Can the Music Industry Change Its Tune?

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Case Study 1B ¡V The questions

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 favour 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. Analyse the response of the music recording industry to these changes. What management,
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Constantly, new substitute products are introduced to the market (eg. iPod and MP3 players, MP3 files replacing CD¡¦s 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 internet has cut the time between production and sale by allowing distribution direct 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.

This is having an effect on old business models and thus creating a new business model. 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 favourite singer.

This has also led to consumers legally and illegally downloading music for their iPOD or MP3 players or burning CD¡¦s with their favourite songs.. This has also meant that some authors/artists are not receiving the royalties from their music.

Research by BigChampagne LLC state more than 1 billion songs per week are downloaded from file-sharing programs (Laudon and Laudon 2006, p. 143). These
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