Can the Music Industry Change Its Tune free essay sample

The music recording industry has been rocked by the peer to peer file sharing technology. The distribution of music Is now available as a digital product (Bloodstock, Kauffman, Riggings 2004). The industry claims that the file sharing technology has caused a reduction in their profits. The increase in popularity of devices that play the digital music, such as the MPH player, Apple pod and the Dell JukeBox, are driving the demand for MPH-formatted music.The digital music format Is here to stay and Is fast becoming the preferred product choice for music customers (Bloodstock, Kauffman, Rig;NSA 2004). 1. Apply the value chain and competitive forces models to the music recording Industry. U. S. Retail sales of recorded music dropped from $1 billion in 1999 to $10. Bun in 2003 (Keenan 2004), while the popularity of digital music has grown. Meanwhile, Apple Attunes customers grew from 861,000 In July 2003 to 4. 9 million In March 2004 (Borderland and Fried 2004), reflecting digital musics new role as a strategic necessity of the music industry. We will write a custom essay sample on Can the Music Industry Change Its Tune? or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Analysts predict that in five years 20% to 33% of all music sales will shift from CDC to digital distribution (Keenan 2004). With this In mind the music recording industry may have to change Its value chain and business models to adapt and survive in this modern digital world. The following figure demonstrates the traditional value chain. Figure 1: Traditional Music Industry Value Chain: Figure 1, shows the main drivers for value In the traditional recorded music value chain Include copyright and licensing, production, distribution and Inventory, and promotion and marketing costs (Bloodstock, Kauffman, Riggings 2004). For digital music, there is no longer a physical product to manufacture. Instead the product itself is information: the digital music recording (Bloodstock, Kauffman, Riggings 2004). The nature of the new digital music format Is a key driver of the new virtual value chain in the industry. The following figure illustrates a new outlook on the digital music value chain. Figure 2: Digital Music Industry Value Chain Figure 1 2: distribution is decreasing, but digital music retailers add new value.With Internet distribution and music piracy, they can now add value through marketing, promotions, copyrighting and licensing. There is also value added through enforcement of IP rights and piracy prevention (Bloodstock, Kauffman, Riggings 2004). He competitive forces model can be used to evaluate the music recording industrys current situation and what business strategy they may employ to maintain and generate new sales. Figure 3: Porters competitive forces model Figurer: Forces Driving Industry Competition. Source: M.Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: Free Press, 198. Rhea Internet has completely remodeled the competitive forces model for music industry over last few years. Digital technology meant that media, including Cads, could easily be copied without loss of quality. The arrival of MPH meant that the opted version could be compressed without any noticeable drop in quality, this makes the distribution much easier. The internet offers a network where the copies can be exchanged.After Peer-to-Peer programs such as Anapest were invented the general population was able to obtain a near-perfect copy of a CD for nothing. The competition arises from: Industry competitors: Five major recording labels MI, Sony Music, BMW, Universal Music Group and Manner Music Group account for about 75% of the market share worldwide. The companies which embrace new business models/strategies will gain a competitive advantage which ultimately will help them to survive in the new digital music environment.Potential Entrants: Rhea five major labels can not take their market share for granted anymore as many artists are cutting out the record companies and establishing their own website from Inch they can promote their music, the competition naturally becomes more ferocious. Companies such as Anapest, Grosser and Apple limits the recording labels profit as the sales of CDC drops and the downloading of digital music rapid ly increases. Substitutes: If a record companies product isnt priced right, or not delivered in the right format, t from the internet or burn the CD from a peer. Errs: Rhea power of the consumer has increased due to the availability of music online. Consumers can now download music for free, instead of having to make a lager purchase for a CD in a traditional music store. This requires record companies to sell their product at a lower price and through different channels. Luckily, they have begun to do this (tunes from Apple for example). Record companies need to listen to the wishes of consumers as they cannot prescribe a format or a channel. Suppliers: Due to the introduction of the internet, artists have become less dependent on the rotational networks of the record companies.Authors can directly promote their material through their own website. Some completely by-pass the record company all together. The author gains more control over their own product and the record company now has less control. 