TO DIFFERENTIATE AND COMPARE MUSIC MARKETING STRATEGIES IN UK AND CHINA
CHAPTER 1
1.0 Introduction
Music industry is one of the contributors for economies in the global world. In this regard, various industries are trying to initiate a marketing approach that would be able to enhance their market position and to sustain their competitive advantage. Primarily, the main goal of this dissertation is to investigate the differences of marketing strategies in the music industry in United Kingdom (UK) and China. Music marketing in the modern music industry poses challenge for record label distributors. Publicity is a buzzword for musicians, singers, record producers and the like. Publicity strengthens the name register and the quality of the music. Though it is more instrumental in building awareness, it is the degree of marketing which will truly sell a record (Summers, 2004).
Since most studies regarding music marketing are relatively focus in general, this study proposes examining music marketing strategies from a specified locations as UK and China. There are several reasons why marketing music in these regions is a challenge. On the one hand, music marketing in China passes through a political scrutiny wherein all music and videos are subjected to formal examinations of various bureaus under the State Council and authorized provincial distributors (Li, 2003). On the other hand, the development of clubbing, DJing and partying in different UK destinations inhibits a presence of oneself in music destinations over just merely listening to it (Horner and Swarbrooke, 2005). There is drive to understand how these two countries overcome such challenges and continually keeping their respective music industries alive.
The rationale of this study is basically to differentiate and compare music marketing strategies in UK and China. This study will be useful for companies and musicians that are willing to market their produce in UK and China.
Research Questions
The study will answer the following questions:
- What are the relevant music marketing strategies in existence in UK and China?
- What are the challenges and conflicts in implementing music marketing strategies in UK and China?
- What are the similarities and differences of music marketing strategies in UK and China?
- Do the music marketing strategies in UK and China proved to be feasible financially and economically?
- How the success of a specific music marketing strategy does is measured?
Research Objectives
The study will address three key objectives as follows:
Ø To determine the music marketing strategies employed in UK and China and to identify their similarities and differences
Ø To determine the challenges and conflicts these music marketing strategies are experiencing and to identify factors that underpin such
Ø To determine the performance of different music marketing strategies in UK and China and to identify success or failure indicators
Research Model
Since this study will focus on marketing of music industry in UK and China, the research model to be used is Marketing Mix. The idea of the marketing mix has been around for many years - well before an 'e-' came in front of 'marketing' or anything else. Marketers devise strategies and tactics aimed at providing satisfaction and adding value for customers. The marketing mix can be defined as the blend of tools and techniques that marketers use to provide value for customers. It is most widely known as '4Ps': Place, Product, Price and Promotion. Place refers to the routes organizations take to get the benefits of the product or service to the intended customers. Product means both tangible product and also 'service' and all the ways in which an organization adds value. Price means not just the price charged, but also all aspects of pricing policy.
Finally, promotion is not just the more specialised sales promotion, but also every way in which a product is promoted to customers – from print advertising to websites. The 4Ps are used as an approach to marketing planning. The prominence of the 4Ps derives largely from Kotler's and colleagues' (e.g. 2003, 2001) focus on these as central to marketing strategy.
In recent decades, there have been numerous attempts to update and revise the marketing mix. Jefkins (1993, p. 37) pointed out that the concept of 4Ps is no more than a simplifying convention that “loses sight of the chronological sequence. He devised a more realistic twenty-element mix that attempted to describe the marketing process sequentially, starting from conception, through pricing, product, distribution and sales to maintaining customer interest and loyalty.
For some marketers there are '5Ps' of marketing, with the fifth being 'People'. 'People' has two meanings in this context. First, customers are people, often buying according to emotion and whim; without them, there is no business. Second, people make it happen. Without people to put marketing plans into operation, nothing happens. Furthermore, Booms and Bitner (1982) proposed that for marketing services, the marketing mix should be extended to seven, with the sixth and seventh being 'Process' and 'Physical Evidence', respectively. For a service, where there is no tangible product, the process of providing the service is all-important. Similarly, a service cannot be sampled. The provider needs to present evidence of the quality of the process.
