Supply And Demand Chain In Music Establishments Marketing Essay

Since the inception of humankind, music has been significant to civilization of human race providing various advantages physically and psychologically to every person involved with making or being attentive of music and tasting pleasure in doing so.

Prior to 19th century, musical pursuit suggests participating live performances and using of music equipment by people on their own at home. A soaring ratio of people involved in playing and singing independently and rest visited see the live performances in concert halls, taverns and music halls. During this era, the only path of saving music was in some recoverable format with support of some pre-programmed mechanical devices to experience notes. This clearly shows that there was demand for devices which can only help in producing and recording the music and can be easily sent out at listeners place.

Before moving towards the process of tracking and distribution of music let observe how music-making has been categorised by culture. Contemporary society has differentiated music - making in two types i. e. traditional music and popular/pop music. The classical music includes well trained musician and pop music consists of untrained populace. The traditional music suggest three large periods of music i. e. (Baroque, traditional and romantic) where as popular music can be any modern day contemporary music. The essential difference between your traditional music and pop music is classical music is also known as artwork providing entertainment whereas later only provides entertainment. Traditional music has better musical complexity and it is appreciated by elderly generation while pop music lacks the structural complexity for multiple structural layers but have widespread appeal.

Factor regulating buyer behaviour

Information on consumers' potential behaviour becomes a proper resource enabling promoters to assume competitors, bettering the fit between supply and demand of music in the digital environment

Quality Uncertainty

Cultural goods are experiential goods in the sense that their quality may well not be discovered or measured even after consumption. You will find no suitable guidelines to make a case regarding an unsatisfactory music record. When the product quality is uncertain, people choose what other people like. This represents the next feature of intake in the ethnic business - the occurrence of socio-network effects.


Represents a way of fulfilling wants discovered with highly respected life styles - by consuming social goods, people point out who they are and the communal categories they belong.

Demand Reversal Phenomenon

Once too many people take part in a specific fashion, it ceases to be attractive, and the pattern reverses. On this sense, the usage process is cyclical, and the buyer sections may be affected by the dynamics of fashion. This reversal process can also be repeated, such as when an anthology of Beatles melodies, after being first fashionable, and then less attractive, may once again become respected as "classics", experiencing repeated streams of usage.

Demographic factors

Classical Music

Willing to pay more for

Interested in better audio quality

Buy data as a program: not merely music but notes, lyrics and cover fine art.

Enjoy live concerts

Prefer subscriptions than daily tickets

Popular Music

More enthusiastic about convenience

Need adaptable medium to listen

Comparatively more fascinated exploring songs and artists

Curious about the new phenomenon

Consumer use music in two ways i. e. they own the merchandise in the form of a CD/ Movie or use as something, and listen to radio place or online. The tuning in of music through radio stop also used as promotional route where the recognition is established and consumer is lured to be the owner of the product. The market can be essentially grouped into two sections: music owner and informal listener. It's possible for a consumer to be always a part of both the segments i. e. customer being everyday listener for a few music and music owner for other types of music. If the informal listener is changed into music owner the profit starts coming in. Internet being truly a two-way interactive tool offers gain to sales channel for downloading music as additionally it is used as a promotional channel. Consumer analysis shows that adolescents and university going student identified buying of CDs/Dvd disks as expensive. This conception exists scheduled to mass piracy and copying, devaluing the commercial value of music and other reason being there is only a couple of good value tunes on the CDs/Dvd videos. The easy availability of solutions (Music player), digital downloading and Disc/DVD writing has given capacity to consumer in-turn changing their buying behaviour.

The music industry has dramatically transformed within the last couple of ages, all credit would go to the increasing penetration of strong broadband connection, which gives convenient service to music buffs to download or buy the MP3 paths or any music via internet. This technological change in music industry has adversely influenced the traditional string of traditional music specialists. However in move has resulted into heavy offering of physical music and Movie music online. This activity also lays the building blocks for promoting digital downloads as well as the stealing of music illegally from the web.