2. What role did the Internet play in changing value propositions and the competitive environment? To what extent has it been responsible for declining CD sales? Explain [our answer. Rhea value proposition of CDC has decreased due to the increase in music available did the internet and new technologies.With the introduction of larger memory yester and digital music the need to physically own a CD has declined. Rhea competitive environment of the music market is changing, new forms of entertainment and technology are taking over and altering the way we use and play music. Compact discs are not obsolete but the way we use and access music is changing. People are relying more and more on other forms of entertainment. Many internet users choose free music downloads over purchasing music. It is estimated that 37 million Americans have downloaded music (Lauded p. 143).In 2000, CD sales Nerve about $35. 5 billion, in 2001 sales fell to $33. Billion, a decrease of 5% (lauded p 144). The Recording Industry Association of America (ARIA) is amongst those that blame the access to, and downloading of, free music for the declining CD sales. But not everybody believes this is the full reason. In an article in Necessities (flexible Borehole-gee, Harvard Business School Massachusetts, and Coleman Strumpet, University of North Carolina concluded with their research that . At most, file sharing can explain a tiny fraction of this decline.In that same article Amy Weiss of ARIA states that countless well respected groups and analysts have all determined hat illegal file sharing has adversely impacted the sales of CDC. Research by people Independent of the Music Industry seems to suggest other factors for the decrease in CD sales. These include other forms of entertainment introduction of new technology and storage systems rising prices of Cads weak economy Some researches believe that digital downloads have in-fact increased the sales of music.A survey by Jupiter Research found that Of a survey of 3,319 people 0 found that file traders were reporting that they now bought more music than they had before From his research Borehole-Gee suggests that file sharing has little or no effect on the amount of sales saying [File sharing] is not as dangerous as many have believed. The music industrys ability to influence what people listen to seems almost unbroken , and that That industry marketing video play on MET, for instance seems to affect downloads as well as CD sales. . Analyze the response of the music recording industry to these changes. What management, organization, and technology issues affected this response? Response of the recording Industry The recording industries response to the changing market was to try and stop advances. 0 Testator with they went head to head with Anapests, a website roving software and services that allowed consumers to download MPH music for free, they sued them for violating copyright laws (Lauded, Peggy). Anapest was sued in 1999.In 2003, the Australian Music Industry (AM) took an internet service provider to court involving alleged music piracy, followed by an 11 month investigation. (Pearce 2003). In 2006, Sherman Networks, Sydney, Australia agreed to a payout for compensation to record companies, rumored to be IIS$1 million. (Gonzales 2006). Also in 2006, in Germany, the IF took action against illegal file sharing, with 3500 individuals facing criminal prosecution for uploading large mounts of copyrighted material on peer to peer networks. (if. Org 2006). The industry have also targeted other software providers, unsuccessfully in 2004 and individuals, sending cease and desist letters. 0 Have sent instant messages to Aziza and Grosser accessories said, When you break the law, you risk legal penalties. There is a simple way to avoid there risks: DONT STEAL MUSIC (Lauded, peg 144). 0 How far can they take it? A report by Alexandra Center (University of Chicago) suggests that The development of broadband facilitates music swapping. A soundtrack that takes more than 12 minutes with a dial-up connection can be unloaded in as fast as 20 seconds with a high-speed connection. Teaming up with sites that provide legal low cost downloads has increased legal download sales, Bandsman (2005) reports that During the first half of 2005, legal downloads accounted for IIS$790 million in sales compared with IIS$220 million for the first half of 2004. Thats an increase of more than 350 percent in download sales0 Finally realizing that these methods while sometimes successful would not solve the problem a major recording company finalized a licensing agreement and Mishmash, the first APP legal downloading site was created.Since many other sites have also reached agreements with the recording companies and low cost, legal downloads are available. 2; The music industry deems inter net piracy as the sole reason for the reduction in sales of CDC and loss of revenue. Parts of the music industry has not embraced the new technology and most still have the old school mentality. 2; The music industry decided that it was time to get more involved with the digital world by offering music at competitive prices and removing some of the downfalls of file sharing, like mislabel or infected song files (US News, 2003). The Music recording labels section within the music industry will have to transform their traditional role which is the physical distribution of albums, to managing a smaller set of artists, multiple distribution channels and customer information (Krueger, Eastman and Van Deer Beak, 2004) Technology 2; With the new digital music technology artists are able to promote and sell their music directly to the customer by the internet. #9642; Labels do not have the necessary technological infrastructure to allow for the distribution of digital music Labels would require the rights to produce the same music in a digital format Krueger, Eastman and Van Deer