In recent years, what marketers actually do has changed radically. Some authors (e.g. Gronroos, 1997) have questioned whether the old idea of the marketing mix can still be valid. The challenge is based on a shift of emphasis towards relationship marketing and customer relationship management (CRM), aspects which are fundamental to marketing the e-Business. One development has merit as being descriptive of the way marketers think about the customer. The '4Cs' (Lauterborn, 1990) imply more emphasis on customer wants and concerns than do the 4Ps. In this paradigm, 'Place' can be thought of as 'Convenience for the customer', recognising the customers' choices for buying in ways convenient to them. Rather than being something that a company makes, 'Product' can be thought of as a 'Customer benefit' - or satisfactions wanted by customers.
Furthermore, 'Price' may be what companies decide to charge for their products, but 'Cost to the customer' represents the real cost that customers will pay, including, for example, their own transport costs. Lastly, 'Promotion' suggests ways in which companies persuade people to buy, whereas 'Communication' is a two-way process also involving feedback from customers to suppliers.
Marketing and promotion costs are among the most significant costs incurred in the music industry. Such expenditures are necessary to help artists stand out from competing releases. Whereas major labels achieve significant economies of scale in promotion, small labels are hampered by, for example, the high costs associated with obtaining radio airtime. In an online world where consumers have many more listening choices, the role of promotion will become even more critical in differentiating individual artists and driving sales. Owing to the high costs associated with promotion and distribution independent labels rarely reach large audiences (Coats et al., 2000).
CHAPTER 2
REVIEW OF RELEVANT LITERATURE
2.0 Introduction
One of the recognized industries in the world today is the music industry. For years, music had very little to do with business. Basically, the music industry revolves on business activities including fast-phased unit-led production, licensing, marketing and distribution. The objectives of the music business is primarily concentrated on fast distribution of products, speed of re-stocking and selling products on major territories and be more competent. The music industry is a department that is in-charge with the promotion, creation as well as preservation of music. In the business world, the music industry is simply equated as the business of music. Since the popular music is of worldwide significance, the international music industry is deemed highly relevant. And according to Burnett (1996), the international music industry is widely based on thee production and sales of phonograms (records, cassettes, mini and compact discs).
Today, the music industry does not only consist of cassettes, mini and compact discs. The music industry has gone a long journey which enabled it to become more loosely integrated vis-à-vis the rest of the entertainment industry. The music industry has become one of the most profitable industries in the global marketplace. Indeed, the music industry has been highly commercialized. However, in the recent years, there has been a noted decline on the global sales of music. This can be attributed on the lack of “blockbuster” releases, competition from other media such as computer games for younger consumers, and the availability of free music on the Internet. Because of this, issues have been raised regarding the delivery of music over the internet. (Fox, 2004)
Chiefly, the access to free music has made a great on the delivery of online music. As a result, companies under the music industry are pressured to devise strategies that can address the threats of online music delivery. There is also an urge for them to adopt new business models in order to meet consumer needs successfully in the e-commerce milieu.
In the ever-changing environment of the music industry, competition becomes the major organizational principle of marketing activities. As time evolves, consumer behavior, trends and issues put the music business on considerable stress. Changes and marketing approaches would have to be altered accordingly. Thus all companies in the industry are challenged to formulate marketing strategies that will ensure them of achieving competitive advantage over other companies. In order to position themselves on top of the competition, many companies are focusing on developing loyal customers – customers that avail of its products and services consistently over time, generally at regular prices, commonly ignoring the pleas and platitudes of competitors. The main objective of this dissertation is to compare the marketing strategies of music industries in China and UK. In order to achieve the objective of this paper, the literature review will focus on the following topics: Business Strategy for Music Industry, UK and Chinese Music Industry Marketing Strategy; the government policy of UK and Chinese music industry; Effect of the information technology and internet on marketing strategy of UK and Chinese music industry for non- academic literature. For academic literature the discussion will include the discussion of consumer behaviour, specifically the audience development of music industry in UK and China. For this paper, the research model to be used will be based on the 7ps of marketing.