T he unlawful downloading of music is the existing major problem confronted by the people coping in music industry and the owners of the music. Downloading music illegally hasn't only started out devaluing the value of music for complete generation of youngsters but also influencing this content owners in conditions with their financial earnings which is lessening day-by-day. A huge challenges also experienced by the retailers as there is a rapid ranges of price deflation scheduled to free downloading of music by the new generation of consumers.

While essential changes are occurring in the music and video retailing as well as major upsetting on the list of specialist players, they can be being provoked by the swift escalation of technology setup in the consumer's place. Using the influx of broadband connection there's a mass upsurge in the ownership for iPods' and MP3 players. Other known reasons for growth in online sales are because of the moving of supermarkets from food to non-food categories creating and carrying on the huge impact. Thus, in this environment the obstacles for vendors are to find various ways to serve their consumers for retaining their expected success which will help them to endure in this challenging competition.

On the whole, the music industry is facing a massive challenge. A few of the most popular artists have an undersized product life cycle as the character of the industry has evolved. Then alongside is the present day technology and broadband letting consumers to acquire traditional and popular music at superior quality for free or diminutive cost during exchange of the MP3 songs or file sharing. Relating to music saving companies and their staff the massive and regular use of this method for obtaining traditional and popular music has been a major setback for tracking companies as this being the reason with their declining sales and success. Members and followers of the file sharing partly blames the commercial desire of the taking companies and point out towards the comparatively great prices of DVDs, CDs and noted music as the most important reason of consumers shopping for new and other options.

When we discuss technology it is clear that modern technology is here and you will be improved time to time can be even more complex in future. Numerous performers have problems and neglect to get their music read as a result of governance of the 'quick buck' ultra marketing of the present cut of top acts. Internet is the useful tool for the performers and performers and could offer useful resources for providing their music with their follower all over the world. No matter what the main point is? The music industry will counter the challenge of encountering the modified market place and exactly how they respond to such troubles is going to be critical in their success and prolong development of music industry.

Implications to provide chain, Publisher and Demand chain

The Music industry consist of performers/artists, labels/publisher, producers, manufacturer, engineers, marketing companies. To understand all the quarrels affecting each users of the resource chain, recording companies and demand chain it is important to know how music industry operates. It really is huge and complex industry. In real meaning, a performer or an designer, is undersigned in a deal by the record companies to set-up an recording or songs. Then documenting company pay or may pay for the produced albums to market it or produce the CDs which will be distributed all over the world. In exchange, the earnings is made by the sale of the albums which covers all the cost incurred on producing the CDs and therefore the income is handed to each member involved in the process.

The music company are therefore smashing their business searching for providing a number of music to meet up with the various selection of tang of the consumer. For carrying out this, it is vital to manage the merchandise profile sensitively as any action taken will have a detrimental effect on cash flow. The music company has to ensure that there surely is a sufficient cash flow available to control its liabilities. Nearly every main record company will highlight the fact that they have dozens of other company that has set up under it or they have obtained them. For instance,

The Universal GROUP owns:

Jazz recording company


Classical saving company

Deutsche Gramophone

Apart out of this the labels also offers different companies under them which disperse normal pop and rock and roll material.

Therefore, the marketplace is dominated by five major companies posting 75% of the total sales of noted music all across the globe. But to the fact, there are a large number of other labels and companies which are respected as a individual entity but might have been under used or set up by their parents company over time.

(Source: IFPI, Market Talk about of the Music Industry, 2008)

The Problem

The problem centres on several issues:

Increase in piracy has damaged the record labels severely as they experience a most detrimental in declining sales.

If sales aren't official the musicians and artists are not bound to receive any royalty income from the sale of the music.

The complexity of modern tools is also in charge to make of artificial CDs which is again impacting on the marketplace of the music industry.