Beak, 2004). To prevent illegal copying of music over the internet digital fingerprinting and digital watermarking are put in place. The digital material is encoded with information such as the author and copyright date. The digital products location can be monitored when the digital fingerprints and watermarking are combined with tracking devices (Harvey, 2002). What is the current business strategy of the music industry? Do you think it is liable? Explain your answer. Despite some success with suing individuals, the music industry is unable to stop illegal downloading and copying of music. Obviously it had to come up with a way of benefiting both the downloaded and the music industry. This resulted in internet users now being able to swap music freely and legally with the success of sites such as tunes.Grosser, a file sharing network, and Synonyms Nortek together to come up with a system combing free music sampling with paid downloads. This resulted in Mishmash, finalized in June 2005. This was the first APP to complete a licensing deal with a major recording company. This allows a person to download and listen to a track for a number of times, before purchasing it for accents. Their success now allows the music industry to make money from downloading music. Record companies say they made 1. 7 billion from digital downloads last year. ABACI. Net 2006). Phonographic industry said in 2006, Delayed in the I-J and Germany, two of the biggest digital markets worldwide, legal buyers from sites like tunes, Musically and MS actually exceed illegal file swappers. Target Groups Rhea target group of the music industrys sales is all ages from babies with relaxation music through to the old classics from yesteryear. Other target groups the music industry must focus on are the recording artists they are producing. The musicIndustries compete with: other recording companies illegal download sites friends burning copies of music the companies that produce new technology like the MPH player that only requires {o to download the song onto the memory card etc There are really only 5 major recording companies, providing 80% of recorded music, (Lauded, peg 143) Each company must not only compete with a changing market but also the competition that exists between each recording provider. The number of companies allows artist to shop a round and find the best deal before committing.Universal music groups current e-commerce ventures including: 0 digital download obstruction web casting interactive radio pay-per-play through all digital channels of purchase such as computers set top boxes portable devices. (wry. Universalistic. Com) Rhea long term goals of the music companies involve expanding business inc reasing sales and profit TV finding ways to advance their production and distribution of music with new technologies. The record companies are focusing themselves on the profit or lack of profit rather than embracing the changes in the market.They cannot change the new technologies created or the way people are choosing to listen or obtain music. O continue being profitable they must embrace changes in the market and find new Nays to continue providing their services New technology means new opportunities in the market they need to focusing on providing: cheap safe downloads. Consumers are more likely to pay for music downloads if they know that what they are downloading is from a safe, virus free source. Some sites for downloading music, consumers risk downloading a virus with the song. Changing the contracts that they have with the recording artists so that they are making a profit off all their efforts including endorsements and sponsors. Suing your potential customers is not positive strategy that will increase sales, instead it produces negative feedback and bad publicity. Sending letter seems like a waste of time and money, the $10000 they got from each of the students wouldnt even make a dent in the amount of money 5. What is the effect on an author if people download copyrighted material from the N.B.?If you were an author how would you feel? One of the main problems as confirmed by Ted Cohen, MI UP of New Media, is that nobody feels wrong about doing what (downloading free Amps on the Internet) theyre doing(Doubloons-Turbot t al). When music is downloaded illegally, artists are deprived of royalties from their songs. With this in mind and the increasing rate of internet music downloading/file sharing an author may need to think of new ideas and solutions to advance into the digital future.Some artists may feel angry and cheated due to the loss of royalties, as opposed to others who might use the technology to their advantage. The internet Mould allow authors to boost their exposure, promote and market their music through a web site. Rhea use of legal downloading of copyright music through online distribution allows ewe opportunities for the music industry to develop new business strategies that Nil in turn be profitable for artists and musicians (Krueger, Eastman van deer Beck, 2003). According to the musician Mob, the record industry will have to throw out its current business model.Once the record companies have less marketing clout, and Ninth internet distribution, artists will be in powerful position. Why is a record company any more qualified to send an MPH to tunes than I am? (Doubloons-Turbot et al). Rhea Recording Industries Association of America (Aria) suggests that Unauthorized striation of music is killing both sales growth and profits. The result is music costs more to produce, theres greater risk in signing smaller acts with uncertain