Business Strategy for Music Industry
Business model is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets (Rindova & Fombrun, 1999). Only firms that continuously upgrade their competitive advantages over time are able to achieve long-term success with their strategy and implementation. Choosing the appropriate business model is intended to create differences between the industry’s positions relative to those of its rivals (Drejer, 2002). To position itself a firm must decide to whether it intends to perform activities differently or to perform the different activities as compared to its rivals. Thus, the firm’s business model is a deliberate choice about how it will perform the value chain’s primary and support activities in ways to create unique value. Over the years, different companies and organization are trying to utilize the business model in which they think should bring success to the over-all performance of a business. In addition, business model is also referred as the mechanism or system by which any firm or business aims to produce profit or revenue. It is the totality of how the industry intends to serve its target market. It involves both the marketing strategy and its strategic implementation. Throughout the years, the uses of business model are regarded as complicated and sophisticated. Business models have different kinds.
However, the business model that has been used by the music industry prior to the emergence of the internet is the basic business model which is the subscription business model. In this chosen model, different music industry like Sony Music, or EMI do not sell their products directly. Instead, these industries are selling their products monthly or annually. In this model, the effect simply lies on the conversion of a one-time sale of a particular music labels or musical records into a frequent sale of a product. This to know where the target market lies, providing their products on time that they know it will hit the target market and tries to promote it through advertisement.
Prior to the use of Internet, music industry’s competition depend largely on how they locked their consumers. This means that the music industry is in control of their consumers by means of the kind of music that the music industry will offer. The relationship between the organization and the consumers are being embedded to consumer as a buyer and the organization as the producer. In this manner, the consumer would tend to buy the music products from the store just to hear the particular songs that they wanted to listen to. Herein, It does not matter whether the other songs or tracks included in the album may or may not attract the consumer. In addition, the music industry prior to the use of internet tries to market their products depending on the artists or the musicians and the labels that they have.
Using the Porter’s Five Forces Model (See Appendix 1), the model of the music industry can be seen in Table 1. As can be seen in the table the competition for the music industry vastly depends on the musicians in which the industry has. And the competition not only lies within music industry but also to its rival competitors. Moreover, the competition on the labels is very tight since consumers have different taste when it comes to music and its label. The music industry depend its profit on the musicians and the artists. On the other hand, in the suppliers of the music industry will also depend on the musician, labelling and the consumers. Herein, a certain music industry likes for example the Sony. The company will be able to get their supplies from those musicians who wanted to use their industry as the promoting agency. The labelling, will include copyrights for its original holders, the agreement is in between the music industry and the people behind a certain musical records.
Utilizing still the Porter’s Five Forces Model, the buyers of a certain music industry is depended on their listeners through the labels and the concerts. The labelling in this manner came from different distribution channels, promotional media, retail outlets and customers with playback devices. The only threat of a music industry during the times when the business does not utilize the internet is the emergence of new popular sounds and new bands. Moreover, the threat will also include new record labels and other musicians and for the audiences the threat would possibly be the digital lifestyle due to the technological progress. However, the music industry’s marketing or business strategy may also have its own substitute. This enters music videos and movie soundtracks in which they can use as an alternative to get the attention of their target market. Moreover, labelling may include different variance such as tape, cassettes, CD of DVD. On the other hand, the substitutes for the music industry for the audiences may include new media, peer-to-peer audiences and the digital lifestyle as well (Henderson and Mihas, 2000).
Likewise, the music industry also value brands and brand creation. Indeed, in any firm, building brand is a significant management skill. Branded product lines generate a distinct set of benefits that is covered within a recognizable character. Along with these products are the connection between the customers and the product. In the music market, the artists are the brands themselves. When the brand is strong and powerful enough, it produces an image and identity for a certain product or company. This further establishes the relation between brands and consumers. When the requirements of the customers are met by particular music brands, consumers tend to become loyal. Upon failing to do so, consumers are quick to patronize other brands.
UK Music Industry’s Marketing Strategy
The UK music industry is enjoying a boom as new artists are breaking through the scene and the people are lapping them up. Not including compilations, CD sales are higher than ever and albums by British artists have hit a seven-year sales peak in 2005 (Youngs, 2006). According to a recent survey by research firm XTN Data, around 85% of people buy at least one album monthly. Legal song downloads are also enjoying sales increase (Youngs, 2006).
