group 4: muhamad hafidzcga090003 shervin shahidi hamedanicga080072 mohd nashran awang @ mamat...
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Group 4:
Muhamad HafidzCGA090003Shervin Shahidi HamedaniCGA080072Mohd Nashran Awang @ Mamat CGA090036
6th August 2009
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Contents
Case Study Overview Physical vs Digital Download Online Music Distribution Analysis Value Chain and New Business Model “Bricks and Mortar” and Music Label
Strategies Recommendation and Conclusion
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Case Study Overview
Music Industry in the Digital Era
Music industry is facing an array of market challenges
Technology - change the way people listen and obtain music
Issues of piracy and copyright theft
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Physical vs Digital Download Comparison
4Source: http://en.wikipedia.org/wiki/Music_industry_in_the_21st_century
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Physical vs Digital Download Comparison
5Source: http://en.wikipedia.org/wiki/Music_industry_in_the_21st_century
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The Three Main Legitimate Online Music Providers
Apple iTunes Over 750,000 songs Compatible with iPod &
iPhone Napster
Over 1 millions songs. Sony Connect
Over 300,000 songs. Only compatible with Sony
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Alternative Channels
Peer to Peer Network (P2P) BitTorrent, Kazaa, limewire,
The Pirate Bay File sharing (direct
download) Rapidshare, savefile.com
Social-Networks Myspace, Friendster
YouTube
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Users of Digital Music Tends to Think That Copying is Not Piracy
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THEFT GROSS COMMERCIALCOPYRIGHT INFRINGEMENT
FILE SHARING PIRACY
Source: http://www.vincentchow.net/2473/file-sharing-is-not-piracy
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Truth About Physical and the Future of Digital Distribution (Video)
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Do
or
Die
!!
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Analysis of Online Music DistributionPorter’s 5 Forces AnalysisThreat of Substitute Products• Physical music records such as Compaq Disc.
However, there are various types of digital music format – each competing with each other to win market share.
Threat of New Entrants• Barrier of entry is lowered as traditional value
chain providers. New and independent artist can market its music directly to the end consumer.
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Analysis of Online Music DistributionPorter’s 5 Forces AnalysisBargaining Power of Suppliers• Artist and Record Labels have greater ability to
reach the consumers directly.• Further consolidation of Music Labels through
Merger and Acquisition could still take place due to high competitiveness nature of the industry.
Bargaining Power of Customers Customers are able to reach the cheapest cost
supplier using Internet. Customers have easy access to free music by
using P2P Networks.11
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Analysis of Online Music DistributionPorter’s 5 Forces AnalysisThe Intensity of Competitive Rivalry• The number of major music labels was
reduced to four from five and are holding on a significant majority of the market share
• “Bricks and Mortar” music stores retailing is getting more competitive with integration with online distribution channel as well as competition from other supermarket chains.
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The Value Chain and Evolving Business Models
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• Shifting the power centers and introducing new players.
• Artists are increasingly getting more involved in the production, marketing and distribution
• Three categories of digital music retailers have entered the market • pure play : digital retailers whose main focus is music
sales (Napster)• vertically integrated players : who use music as a means
to promote their core offerings (iTunes)• diversified players : who have included music in their
service offerings (Amazon MP3 Store)
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The Value Chain and Evolving Business Models
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• Independent and unsigned artists are using the digital channels to distribute their content directly to the listeners, bypassing the traditional intermediaries
• Music companies are increasingly using their music along with other media and entertainment forms such as TV, mobile games, advertisements, etc
• Music companies are also partnering with ISPs and mobile handset manufacturers and portable music device manufacturers to broaden their customer reach
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The Value Chain and Evolving Business Models
15Source: The Digital Music Market Outlook, Business Insight 2009
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Strategies available to Music Labels and “Bricks & Mortar” channels to mitigate competitions from online music distribution
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• Encoding a wide variety of songs in widely accepted industry standards and selling these songs via the Net
• Offering facilities in stores for compiling songs onto albums and charging a premium for these services
• Turning physical retail stores into social gathering places with appropriate ambience for music lovers
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Strategies Available to Music Industry to Address Piracy Problem
17Source: How Market Smarts Can Protect Property Rights, Harvard Business Review, 2004
Nip It in the Bud (prevent misappropriation
)
Prescribe a
Sedative (lower
the competit
ive intensity
)
Dig a Honey
Pit (entangl
e key assets)
Make a Bundle
(combine a secure
with insecure products
)
Move the Goalpost
s (redefine
the firm’s
boundaries)
Let the Dogs Out (relinquish your
core assets)
Defend Core Assets Embrace the ThreatsMarket Strategies
pre-emp
t
deny asse
ts
out-innovate
threaten to
retaliate
create synergi
es among related busines
s
Marry assets
to complement
ary produc
ts
preserve the core with add-ons
expand into
rivals’ busines
s
narrow your own
business
reallocate
resource to
adjacent
business
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Conclusion
The industry need to embrace the inevitable of Online Music Distribution Channel through integration of the channels
The internet as delivery medium and innovations of handheld devices will continue to be the key to growth
Piracy is expected to widespread among younger generation
Key to success shall be execution speed and flexibility to adapt to consumer demand
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Is this theft?
19Source: http://infinity-sama.blogspot.com/2008/01/2008-anti-piracy-year-in-mauritius.html