audiences, and the lower sales volumes have forced the labels to raise the retail price of CDC. As an author initially I would feel annoyed, robbed and vulnerable as I would not receive my full entitlements. I would be concerned about the future and have to start thinking how I could make the most of the digital era. Conclusion Nile studies show that early on free downloads and music piracy had a major effect n the sale of Cads, later studies and statistics also show that if the music industry and the APP sites work together, then a happy medium can be reached, with the benefits all around. Can the Music Industry Change Its Tune free essay sample The online downloading of music from the Internet has ripped apart the old business model of record companies controlling the production of albums which are purchased through record shops. The last few turbulent years have seen many high profile law suits; some of which went In favor of the music Industry and some of which went against. 1. Apply the value chain and competitive forces models to the music recording Industry. 2. What role did the Internet play in changing value propositions and the competitive environment?To what extent has it been responsible for declining CD sales? Explain your answer. 3. Analyses the response of the music recording industry to these changes. What management, organization, and technology issues affected this response? 4. What Is the current business strategy of the music Industry? Do you think It Is viable? Explain your answer. 5. What Is the effect on an author If people download copyrighted material from the web? If you were an author how would you feel? Introduction: For many years the recording industry has been threatened by the impact of genealogy. We will write a custom essay sample on Can the Music Industry Change Its Tune? or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Before the CD and the internet, in the iii there was the cassette tape, which began the Issue of illegally copying music by individuals. Steven Hanford (2003) says that music is in transition from being a tangible commodity to becoming an intangible one and I*This side-materializing of music has the big five companies worried, and with good reason. I To address the Issues In the recording Industry It Is necessary to describe the industry business models bearing in mind the managerial, organizational and technological impacts in today society. The value chain model Is an organizations set of linked, value-creating activities, ranging from securing basic raw materials and energy to the ultimate delivery of products and services. The model is used to address specific business activities I OFF (such as lowering cost to provide better value to customers, producing a different product or, enlarging or narrowing the current market. ) The primary activities of the value chain model include the production and distribution of products and services and the support activities include organizational infrastructure, human resources, recurrent and technology (Lauded and Lauded 2006, p. 1). In the music industry the value chain model can be seen in the growth of companies which use the Internet as their medium ( egg. Aziza, Morpheme, Grosser, limier, torrent download sites). The internet has made it possible to create a new online digital product compared with the physical product in a store. Following from this is the ease of new entrants in the market due to price rivalry by providing lower cost products to consumers who enjoy the ease of use and the accessibility of the product. Porters competitive forces model (Lauded and Lauded 2006, p. ), outlines the need for businesses within an industry to cooperate to achieve strategic advantage due to market threats and opportunities which affect the firm. These threats include: OX New entrants OX Substitute products OX Bargaining power of customers OX Bargaining power of suppliers OX The positioning of traditional industry competitors Hanford (2003) is concerned about the way that the five major record labels (Universal Music, Sony Music, Warner Music, BMW and MI ) have continued to take over the minor labels. They belong to the Recording Industry Association of America (ARIA).They also control about 80% of all titles produced, own distribution companies that control over 80% of the wholesale market and often have the rights to much of the copyrighted music iv and often not the original artists (Hanford, 2003). Despite the efforts of the five major record labels the success of new entrants and products is overwhelming. The new products are cheap and easy to use and are market driven due to the bargaining power of customers who want value for money and suppliers who aim to maximizes profit with lower costs.Constantly, new substitute products are introduced to the market (egg. Pod and MPH players, MPH files replacing CDC and tapes). The Role of the Internet The internet is fast becoming the way in which consumers do business, where consumers once went to a retail store to select their product or any service they needed, now they only need to log onto the internet and make a purchase. The from warehouse to consumer. In turn the internet has reduced cost of marketing, information storage and to make their products or services more widely available and at reduced cost to consumers. His is having an effect on old business models and thus creating a new business del. For the music industry this has meant that consumers are not physically going into their stores but using the internet to obtain their information. They can order music over the net, see what is topping