Although online digital music sales are a small fraction of the overall UK music market, they are increasing rapidly. According to the International Federation of the Phonographic Industry (IFPI), online sales tripled in 2005 to reach 6% of the overall market (Reimer, 2006). In another report, it was revealed that legal song downloads more than quadrupled in 2005 (Youngs, 2006).
According to the British Phonographic Industry (BPI, 2006), in 2005, the UK's digital music business was worth $69m, bigger than Germany ($39m) and France ($28m) combined. The $69m / £38m total was split £25m a la carte downloads, and £13m mobile – which does not include an estimated £2.5m from subscriptions (BPI, 2006). As more sales move from CD to online transactions, the UK music companies are enjoying increased profits as a result of lower costs for digital distribution compared to the costs for physical media.
However, the growth of legal music downloads is being challenged by illegal filesharing. In a report by TNS Worldpanel (2006), the cost to British music of illegal filesharing reached £1.1bn from 2003 to 2005. Figures estimate the cost to British music in 2005 of people illegally filesharing rather than paying for music was £414m; 2003 had £278m lost sales and 2004 had £376m lost sales (BPI, 2006). According to Peter Jamieson, BPI chair: “The UK record industry is the biggest single investor in British music. Too often people believe that when they take music illegally over the Internet it is a victimless crime. But when people share music files illegally, they are stealing the future of British musicians and the people who invest in them” (BPI, 2006, p. 1). The figure below shows the change in spend on entertainment products in the UK.
The downloading of free music by young consumers is also a particular concern for the music industry in many countries worldwide. In the United States, evidence shows that these consumers are purchasing less music: Between 1991 and 2000, the overall market share declined from 18.1% to 12.9% for 15-19-year-olds, and from 17.9% to 12.9% for 20-24-year-olds (Recording Industry Association of America, 2001). Understandably, these findings raise concerns about the future of music as a product, particularly with regard to young consumers, whose future music-purchasing habits are being influenced by the availability of free music over the Internet.
Offsetting the above concerns are predictions that delivery of music over the Internet, that is, music as a service, will expand significantly through the coming years. Aside from the sale of physical music products over the Internet, sales of music downloads may increase significantly over the next few years. Most downloadable music sales are expected to take the form of subscriptions, wherein users pay a monthly fee to gain access to and download as many songs or albums as they choose. Estimates indicate a rapid increase in both a la carte and subscription music sales. While the predictions may be overly optimistic, the distribution of music as a service (rather than a physical product) likely will grow significantly in the future and will comprise an increasing proportion of overall music sales.
Free music online has redistributed power in the music industry from music labels to individual consumers. The record labels have attempted to thwart the efforts of free music providers through the creation of copyright-protected files and through lawsuits against providers of free music. According to Sherman (2001, p. 36): “Ultimately the best response to online piracy is a legitimate alternative.” Currently, record labels are increasingly competing with free filesharing systems for consumers. To compete effectively in this context, labels will need to come up with marketing strategies aimed at encouraging consumers to legally download music or buy physical music products online.
The market of music in the United Kingdom is very big. Aside from the large population of the place, music is also highly relevant in the lives of the people. Various artists in the international arena came from United Kingdom. Undoubtedly, music in this area makes it big in business. The market reach of this industry is not only concentrated on the domestic or local level but as well as in the international level.
According to Youngs (2006), the UK music industry enjoys its ‘boom’ today. Specifically, the business is booming as talented new artists are breaking through and the public are lapping them up. Moreover, the industry asserts that excluding compilations, CD sales are higher than ever and albums by British artists have hit a seven-year sales peak. In fact, 85% of its people buy at least one album per month and the legal song downloads have even quadrupled. As a result, the continued investment in the UK record’s industry is definitely paying off. And this success has been the basis of building digital business. More importantly, there has been a strong growth within downloads as well as within the mobile space.