Some artists battle to enter mainstream as they are not authorized by the major product labels; they choose the internet as it is potential source of getting their music to mass audience.

Due to decline of Compact disk sales physically, merchants of all size are facing heat. Some smaller size retailers are complaining the difficulty they face in competing the bigger stores as they have got the benefit of providing the tunes through downloaded music.

The effects of music piracy has created the dispute for the record industry as it promises that piracy generates further sales but recording company wants to protect their monopoly powers by keeping the manufactured prices high, and thus affecting the client base.

Other Problems

The other aspects of music sectors are also influenced by the changing market in the music world. The method utilized by music lovers to purchase music is also going under radical change as you can find development in new kinds of advertising entertainment i. e. DVDs and videos. Companies advertising music have also come to procedures with the impact of changes taking place in the market. Amazon to arrive on-line retailing made other companies like HMV, Virgin and Tower Information, which are the three major sellers to face your competition. Amazon also created the impact by providing the features like speedy delivery times and intensive range of stocks through global access.

'Digital distribution' saviour of supply and demand string in music industries

The RIAA (Saving Industry Association America) pressured Napster and other peer-to-peer companies to shut music sharing business with the aid of severe legal process. The commotion was temporarily stopped but it plainly suggested that there is a need of such essential products and services which will help in understanding the customer's likes and can meet their genuine requirement. The basic purpose was to re-organize the original supply chain for the success which was only possible by inculcating various digital syndication strategies. The content creators, content builders and marketers and stores/ distributors are the three major players for the existing supply chain in the music industry. Composers, lyricists, and performers are the part of content makers. The music posting and record companies are included in content developers which can be central to the industry. s are the They not only procure the musical privileges, recognise and develop undertaking artists, record music in studios but also produce and deliver the music, advertise and promote music through various programs. The distributors consist of large national retail chains and documenting company. 85% of sales come from record companies and much larger national retail chains which can be owned by shops and are also high in comparison to record clubs and mail requests and online retailers which only take into account 12% and 1 % respectively. Lately, there's been a significant shift on the market show from unaccounted music to P2P music sites as the record companies have had a significant influence on the demand as well as the resource chain.

Cost Break down of digital distribution

(Source: Alternate digital circulation, G. Premkumar, 2003)

The above cost framework proposes latent opportunities to build up the efficiency of current source chain. These table supplies the breakdown of the expenses involved using averages from various released sources. Out of this the royalty to composers/designers profile to 12% as manufacturing cost is only 5% of total cost and costs such as labour, lease, and local inventory of retail outlet take into account 35%. Meantime, the expenses involved in shops also account for 35% of selling price. The operating profits runs from 4%-6% of sales in relationship of price markdown and after writing off the inventory. An additional cost of 20% is utilized in promotion and advertising campaign. The break down of these cost facts disclosed 25% of adjustable cost is relatively small to preset cost which is 75%. That is important because 60%-80% of music product labels are designed to be flopped and they neglect to cover the permanent cost. A lot of the consumers do not realize that there is natural risk in this business and the successful labels do only make up the deficits.

Alternate approaches for Digital Distribution

Distributing music digitally through source chain can have a variety of strategies. The three major associates of the source string are content makers/artists, documenting companies and vendors. In order to ensure the success of digital circulation, multiple marketing and interpersonal issues must be resolved instead of technological issues. Because of other restraint, concentrating only on resource chain will may or might not exactly give the solution which may be put in place. Six different strategies listed below are the suggestion for distributing music digitally.

Recording company-retailer-customer

Some consumer support this plan as it advises flexibility to create customized CDs without changing the presentation CDs.

This strategy expose consumer to new designers also provides quality connection with music.

This strategy is categorized into three periods as per changes taking place on the market. The primary level consists of expanding personalized CDs and it advances to second level where in fact the assembling of CDs is performed conquering the in-store inventory problems. In the 3rd stage, this plan provides inventory less in-store and help consumer to identify types of music they want, different artists, and can also create CDs.

