Users of the subscription service can download and stream an unlimited amount of music while subscribed to the service. But when the subscription period lapses, all of the downloaded music is unplayable until the user renews his or her subscription.
Structure<br />Digital Music Industry: Introduction<br />Key Players<br />Statistics<br />Piracy as a challenge and steps to curtail it<br />Trends<br />Porter’s 5 Forces Analysis<br />Recommendation<br />
Digital Music Industry<br /> An online music store is an online business which sells audio files, usually music, on a per-song and/or subscription basis. <br /> It may be differentiated from music streaming service in that the music store offers the actual music file, while streaming services offer partial or full listening without actually owning the source file. <br />
Digital Music – Statistics<br />US$ 4.6 billion – trade value of the digital music market worldwide<br />-31% – the decline in the value of the global recorded music industry 2004-10<br />6% – growth of global digital music revenues in 2010<br />1000%+ – the increase in the value of the digital music market 2004-10<br />29% – the proportion of record companies’ global revenues from digital channels<br />16.5% – proportion of internet users purchasing digital music in the US<br />13 million – tracks licensed by record companies to digital music services<br />400+ – licensed digital music services worldwide<br />Source: www.ifpi.org<br />
Key Players in the market<br /> ITunes Music Store:<br /> It is the largest player with more than 75% of the market share in the online music industry. Also it is biggest music seller in the USA in all forms<br />Opened: April 28, 2003<br />Pricing model: Pay per song<br />Platforms: Mac OS X, Windows, Apple TV, and iOS.<br />Format: Protected AAC (.m4p), MPEG-4 Video<br />Restrictions: (Protected) Music, unlimited iPods and iPhones.<br />Catalogue: More than 14 million songs worldwide, 1,000,000+ podcasts (USA), 40,000+ music videos (USA)<br />Streaming: Previews<br />Availability Worldwide<br />Website: itunes.com<br />
Key Players in the market<br />eMusic<br />Opened: January, 1998<br />Pricing model: 30-day subscription<br />Platforms: MP3s downloadable in any platform; open-source clients available for Microsoft Windows, Mac OS X and Linux<br />Format: MP3 (.mp3)<br />Catalogue: 6,000,000+ tracks, 7,000+ audio books<br />Preview: 30 seconds<br />Trial: 7 days music<br />Availability United States, Canada, Europe, United Kingdom<br />Website www.emusic.com <br />
Key Players in the market<br />Amazon MP3 : <br />Amazon MP3 is an online music store owned and operated by Amazon.com<br />Opened: September 25, 2007<br />Pricing model: Variable pricing per album<br />Platforms: Amazon MP3 Downloader is required for downloading albums (Windows 98 or later, Mac OS X or Linux)<br />Format: 256 kbit/s VBR MP3<br />Catalogue: 14,815,786 songs<br />Preview: 30 seconds<br />Availability United States, United Kingdom, Germany, France, Austria, Switzerland, Japan<br />Website: www.amazonmp3.com<br />
Key Players in the market<br />Napster<br />Napster is a successful online music store and a subsidiary of Best Buy. It was originally founded as a file sharing service.<br /> Opened: 1999 as free (and reconfigured as non-free by Roxio in 2003)<br /> Pricing model: Offers unlimited listening for $5–7 per month. Napster also offers an MP3 store, a pay-per-track store which does not require a monthly subscription fee.<br /> Format: DRM Free MP3, WMA<br /> Catalogue: 8,000,000 tracks three times each<br /> Availability USA, Canada, the U.K. and Germany<br /> Website: Napster.cpm<br />
Digital Rights Management (DRM)<br />Digital rights management (DRM) is an access control technologies to limit the use of digital content and devices<br />Controls if and how many times a digital music file can be copied<br />Many online music stores employ DRM to restrict usage of music purchased and downloaded online<br /> Example: Napster music store offers a subscription-based approach to DRM alongside permanent purchases<br />
The Biggest Challenge: Piracy<br />Decreased sales because of piracy<br />Pressure on new artists globally<br />Lower music sales means fewer jobs<br />Customer’s unawareness about copyright laws and illegality<br />
Can Piracy Be Stopped: isp and government’s role<br />ISP<br />Blocking services<br />Communication with subscribers over the punitive lawsuits<br />Educational notices to the customer culminating into a sanction<br />Government Role<br />France led the way in 2007 by enacting a graduated response law<br />South Korea passed a law in April 2009 providing for suspension of user accounts : <br />for less than one month for first time offenders; <br />one to three months for second time offenders <br />up to six months thereafter<br />UK, New Zealand, Ireland, European Union, Taiwan, Chile, US have enacted similar laws<br />
Can Piracy Be Stopped: Content Protection<br />Strategic litigation<br />US District Court injunction for Limewire in 2010<br />ISPs were ordered to block the popular The Pirate Bay in Italy in Feb, 2010 <br />Between February and October 2010, usage of The Pirate Bay in Italy tumbled by 54 per cent<br />Role of intermediaries<br />Restrict use of search engines to as a vehicle for piracy<br />Tackling pre-release piracy<br />The IFPI global anti-piracy team removed about seven million infringing links in 2010.<br />