In 2004, there has been a price war on the online music market between Apple and the RealNetworks. Specifically, there has been a cutback on the price of online music by the RealNetworks Company. Because of this, it directly undercut its arch-rival Apple. They sell their music products half of the price of Apple. And, this move has created a fuss on the market competition for online music. (BBC News, 2004)
The situation presented above greatly reflected the nature of e-commerce on the music industry in the United Kingdom. Obviously, this is an actual case on the music industry of UK. More importantly, the case presented a promotional tactic in order to acquire a large market of online music. In addition, the cutting of prices did not only outsmart its competitor but also encouraged people who are currently downloading illegally to start buying online music legally.
Indeed, the year of 2005 has been a good year for the music industry in UK. This is because of the claimed victory in its first battle with the illegal file-shares. Twenty people have paid £50,000 in order to settle their crimes out of court. The illegal sharing was done through the use of different file sharing software such as Kazaa peer-to-peer network, Imesh, Grokster, WinMix and BearShare. The compensations payments were returned to the music copyright holders. (BBC News, 2005)
Chinese Music Industry
Because of the rapid changes in the market environment, music industries all over the world are trying to initiate their own marketing strategy and Chinese music industry is never an exemption. In the Chinese music industry it is said that the only sale of music in a virtual approach is through the booming of the ringback and ringtone market that generated a $1.5 bln in revenues for China mobile in 2007. However, the emergence of this market caused some problems with the labels and artists of Chinese music industry.
Currently, the music industry that is considered as the big winner in China is Baidu with business mainly focused on digital music. Scholars believed that China represents rock bottom for their music industry, specifically on the economics of the creative side. It is said that CD business for music industries in China has disappeared and the businesses which have emerged have not been able to help the artists.
In an article by Kennedy (2006) he has mentioned that in this generation, Chinese market can be considered as the most exciting new market in the global market, especially for the international recording industry. Having been able to realise the potentialities of the Chinese market, major international record industries have been bale to establish their presence in the country. For instance, EMI has launched a joint venture with one of China’s recording industry, i.e. Shanghai-based Push Sound. On one hand, other multinational industries to enters the Chinese music market include Sony BMG which established a partnership with Shanghai Audio and Visual Press; Warner Music Group, one the other hand has created a local version of the industry which is the Warner Music China and Universal Music have been associated with the Shanghai Media Group.
In addition, independent industries are also seeking for new opportunities to invest in China and enter the music industry in the county. For instance, some music industries are experimenting with new types of business model which is not common in the market. Accordingly, the Chinese music market in this period of time has a picture of untapped competencies. The nation has a population of more than 1.3 billion which is one sixth of the total population of the world. The Chinese music industries target market includes the rising numbers of middle class with disposal income and young people who are music enthusiasts.
Many believed that if Chinese market and music industry will work together, the country may experience an exciting growth in the years to come. Chinese music industry is also being challenged by the emergence of various digital music services. Presently, there are five legitimate digital music industries in China and this is forecasted to increase more in the next years. The transition of China to digital has been reflected across the globe. In this regard, the record and music industries have rapidly changed themselves from an enterprise dominated by revenue streams like radio and physical retail sales to one of various licensing channels, from the use of ringtone to subscription music service, from mobile downloads to the music video. In the article, it has also mentioned that China has been able to cope into the digital period with the help of the music industry. It is said that great opportunities comes with various challenges and the music industry of China is now facing various challenged. One of the challenges is the issue on the development of a legal environment, promotion of legitimate music channels and most of all to destabilise the culture of music piracy in the market which affects the music industry in a negative manner.
Government Policy of UK and Chinese Music Industry
The music industries all over the world have been threatened by different challenges and one of this is about piracy. Basically, piracy is a criminal activity being theft of others’ intellectual property. In relation to the music industry, piracy is considered as unauthorized copying and in this aspect falls into 3 categories (IFPI, 2004c):
n Piracy is the illegal copying of an original recording for commercial profit without the permission of the rights’ owner. Herein, the packaging of pirated copies differs from the original one.
n Counterfeits which are copied and packaged to be like the original as closely as it can be. In this regard, the original producer’s trademarks as well as their logos are reproduced so as to mislead the targe audience into believing that they are purchasing the original product.
n Bootlegs referred to the unauthorized recordings of broadcast or live performances. Such copying refers mostly to Audio and Video CDs only.
