Can the Music Industry Change Its Tune

1. Apply the value chain and competitive forces models to the music recording industry.

The principal physical distribution channel of the recording music industry value chain has been standardized with a final physical media as CD's among other products.

Unfortunately with the Internet and digital technology the recording music industry has been one of the most affected by companies like KAZZA, Morpheus, Grokster, Gnutella, and the like, which are all based in peer to peer networks or just selling music without taking care of the copyrights.

When a person buys a CD, that person is acquiring a product that represents all contributions of a chain that are part of the music industry. The price that is paid for a CD compensates all the contributors involved in the production of the CD.

The value chain for the music recording industry consists in basically 6 components:

1. Artists or Singer:

2. Recording: Studios (Universal Music Recording, Sony Music, Warner Music, BMG or EMI)

3. Manufacturing: CD Manufacturers

4. Marketing: Advertisement, catalogues, tours, concerts, Interviews, etc

5. Distribution: Transportation, Packaging from manufacturing to distributors.

- Indirect distribution through traditional channels: chain music stores and chain bookstores

- Indirect distribution through nontraditional channels: gift stores, independent business.

6. Retailing: Carried by major label and internet superstores until products become popular with particular segments.

It is important to know that there are other types of distribution channels like radio stations which use music to make profits. These companies are known as professional users of music and in order to use any kind of music they have to pay fees for doing so.

In this way some of the factors that make part of the recording music industry value chain are facing decreases in their sales and revenues.

2. What role did the internet play in changing value propositions and the competitive environment?

Internet plays positive and negative roles

Negative: Because it has been led to illegal commercialization. The recording music industry has lost control over the web because of companies like KAZZA. Practically a black market has been taking advantage of this industry making incredible profits in a way attractive without taking care of the risks.

Positive: Because the music industry is opening new opportunities for the public to experience music in new ways. Finally the music industry resolved to enter the world of digital distribution without physical package.

To what extent has it been responsible for declining CD sales? Explain your answer.

- If the CD prices remain high and the music is free or cheaper on internet, the music recording industry will continue decreasing no matter what.

- The price of 15 dollars or more represents too much money to pay for a CD that only brings one or two good songs.

- The music industry was totally closed to electronic distribution; they were fighting companies like KAAZA without offering new alternatives for users.

- Inevitably the traditional channel has been affected for the digital technology.

3. Analyze the response of the music recording industry to these changes. What management, organizational and, technology issues affected this response?

- The music recording industry has been slow to offer the user's better alternatives to the networks P2P. Most of the time the big industry has been worried impeding the new change than being adapted to it.

- The recording