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Music Industry And File Sharing: Who Is Winning The Battle?:

Music Industry And File Sharing: Who Is Winning The Battle? Stephen McCord Dr. Vaidotas Lukosius MGMT5000 30 November 2012

The Evolution of Music File Sharing :

The Evolution of Music F ile Sharing For nearly 100 years, the music industry was secure and immune from any real threats of competition. Music distribution was controlled by key industry players, primarily major record labels. Record stores and clubs were the only place one could purchase music In the early ‘90s, the personal computer evolved into a hub for sharing music via optical disc drives and the recordable CD (CD-R). In 1996, the MPEG2 Audio Layer 3 (MP3) audio format was first introduced to mainstream society The emergence of Peer-to-Peer (P2P) networks soon followed as a means for sharing MP3 music files

The Dilemma:

The Dilemma 1998 – Illegal file sharing exploded on the world stage via a P2P network called Napster, which transformed the music industry. Suddenly , labels were competing with “free ” and endless music distribution channels were open to a worldwide audience. At that time, the average selling price for a CD was $18. Illegal file-sharing affected “Price” one of the four P’s of marketing End result has led to dramatic sales declines Devaluation of music. Music has became as assessable and ubiquitous as water. It is everywhere (e.g . computers, phones, tablets, connected TV’s, iPods) Death of traditional music retail chain stores (Tower Records, HMV, Sam Goody, etc.)

Competitive Forces:

Competitive Forces Michael Porter wrote a Harvard Business Review article “How Competitive Forces Shape Strategy” defined business attractiveness by five criteria . Because Internet created lower “barriers to entry” for music industry competition 1 . Threat of new entrants (indie labels) = high 2. Bargaining power of buyers (consumers) = high 3. Bargaining power of suppliers (major labels) = low 4. T hreat of substitute music products (YouTube, Pandora) = high 5. Rivalry among participants (World-Wide-Web) = high

File Sharing Impact on the Music Industry:

File Sharing Impact on the Music Industry In 2000, the RIAA (record labels largest trade organization) shut down Napster. Launched educational programs, filed massive “copyright infringement” lawsuits to curb illegal file sharing Tremendous market saturation and multi-year double-digit sales declines By 2008 115,000 albums released in U.S. Only 110 of those albums sold 250,000 copies. Only 1,500 sold more than 10,000 copies. Fewer than 6,000 sold more than 1,000 copies Decline of major label hold on power. Shifted from labels to artists (and their fans.)

The Future of the Music Industry:

The Future of the Music Industry Music industry finally embracing digital technology in ways to cost-effectively promote artists like never before Rise of social networks – 1.43 billion users in 2012 (1 out of 7 people world-wide) Current major players for music discovery: Facebook, Instagram , Twitter and blogs Rise of the “Do-It-Yourself” music industry models Music fans demand more direct contact with artists

The Future of the Music Industry:

The Future of the Music Industry Embracing technology has led to other new music industry innovations. Examples: Crowd-funding sites such as Kickstarter and Pledge offer alternative ways to help artists fund recording sessions, instruments, tours, and touring vehicles by engaging the help of their fans. Subscription services like Pandora and Spotify create opportunities for DIY artists to get exposure Immediate access to music is creating new ways for a new music industry to monetize music. Future looks brighter than ever!

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