The advent of the mass-produced CD has changed the face of piracy from a problem largely confined to local borders to a sophisticated which include Laser Discs (LD), Video Compact Discs (VCD) and Digital Versatile Discs (DVD), are inexpensive to manufacture and easy to distribute. In 2000, over 20 million pirated optical discs were seized, and by comparison, 4.5 million videos were seized worldwide in the same period. Unlike traditional analog piracy, a digital pirated disc is as pure and pristine as the original (MPAA, 2004). In addition, a production facility can churn out huge volume of illegal discs in relatively short time (MPAA, 2004).
Wit this challenge, the government of UK and China has been able to regulate their own policies to protect their music industry. As compared to other media industries like press or the broadcasting, the music industry of UK has not been considered as the object of much governmental interest except on the notion of occasional amendments of copyright law. However, in the 80s, British music industry has been given emphasis in terms of the development of the local government cultural industry policy implementations, and since the 1997 election, the labour government has changed the policies of UK music industries to the national level through the establishment of Music Industry Forum, Creative Industries Task Force and others. Part of this was the provision of the British Department of Culture, Media and Sports (DCMS), regarding the three strands of the music policy which include the education and training (both as an element of employment regulation and as a policy for securing British Music industry’s future talents and artists base); rights protection which is specifically made for the protection of the British rights in global environmental situation and in new technology; and social inclusion which is referred to the use of music to articulate the modern multicultural British for the nation and for the global brand of the UK’s music industry. It can be said that the policy of UK begs two essential aspects: first, it shows that the British music industry is equivalent with their record industry and secondly, the policy assumes that there is a modified national music interest (Frith, 2000).
Unlike in other nations, the intellectual property protection of China as part of their government policy for music industry is still at its early phase for a market economy. The condition of the IPP in China is the same to the situation of the protection of the environment which shows that there is a gap between the day-to-day reality and government policy. The enforcement of intellectual property policy can also be considered as ineffective and weak in most parts of the nation. because of the local protectionism and because of the lack of an independent enforcement authorities to implement the polices, infringers of intellectual property are mostly not punished or prosecuted. Although, the government is issuing fines, the fines are noted to be low to defer or eliminate infringing operations.
During the last years, Chinese government policy for music industry’s ip protection has seen essential improvements. In china, internet piracy has rapidly increased in China which threatens to strangle the improving legitimate digital music market. In addition, China has seen an alarming growth in websites, and other streaming sites along with illegal-file sharing which needs attention. Chinese music industry in cooperation with the government agencies is said to stepping up their attempts to eliminate the infringing internet sites from the networks. In 2005, China has sent over a thousand warnings which aims on taking the sites down through ISP’s. However, the government has find this process to be slow and cumbersome hence, they have proposed new internet regulations to give incentives for ISPs who are effectively fighting piracy and shift the burden of accountability for tackling infringement towards the ISPs.
Progress of IPP is considered to be more visible in big cities in the country. In Beijing, for instance, a copyright protection centre was established by the government in 1993 to protect the rights of the artists in their music industry as well as in the performance arts. In this regard, it can be said that China are trying to improve their government policy to protect their music industry (Objectiva Software, 2008).
The music industry relies greatly on copyrights. Copyright enables record companies to provide sufficient capital and enterprise in producing commercial recordings that can be exploited in both local and overseas markets as they contain legal protection to counter unauthorized reproduction. Furthermore, copyright is significant in assuring that all talents used by successful artists are given due recognition and reward. In the music industry, there are two significant copyrights involved (Monopolies and Mergers Commission, 1994). The first copyright protects the performance and efforts employed to create the product, including those of the artist and the composer. The second copyright protects the actual sound recording involved in the production of the music when a certain artist completes a musical work and is recorded.
