its unique skills to bear: 1) an elegant touch interface; 2) simple networking; and 3) music content management and playback. With this new device, Apple could reach 15 million US homes in three years, which would not only solidify its position in the audio world but would establish a new platform for innovative music promotion and playback. Competitors would benefit from the refreshing of the category as well, as long as they brought the same level of innovation to competing devices.

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