the charts and even find information about their favorite singer. Iris has also led to consumers legally and illegally downloading music for their POD or MPH players or burning CDC with their favorite songs..This has also meant that some authors/artists are not receiving the royalties from their music. Research by Bacchanalian LLC state more than 1 billion songs per week are unloaded from file-sharing programs (Lauded and Lauded 2006, p. 143). These programs are legal, however, they do allow the individual to illegally copy and download. There is a consumer belief that the internet is available for all and downloading is a natural part of the internet.. Only a small handful of people ever get caught for illegal downloading and it is a very difficult area to control.Consumers are attracted to I*freebies: or bargains and find the downloading option very appealing. ANAPEST had 80 million users until it was shut down, currently Aziza has most of the 7 million US users (Lauded and Lauded 2006, p. 143). Ere Internet and declining CD sales Downloading, (egg. I*peer-to-peer: through Aziza, Morpheme, Grosser, and later Apple tunes) has been accused by the industry of dramatically reducing sales and therefore profits. The music industry claims the cost due to music file sharing is billions of dollars per year (Lauded and Lauded 2006, p. 44). However, Bricklike (2002), stated that while there was a decline in sales (2000-2001) the revenue was up due to 7% rise in CD prices. Some critics say there are other contributing factors to the decline in sales. For example, consumers may be burning more CDC customers may have made a demand shift to DVD ( no US homes had DVD:s in 1999 but 35% had them in 2002). Also, CD prices have risen at a higher rate than the rise in consumer prices. Hanford (2003) puts it down to piracy I*kind Just plain unexciting music from the recording companies .Figures released by ARIA on thematic. Com website reported a 250% increase in Australian wholesale music market has grown by 27. 12% but heavy price discounting caused the dollar value of sales to drop by 3. 11%. Other reasons for declining CDC sales can be attributed to new products such as Pods and MPH players. New products are creating more opportunity for increased information storage and the products can be tailored to the individual taste. It is becoming easier to find and download music from the internet either legally or through piracy.In the words of Jeff Orphan a manager for artists and music producers: acids have become little more that advertisements for more-lucrative goods like concert ticks and T-shirts. I sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than an income article_email/SB117444575607043728-1 Nonjudgmental) The Music Industry Response The initial response from the music industry is to pull rank and incur costly legal expenses in the face of consumer demand for cheaper products.The industry has somewhat unsuccessfully sued firms and then has targeted individuals by using technology to message users about stealing or to obtain information on the identification of users who download. This has been challenged legally (Lauded and Lauded 2006, poppy-144). ARIA did identify and prosecute students and individuals for illegal music downloading. Letters were sent to colleges requesting that their students stop downloading music illegally. There have been prosecutions and compensation (not of much dollar value) was paid by university campuses where file-sharing was operating (Lauded and Lauded 2006, up. 43-143). ARIA sent Aziza and Grosser users messages stating sheen you break the law, you risk legal penalties. ARIA then filed lawsuits against 261 Americans. While the lawsuits have frightened some of the illegal downloaded there are still a large number who believe that there is nothing wrong with downloading or sharing music files (Lauded and Lauded), p. 144). In December 2003, the recording industry was dealt a further blow when the US Appeals court disallowed the method used by the recording industry (via ISP to determine online pirates (Did : Angelo 2003).Another response was to try a new strategy with music delivered legally by the internet with pricing structures. With consumers paying $1. 00 per song turnover increase would be around $5 billion a month. In 2002 songs were licensed for legal Other responses mentioned later have stemmed from the fact that these reposes are not working. Management issues affecting this response could include: How to counter-attack the threat to the industry long term stronghold over the industry (power issues) Concern about the serious impact that they thought downloading was having on profits.The issues of copyrights and the impact on the owners (even though many companies own the music, not the author/artist). Other issues would include the time, cost, effort involved in: How to compete within the industry at the new game Investigating other avenues for making money iv egg. Obtain income from artists other earnings (concerts, merchandise etc) Investigating ways to provide a product that cannot be downloaded e. Bonus collectors item, books, picturesOrganization issues affecting this response could include: The threat of loss of control over the market forces such as production, marketing, distribution and retail The impact on the business model iv it would have to be redesigned if alternatives Nerve sort in order to compete The cost of redesigning business processes for a change in focus and production of new products The huge impact on sales and distribution and the people and businesses involved Technology issues