Normally, the sound recording copyright is owned by the record company, although copyrights may be granted or licensed to others. These copyrights are vital to the owners as they provide several rights, such as the sole right to produce product copies as well as the exclusive right to perform the music piece in public, including broadcasting. Moreover, performing the record in public, such as in public places, radio or television, permits record companies to receive license fees. Copyright is interpreted as territorial in its application and is enforced by international agreements (Mansell and Steinmueller, 1995).
Business Strategy for Music Industry
Business model is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets (Rindova & Fombrun, 1999). Only firms that continuously upgrade their competitive advantages over time are able to achieve long-term success with their strategy and implementation. Choosing the appropriate business model is intended to create differences between the industry’s positions relative to those of its rivals (Porter, 1980). To position itself a firm must decide to whether it intends to perform activities differently or to perform the different activities as compared to its rivals. Thus, the firm’s business model is a deliberate choice about how it will perform the value chain’s primary and support activities in ways to create unique value. Over the years, different companies and organization are trying to utilize the business model in which they think should bring success to the over-all performance of a business. In addition, business model is also referred as the mechanism or system by which any firm or business aims to produce profit or revenue. It is the totality of how the industry intends to serve its target market. It involves both the marketing strategy and its strategic implementation. Throughout the years, the uses of business model are regarded as complicated and sophisticated. Business models have different kinds.
However, the business model that has been used by the music industry prior to the emergence of the internet is the basic business model which is the subscription business model. In this chosen model, different music industry like Sony Music, or EMI do not sell their products directly. Instead, these industries are selling their products monthly or annually. In this model, the effect simply lies on the conversion of a one-time sale of a particular music labels or musical records into a frequent sale of a product. This to know where the target market lies, providing their products on time that they know it will hit the target market and tries to promote it through advertisement.
Prior to the use of Internet, music industry’s competition depend largely on how they locked their consumers. This means that the music industry is in control of their consumers by means of the kind of music that the music industry will offer. The relationship between the organization and the consumers are being embedded to consumer as a buyer and the organization as the producer. In this manner, the consumer would tend to buy the music products from the store just to hear the particular songs that they wanted to listen to. Herein, it does not matter whether the other songs or tracks included in the album may or may not attract the consumer. In addition, the music industry prior to the use of internet tries to market their products depending on the artists or the musicians and the labels that they have.
Using the Porter’s Five Forces Model (See Appendix 1), the model of the music industry can be seen in Table 1. As can be seen in the table the competition for the music industry vastly depends on the musicians in which the industry has. And the competition not only lies within music industry but also to its rival competitors. Moreover, the competition on the labels is very tight since consumers have different taste when it comes to music and its label. The music industry depend its profit on the musicians and the artists. On the other hand, in the suppliers of the music industry will also depend on the musician, labelling and the consumers. Herein, a certain music industry likes for example the Sony. The company will be able to get their supplies from those musicians who wanted to use their industry as the promoting agency. The labelling, will include copyrights for its original holders, the agreement is in between the music industry and the people behind a certain musical records.
Utilizing still the Porter’s Five Forces Model, the buyers of a certain music industry is depended on their listeners through the labels and the concerts. The labelling in this manner came from different distribution channels, promotional media, retail outlets and customers with playback devices. The only threat of a music industry during the times when the business does not utilize the internet is the emergence of new popular sounds and new bands. Moreover, the threat will also include new record labels and other musicians and for the audiences the threat would possibly be the digital lifestyle due to the technological progress. However, the music industry’s marketing or business strategy may also have its own substitute. This enters music videos and movie soundtracks in which they can use as an alternative to get the attention of their target market. Moreover, labelling may include different variance such as tape, cassettes, CD of DVD. On the other hand, the substitutes for the music industry for the audiences may include new media, peer-to-peer audiences and the digital lifestyle as well (Henderson and Mihas, 2000).
Likewise, the music industry also value brands and brand creation. Indeed, in any firm, building brand is a significant management skill. Branded product lines generate a distinct set of benefits that is covered within a recognizable character. Along with these products are the connection between the customers and the product. In the music market, the artists are the brands themselves. When the brand is strong and powerful enough, it produces an image and identity for a certain product or company. This further establishes the relation between brands and consumers. When the requirements of the customers are met by particular music brands, consumers tend to become loyal. Upon failing to do so, consumers are quick to patronize other brands.