Due to inherent cost efficiency in this plan, it provides benefits to Retail store operations.

This strategy also helps saving companies to protect their copyrights.

Record company-customer

This strategy of direct distribution take good thing about eliminated suppliers as it reduces the price tag on retail businesses for distributing music. Thus creating potential market for digital circulation between documenting company and customer.

Record company-intermediary-customer

This strategy is also known as "one-stop shop". The consumer can get their music at multiple sites at one place. Music from multiple tracking companies is consolidated at one place by intermediary which offers consumer to buy their favourite music at one place. Trusted online retailers like Amazon. com can generate extra sales income by providing quick search service and good system network to download music.


This strategy creates the most effective supply chain through the elimination of the intermediaries and save cost atlanta divorce attorneys aspect for music companies for distributing music. Although this plan suggest expenditures for designers in terms of direct advertising and retaining the price of the web site. It is also important to address other issues for the success of this chain.


In this plan, an intermediary combines the performers and offers them services to minimise their search and information problems related to consumers also does expand the marketplace reach for the designer. The intermediaries creates social network with similar music interest also offers services like online reviews and provides email notifications to consumer for new produces and concerts. Thus they add value to this strategy.

Audio-on-demand (AOD)

This option helps consumer to generate their own playlist of the favourite sounds and can hear as per their convenience through internet radio stations. This strategy uses simple registration model for delivering the music to consumer. A consumer can change their playlist as per their choices through the subscription period this will help consumer to reduce old and few songs considering the ownership model.

(Source: Alternate digital distribution strategies, G. Premkumar, 2003)

Comparison of distribution strategies

(Source: Alternate digital circulation strategies, G. Premkumar, 2003)

It is thus necessary to educate people about unwanted effects of piracy and guarding the copyrights. This is also critical for keeping the music industry healthy and flow of income and royalty to musicians and artists will encourage them to create new music lightweight devices. Internet r / c require two-way reference to each consumer in comparison to broadcasting radio which will creates load on server and system infrastructure. These problems will be fixed in future with the aid of surplus bandwidth.

Future of Music Distribution

The above desk provide the overview of merit and demerits of every distribution stations for stakeholder, performers, labels and publishers, vendors and consumers. Though it will be enticed to state which strategy is going to succeed in future, it is apparent that quite of these will endure in their own area of interest markets. The definite victory of every channel depends on their comparative features. An individual feature that will cause the reformation of the industry is the dominance between your artists, publisher, sellers and consumers. As previously stated, some of the big brands and publisher not just have control of creation, marketing, and circulation of MP3, CDs, Dvd videos dominating the marketplace but likewise have considerable control on the performers. Increase in consumer capacity to copy the music documents from P2P file sharing sites, which was forgotten because of legal actions taken by saving companies implemented the closure of P2P music sites. However the impact of action considered by RIAA's did not stop launching of several new P2P music sites. Because of the threat of breaching copyrights, musicians and artists have started assisting the point of labels and web publishers related to digital syndication of music. The above table suggest that the problem for suppliers is on risk in future, they need to diversify their services to on-line retailing. E. g. ARKIV. com, NAXOS. Looking at the future of music industry the taking companies will impact the most to each circulation strategy as they will have proper control on incentives and disincentives for consumer to operate one technique or the other.

Various business models can work all together to give utter supple to consumer when music is accessible digitally. As a matter of fact, the business enterprise model modified by Naxos, MuiscNet is the mixture of strategies saving company-intermediary-customer and music on demand which gives ownership and tuning in features to consumers.


The information given above provides opportunities for re-engineering the original supply chain by digitizing the music. The negative impact on members of resource chain, publisher and demand string because of the against the law copying and downloading of music can be solved with the use of six digital syndication strategies. These six distribution strategies were investigated in terms of cost framework and the relative tasks of stakeholders for the music industry. The major problems from the successfully implementation of each strategies were learned and explicated.

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