Marketing Management

Question 1

Australian music industry has not been substantially impacted by the digital music trend yet. But the symptoms of perceived impact can be felt by looking at the mass digital music adoption rate. Digital music has shown tremendous growth of about 250% of value $ 27.8 million and 320 % in volume till end of 2006. This growth has increased the share of digital distribution from 1.5 % in 2005 to 5.5 % in 2006 in Australia. Amidst global trend of obtaining digital music online from legal and illegal source growing at a rapid phase. The Australian music industry on other hand is dominated largely by the physical sources of music like CDs and DVDs up to 95 % till 2006.

(Source: 2006 ARIA yearly statistics http://www.aria.com.au/2006AustralianWholesaleRecordSales.htm)

The future forecast of digital music is assumed to be $ 60 million in 2007 and around $ 200 million in 2010. The future of music industry is online digitalization, which would waive off the physical medium in times to come.

(Source: IBIS World http://cyberextazy.wordpress.com/tag/research-statistics/)

Target Markets for Online Digital Music

Internet is the prime medium to download the digital tracks from various online music stores. Hence understanding the degree of diffusion of internet in Australian consumers gives vital information about the consumer’s likeliness to purchase digital music online.

According to Australian bureau of Statistics, the accessibility of internet among the Australian household have grew from 16% in 1998 to 46% in 2002. In 2004-05, 56% of households were connected to internet which grew rapidly from 16 % in 1998. While the age group of 18-24 years forms 70% of total internet users in Australia.

(Source: Australian Bureau of Statistics (ABS) (2004) “Household use of information technology, Australia”, http://www.abs.gov.au/Ausstats/abs@.nsf)

Digital Music - adoption

The various factors influencing Diffusion of innovation of digital music:

1. Degree of consumers trying new products вЂ" Digital music and personal influence.

2. Characteristics of the digital music as Innovation.

3. Organizations readiness to adopt innovations.

Degree of consumers trying new products вЂ" Digital music

This innovation is finding place in market because of convenience factors associated to it, like above. The consumer adoption process or diffusion of innovation can hence be understood by applying this innovation on Adoption of innovation model from Kotler and Keller, 2006e, Pg 659.

1.1 The chart shows the present and future sales of digital music in Australia from 2005-2010

Adopted from: Relative time of adoption of innovation, Kotler & Keller, 2006e, Fig 20.7, Page no. 659. Source: Statistical figures adopted from (Source: 2006 ARIA yearly statistics http://www.aria.com.au/2006AustralianWholesaleRecordSales.htm) and IBIS World http://cyberextazy.wordpress.com/tag/research-statistics/)

The figure 1.1 contains the sales of digital music according to the annual reports of ARIA for the period 2005 and 2006.While the future sales figures are been taken from forecasts made by IBIS world. These figures are taken and assimilated into the diffusion of innovation model to understand the Australian adoption process of digital music.

It can be analyzed that the innovators in adapting digital music were active in the period 2005-2006. While the early adopters have begun to be actively participate from 2006 onwards. The present stage of the Australian adoption process to digital music is early adapters. There are tremendous possibilities of early majority expected from the period 2007 to 2010.

Innovators: In context to digital music, the innovators were the initial users who found purchasing online music of there choice very easy in comparison to the traditional way of buying from a retailer. The rate at which innovators grew over time is 250 % which shows that the innovation have considerably found acceptance among consumers.

Early adopters: Early adopters in adopting digital music have found to growing with rapid phase of 115% from 2006-2007. This shows that digital music have been accepted by these early adopters. Based upon the degree of growth in volume have made the market watchers perceive the substantial growth of this innovation leading to early majority by the end of 2010.

Characteristics of Digital music as an innovation

The characteristics of any innovation can be determined on various parameters like relative advantage, compatibility, complexity, divisibility and communicability.

Relative advantage: The degree of relative advantage of digital music over traditional decides the adoption. Digital music has many solid advantages and convenience factors over traditional music medium like:

1. Digital music can be obtained via online shopping rather than going to retailer to purchase saving time & energy.

2. Digital music provides large search options instantly while physical availability of such collection CDs and DVDs at retail store is very unlikely.

3. Digital music has advantage of storing, accessing and carrying in comparison to CDs and DVDs.

4. Consumers can buy even a single track rather than buying the whole album in contrary to traditional CDs and DVDs wherein whole album is required to be purchased. This relative advantage saves time, money and energy.

5. The overall cost of digital music also reduces for the end users due to removal of middle links in value chain. The cost of physical medium, transportation and storing are cut due to the nature of digital music; this makes digital music very much affordable and profitable for both consumers and service provider.

6. Online comparison of prices, availability and quality of digital music saves time, energy and money than music from traditional retailers.

Compatibility: Purchasing music online can be explained on individual’s social value. Like technology passionate individuals simply do