Music Industry Evolution

Introduction Music Industry Mediums – Then & Now 45 RPM records Records 8 tracks Cassettes Compact Discs Digital Devices

Modern Music Industry Benefits Profitability(Record Companies) Accessibility User friendly Diffusion of music Pitfalls Music/Software Piracy Loss of Income(Record Companies) Consumer affected from malicious viruses

Situation Analysis Industry Makeup Concentrated market – 4000 stores, brick & mortar, electronic Combined Revenue $4 billion per year Ultra competitive market Top 50 companies holding 80 percent of the industries revenue

Situation Analysis Shifting Values Sales recorded music fell drastically 2008 Consumers drifting from CD format to digital Digital music sales up 27% in 2008 compared to 2007 1 billion songs downloaded Major music retailers such as Walmart reducing shelf space for CDs drastically

Shifting Values Diagram

Situation Analysis IPod Influence Apple’s earnings per common share – diluted in dollars Apple’s shares used in computed earnings per share – diluted in thousands

Target Market MP3 using customer 18-24 year old average customer 80% customer base male when market first opened Current market split usage 50% male 50% female Generation Y & “tweens” are the predominant users amongst population

Target Market Demographic breakdown Access to internet at home or on the go (mobile) Middle to upper economic class Education – high school education or higher, college educated has a higher probability of downloading Consumers who are active and on the go

Ideal Target Market College student male and female 18 – 24 years of age Active on the go lifestyle Middle to upper class families Tech savy (internet) Over 70 million fall into this category domestically

Consumer Behavior Concepts Generational differences in products used to listen to music – Baby Boomers, Generation X, Generation Y, Tweens Consumer adaptation to new products and emerging technology Minimalizing the need for different devices – one device suits all needs Digital music is more environmentally friendly than CD production

Advertising to the Consumer Advertisements vary across the globe – developed by region to positively appeal to the consumer of that area Music is a form of common interest in this market (likes & dislikes of music listeners) Providing to the music consumer at the time of his or her want

IPod first advertisement (Consumer wants) Consumer wants change, “On the go” appeals to the consumers and the ability to have music whenever and wherever they want http://www.youtube.com/watch?v=yF9s3TpncAo

Non-Verbal Advertisements Visual appeal of listening device – ear buds Characteristics of head bobbing while listening to music IPod’s visual appeal Your own world not having to pay attention to people around you

Conclusions 2002: CD reached decline stage of product lifecycle Music industry lost opportunity Never try to stop innovation, adapt and grow 1999: Napster 2003: iTunes Store Perpetual disruptive innovation: Accelerating creation and adoption(Rogers) 1999-2003: Illegal downloading normalized for an entire generation, despite initial irritations of it. Industry refused to give customers what they wanted to buy. Millions of units sold Innovators Early Adopters Early Majority

Reccomendations Digital format has less overhead Develop own download site to compete with iTunes, appeal to non-Apple customers 75%

Recommendations General Recommendations: Develop different download sites for different target markets, showcase “their” type of music, ex: Country, Hip-hop, Oldies, Pop, etc. Continue “hip” appeal for younger crowd, Apple is leader in this Appeal to “tweens” and parents: safe place to download music, vetted product, no lawsuit. Cultivate this market early to create lifetime consumers Develop Under-exploited markets, “Niche-markets”: People who aren’t “Macs,” (google “I hate Apple”), non-Apple customers Parents/Children: “Education & childrens songs,”, appeal to parents, especialy helicopters “Older” (35-49) customers: make ease of use and ability to get older music easily the primary draw, underscore this in advertising. Disposable income, little time, don’t know how to “pirate.” Non-mp3 player users—just want to burn a cdS

Whats next? “Streams” music, instead of giving “physical” file for storage, reduces risk of piracy “Library” stored in profile, on demand, not in device memory Membership fee, or small per-song fee (<10¢) Increasing speeds of smart phones, mobile internet making feasible Market to new music consumers and next wave of music consumers (get them as young as possible) Cloud Music: Lala.com

References Apple iTunes: Changing the Face of Online Music Retailing Industry. Retrieved from http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/BSTR070.htm Deleon, Nicholas. (2009, March 23). How will The Cloud change the way we think about music ownership?. Retrieved from http://www.crunchgear.com/2009/03/23/how-will-the-cloud-change-the-way-we-think-about-music-ownership/ MacQuarrie, Rebecca. (2008). Music CD Industry. Retrieved from http://www.soc.duke.edu/~s142tm01/main.html Meyer, Janet. (2006, August 29). iTunes Inspires Changes in Music Industry. Retrieved from http://www.applematters.com/article/itunes-inspires-changes-in-music-industry/ Miniwatts Marketing Group. (2009). Internet Usage Statistics for the Americas. Retrieved from http://www.internetworldstats.com/stats2.htm Peters, Kurt. (2004, September 24). History repeats itself: Movie downloading mirrors early music downloading. Internet Retailer, Retrieved from http://www.internetretailer.com/dailyNews.asp?id=12965 IMCR. (2003, December 12). RIIA,(2009). RIIA- Recording Industry Association of America. Retrieved from http://www.riaa.com/ Sutter, Katherina. (2005). Sales And Marketing Trends In The Music Industry. Musician Network Portal, Retrieved from http://www.get-it-all.net/indie112-Sales_And_Marketing_Trends_In_The_Music_Industry.htm Swartz, Greg. (2008, January 12). A Brief History of the Music Industry over the Last 10 Years. Retrieved from http://www.urbanhonking.com/ideasfordozens/archives/2008/01/a_brief_history_1.html