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Can The Music Indusrty Change Its Tune

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Table of contents

Executive Summary 1

1 Question ÐŽV 1 2

2 Question ÐŽV 2 3

3 Question ÐŽV 3 4

4 Question ÐŽV 4 5

5 Question ÐŽV 5 6

References 7

Executive Summary

The music recording industry (MRI) is dominated by what was formerly known as the ÐŽ§big 6ЎЁ that comprised the recording labels of Warner, EMI, PolyGram, MCA, BMG and Sony. However today there have been two mergers between Warner and EMI and also Sony and BMG to that forms dominance by four music recording companies.

The MRIÐŽ¦s main stream of revenue is through the sale of CDÐŽ¦s that are predominantly sold through the retail outlets. The past few years has seen the on come of the MP3music files and the internet as a mode of travel, transfer and duplication for them. This, however illegal under current copyright protection laws, is still extremely prevalent amongst music consumers today. This duplication and transfer, or sharing as it commonly known as has been made possible and flourished by shareware internet sites other wise known as peer to peer (P2P) sites such Napster, Lime Wire and many more. These sites offer users to access and down load music from all other usersÐŽ¦ hard drives at no expenses.

This report looks at the Music IndustryÐŽ¦s current business strategy, the changes to how music is used the consumers. The advancement in technology and how this has affected the music industry.

(1) Apply the value chain and competitive forces model to the music recording industry.

[The Industry Value Chain of The Music Industry]

SupplierÐŽK The musicians who signed with the company


FirmÐŽK The music recording firms such as Universal Music, Sony Music, Warner Music, BMG and EMI


DistributorsÐŽK The music retail shops (CD shops)

The online music download website such as iTunes Music Store


Customers... including the CD buyers and the users of online music download website


Ñ"Ь The most important support activity of the firm value chain is the technology as the music recording firms entered into online music sales. Major five music recording company made a contract with Apple that provides any music in their catalogues on the iTunes Music Store. Also, the music recorded by the musicians is all stored digitally.

Ñ"Ь The most important primary activity of the firm value chain is the sales and marketing, which is the activity that promoting and selling the firmÐŽ¦s product. The music recording firms now sale their product not only by selling music CDÐŽ¦s ($14.19 per CD on the average) but also by selling digitised MP3 music file (about 99c~$1 per song) through the online music download service such as iTunes.

[The Competitive Forces Model of the Music Industry]


1. A new market entrantÐŽKthis threat has small influence as the music industry is monopolistically dominated by major five firms.

2. Substitute products and serviceÐŽK this threat influenced the music industry greatly as increase of the number of people downloads music for free through online file-sharing services. It influenced sales of music CD to decrease and led many people to violate the copyright law.


The bargaining power of consumers and suppliers are increased as the Internet technology is now available for everyone. Especially the bargaining power of the consumers increased as the music download services became popular. The firms struggle to prevent people to download music for free through online file-sharing services, but now they applied music download service so that they can sell music on the Internet and provide music to the consumer legally. The Internet technology did expand the music industryÐŽ¦s business opportunities.

(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?

The internet has played a significant role in changing the value propositions and the competitive music industry. The following are some key issues relating directly to the Internet.

(1) P2P (person to person) file sharing software over the internet

(2) Fast internet access worldwide

(3) Availability of data copying (Ripping) software on the internet. File converters e.g. From CD to MP3 format.

The Internet, information superhighway as it is commonly referred to have changed the publicÐŽ¦s sense of value in regards to music. With high speed broadband connections worldwide and the ever popular P2P file sharing networks world wide it is easier than ever to access ЎҐfreeÐŽ¦ music. A P2P network allows all users to share files on their hard disks, essentially creating global peer-to-peer networks. Mostly for music files, this type of sharing was popularized by the famous Napster service which went offline in 2001.

The music industry has to re-create business strategies which are inline with the digital age. People donÐŽ¦t realize that transferring oneÐŽ¦s entire music library from one IPOD to another is a copyright infringement and free music has become more and



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