Can Piracy Be Stopped: Consumer education<br />Consumers not even aware about what they are doing is illegal<br />Unaware about the damage being caused to the industry<br />Some Steps to increase customer awareness<br />Music, Film, TV and the Internet - a guide for parents and teachers<br />Music Matters created in the UK by the music industry<br />Pro-music - an international information campaign<br />
Some Trends<br />Downloads still the dominant source of revenue<br />Itunes account for 70% of total revenue in USA<br />Subscriptions package gaining momentum<br />Free advertising-supported streaming service and a premium paid-for service<br />Now improved compatibility, underlying technology <br />Broadband penetration levels have improved quality and the consumer experience<br />
New Trends<br />ISPs as logical partners<br />ISP’s billing relationships with a wide customer base<br />Cost could be bundled within the cost of a broadband fee or paid for separately<br />Benefits to ISP’s<br />Strategic partnerships can act as a marketing tool<br />Significant in reducing churn <br />Increase ARPU<br />Acquire new customers<br />
Mobile operators as logical partners<br />Achieve scale in the marketplace<br />Highly visible distribution<br />Direct billing that puts customer not more than 2 clicks away from download<br />Benefits to Mobile operators<br />Strategic partnerships can act as a marketing tool<br />Significant in reducing churn<br />Increase ARPU<br />Acquire new customers<br />New Trends<br />
New Trends<br />Music in the living room<br /> Subscribers can now access music through their TV set(79%)<br />Apple also launched the new version of Apple iTV<br />Music in the cloud<br />Access own music collection through:<br />a range of different devices or<br /> catalogue of tracks owned by the service provider<br />Sony Corporation’s Music Unlimited is a cloud based music streaming service, launched in December, 2010<br />Several others are reported to be in the pipeline, with parties involved including Google and Tesco<br />
Analysis of Online Music IndustryPorter’s 5 Forces Analysis<br />Threat of New Entrants- Medium <br />Capital requirement for the new player is low<br />Brand loyalty is missing<br />The entry barriers are reduced due to absence of sales force required and other infrastructure<br />Every new customer need to have tie up with record companies to get into market.<br />.<br />19<br />
Analysis of Online Music IndusrtyPorter’s 5 Forces Analysis<br />Bargaining Power of Customers- High<br />There is very little difference in the service provided by different players so customer switch easily from one player to other.<br />Customers are able to reach the cheapest cost supplier, hence bargain on price.<br />Shift the bargaining power to the end customer by eliminating the intermediaries. <br />20<br />
Analysis of Online Music IndustryPorter’s 5 Forces Analysis<br />Bargaining Power of Suppliers- Medium<br /><ul><li>The online stores have to sign distribution deals with major record labels.
Further consolidation of Music Labels through Merger and Acquisition have increased their bargaining power. (Universal Music Publishing Group & BMG Music Publishing)
There is no substitute for what the supplier group provides.
Cannot squeeze profitability out of an industry by increasing prices beyond a certain level.</li></ul>21<br />
Analysis of Online Music IndustryPorter’s 5 Forces Analysis <br />Threat of Substitute Products- High<br /><ul><li>Physical music records such as Compact Disc. However, there are various types of digital music format – each competing with each other to win market share
Customers have easy access to pirated music by using P2P Networks and other websites</li></ul>22<br />
Analysis of Online Music IndustryPorter’s 5 Forces Analysis <br />The Intensity of Competitive Rivalry- High<br /><ul><li>With nearly 450 player world wide and with little difference between the service provided by them the competition is very high
Due to absence of geographic boundaries the player are competing at the global level.
Integrated players who use music as a means to promote their core offerings are increasing the competition (iTunes)</li></ul>23<br />
Recommendations <br />Highly competitive industry with High bargaining power of customers, High threat of substitutes and new entrants.<br />The sector is not worth investing until there are proper legislations in place to curb piracy and free sharing of music.<br />If you want get into business to offer integrated service which will boost your core offering then it could be a good investment.<br />
ISP responsibility and role of government to stop piracy<br />ISP<br />by blocking services that offer access to unlicensed content and addressing file-sharing by individuals on P2P networks<br />communication with subscribers over the more punitive and less effective alternative of mass-scale individual lawsuits<br />series of educational notices to the customer would culminate in a sanction, which could include restrictions on the use of their internet service, for those who refuse to stop infringing<br />Government Role<br />France led the way in 2007 by enacting a graduated response law, which is now in operation<br />South Korea is another early adopter of graduated response. A law passed in April 2009 provides for suspension of user accounts, excluding email, for less than one month for first time offenders; one to three months for second time offenders and up to six months thereafter<br />UK, New Zealand, Ireland, European Union, Taiwan, Chile, US have enacted similar laws<br />