Changes and marketing approaches would have to be altered accordingly. Indeed, the Internet has been the most significant phenomenon to strike the Music Industry since its inception (Ashurst, 2001, p.101). Within the Music Industry the Internet is no longer a “neglected” medium (Mathews, 2001) as it has been researched significantly. This development however, still presents many challenges in marketing music through the internet. Despite the research and a genuine eagerness to make the Internet work for the music industry, marketers’ research and practice have been so far thwarted in uncovering an effective method to use marketing on the Internet (Holt and Watters, 2004). Marketing a band for instance, has been known and practiced by the industry. Nonetheless, internet marketing had simplified this role. Music marketers should then consider the establishment of a relationship between digital media with other forms of communication.
Consumer behavior is perhaps one of the most interesting aspects of marketing because it deals with the individual characteristics of consumers. It is basically the buying behavior of the final consumers which are the individuals and households who buy the goods and services offered in the market for their personal consumption (Kotler & Armstrong, 2001). The main concern in marketing in relation to this aspect is whether consumers actually respond to the marketing strategies employed for the product (Best, 2004) which also gives rise to the model of consumer behavior within which most market researches circle around.
A good consumer behavior model was introduced by Kotler & Armstrong (2001) which discusses the process with which the consumers respond to the different product features, prices and advertising. Figure 1 shows that the starting point consists of the stimulus-response model wherein marketing-focused factors which involve product, price, place and promotion and other stimuli which include outside factors in the market environment enter the “black box”. This contains the individual buyer characteristics and decision processes. The third component of the model involves the actual responses to the marketing efforts which can translate into product choice, brand choice, dealer choice, purchase timing and purchase amount among others. It is fitting the end goal of marketing which is to gain consumer loyalty (Chow & Holden, 1997; Ducques & Gaske, 1997; Levitt, 1986).
Figure 1
Model of Consumer Behavior
Piracy of Intellectual Property Right (IPR) works music, audio-visual works and computer software for both business and entertainment purposes is continuing to have a significant impact on the interest of both the IPR owners and the legitimate intellectual property industry as huge demands for pirated CDs hinder IPR protection. Software piracy refers to the copying of software, producing it usually in bulk for sale through unauthorized shops, unlike the purchase of original disc copies from official distributors. Further, pirated CDs involve larger volumes and dollar value compared to the manufactured clothing, medicines, watches or beverages as these generally only appear as counterfeits and in much smaller volumes.
Implication of Internet to Music Industry
In the Music industry, increased market competition identifies continuous adjustment and improvement in the production lines, outsourcing and supply chain management of companies. Interdependence and participation of suppliers and manufacturers in product design, innovation, as well as research and development characterize the current international business environment resulting to market volatility (Sobrero & Roberts, 2001; Appleyard, 2003). These organizations usually share proprietary corporate data with external suppliers and partners while ensuring maximum security to enhance efficiency across the product lifecycle by streamlining procurement, production, fulfillment, and distribution processes (Katsikeas, Schlegelmilch & Skarmeas, 2002) which requires integration of applications and data across multiple geographically dispersed supply chain partners, as well as internal integration with legacy systems (Katsikeas, Schlegelmilch & Skarmeas, 2002; Appleyard, 2003).
Recently, Rabinovich and Carter, (2003) illustrated the efficiency of e-based transactions in an internet retailing supply chain in the music CD industry. However, they also emphasized that e-based transactions may also affect negatively the music industry. Recent technological and market forces have profoundly impacted the music industry. Emphasizing threats from peer-to-peer (P2P) technologies, the industry continues to seek sanctions against individuals who offer significant number of songs for others to copy (Rabinovich, E et. al. 2003). Yet, Rabinovich, E et.al. (2003) suggested that there should be a little rigorous empirical analysis of the impacts of online sharing on the success of music products.
Appendix 1
Figure 1: Porter’s Five Forces Model
Source: Porter, M. E. (1980). Competitive Strategy. Free Press