affecting this response would be the how to use technology to satisfy management and organization responses to the issues.For example: How to identify and address copyright lawb reakers. How the compete in the industry at the same game Ere current business strategy of the music industry In 2003, Apple Computers in conjunction with the recording industry implemented Tunes which was a legal and easy to use downloading product that has liberal copy laws (Lauded and Lauded 2006, up. 144-145). Another angle being pursued in Australia is a levy on blank CD and DVD media (a similar attempt to implement a levy on blank cassette tapes was rejected by the High Court). This levy, between three and five percent, presumes that most CDC are used or the purpose of copying copyrighted material, but enables buyers to obtain a refund if used for a legitimate purpose. The Federal Government is considering this. : Discourses year? ). There appears to have been some attempt by the industry to lower the price of the CD from around the ADD$30 to less than half price. The phasing out of the CD I*singles: recently is an indication that the music industry is still working on their Issues. He viability of current business strategy Ere business strategy for online distribution of songs is still progressing and its fate is unknown at this stage. Some believe that is will only be good for selling other products that the companies market. Consumers can still obtain cheaper products illegally through legal means). Ere biggest costs to the music industry are talent and marketing. There have been suggestions of consolidation of the 5 companies to 3 to give the industry more power. : II try to find this source!! JAW) There have also been reports of breaking ranks within the industry.In the New York rimes April 3, 2007 it was reported that MI skibobs ranks with the music industry biggest corporations yesterday by announcing a deal to sell songs online through Apple:s music service without copy protection. This unprotected music sells for $1. 29 per song (compared with . 99 cents per song) and the albums is(without intricacy software and in higher quality will sell for about $9. 99 (the regular price). Ninth Tunes being released the music industry was hoping for a rise in revenue in the digital music industry, this has not been so.While sales have risen it has not compensated for the fall in CD sales from a year ago. Over 40 countries have similar schemes to the one being investigated in Australia. Obscured year ). Recreating individuals will not stop file sharing e. Ill sharing will continue regardless . In fact, targeting individuals may cause a rejection of buying CDC in itself. Generally, it is quite clear that the current business strategy of the music industry is not working. The best way to stay viable in the industry would be to focus on cost reduction and to offer more value to the consumer.If consumers doom:t see value in buying CDC they are likely to download the music they want at a fraction of the cost. Ere impact on the author on downloading material from the web Assuming that this was illegal downloading and the author of the material in this ease was also the artist and held the copyright over the product, the author would miss out on the royalties that are payable in relation to the sale. In this case tit not Just the companies that miss out on a cut from sales, tit also the authors/artists etc. The author may not get the recognition that they deserve for how popular their music may actually be. The music charts, for example, are determined by CD sales, but while an artist may be popular, people may not be purchasing the music legitimately. This can lead too reduction in the artists image as they may be seen as not being as popular as they actually are. This could impact on the artist in a number of ways. Firstly, they may see a drop in ticket sales for their concerts due to reduced media exposure.Secondly, offers for advertising campaigns, movie deals etc may also decrease. There are many changes in the music world that impact on the artists/authors. For example, the authors of music produced by the recording industry are not always the same person as the artist. Another recent change has been the artist taking control over free internet distribution in order to create interest. Just recently, Radioed has shocked the industry by making the new album available online for a nominated price (Gibson 2007).The new album I*Len Rainbows to be released for download on 10 October 2007 is I*the most high-profile attempt yet to restructure the economics of a music industry struggling with the effects of digital piracy: (Gibson 2007). On the first day of sale more people had committed to paying 40 pound for the I*bonus: album than had ordered the download. The band had refused to use tunes because the Apple service sells individual tracks and not whole albums (Gibson 2007). How would the author feel? Therefore, an artist contracted to the companies within the music industry who was acquired illegally. However, if the artist/author has some control over the process it can be used to their advantage as with Radioed mentioned above who are not contracted to a major label (though they were previously with MI). With production and distribution costs down it is quite normal for many artists to manage themselves. Loyal fans will continue to support them via live performances, merchandise and the need to have the physical product. Conclusion Hanford (2003) suggests the continual mergers of the recording companies. MI, Nile the only one not part of the conglomerate, is vulnerable.