A: INTRODUCTION

I.

Background The British Recorded Music Industry stated that British people purchase music per capita most all

over the world. Moreover UK is the second largest source of music songs and even in 2009, the year of recession, the biggest selling album in the world was belong to an UK artist Susan Boyle. The high consumption of music products requires a huge number of music stores to give a chance for music fan choosing their favorite CDs or VCDs. The appearance of music shop is more and more to satisfy customer demands in recent years. However, high technology resulting in online shopping and internet banking with lots of convenience can prevent people from visiting real retail music shops. Furthermore, the newest technology from big brand such as Apple provides iTunes which help people approach their favorite songs and singers as soon as possible. Consumers now have more options in music shopping.

II.

Marketing Research Objectives The purpose of this paper is to study the customer perceptions of the market for recorded music

in Leicester, which will include the music buying behavior of existing customer, customer awareness and influences on their decision-making. In the larger context, the result of this research will help carry out an exploratory analysis of current developments in the recorded music market in the UK in general and in Leicester in particular. As a result, companies or investors who want to invest in music store market in Leicester may base on the research for more information and data in their planning process. III. Methodology

Data collection includes both primary and secondary data. Primary data will be collected through in-depth interview with existing customers who visit music shops in Leicester and observation occasions of consumers in an actual retail outlet selling recorded music. Secondary data is available on the Internet, industry reports, and newspapers. Specifically, data is taken from Research Company such as Mintel, Keynote.

Research design

Primary Data

Secondary Data

Observation Complete Observer

Qualitative Method (In-depth Interview )

Qualitative Method (Reports, Articles, Industry Website)

IV.

Scope and Limitation

1. Scope: recorded music consumers and music shops, retail outlets having music products area in Leicester. 2. Limitation: The study attempts to identify factors affecting CD/VCD and other accessories related to recorded music market of customers in Leicester. It does not appoint all customer targets in East Midland or throughout United Kingdom.

B. MAIN FINDINGS Part 1: Secondary Data I. UK recorded music market According to the report by The British Recorded Music Industry, the UK is the worlds thirdlargest music market. Even in the recession period, album sales dropped not much due to the continuing good value offered by the continued investment in domestic talent. The sales of CD/VCD in the marker fall year by year because the appearance of digital type of downloading or streaming music. However, UK market has managed better than others market and recorded music market also can survive well compared with others sectors in music industry include live music and musical instrument (Keynote, 2012).

1. Recorded music in music industry Recorded music is still the leader in music industry (Key Note, 2010) among live music and musical instrument. Physical and virtual channel are two distribution shares of recorded music in UK now with two feature market leader (HMV and iTunes). Even though nearly 73.7% of adult listen to recorded music (NEMS market research, 2008 cited by Key Note, 2010), there is a trendy shift away from buying and selling music products physically towards the distribution of recordings via internet 2. UK music sales over the years. According to the report Music and Video Purchasing by Gee (2012), the music market in UK will developed well in next years after an decrease in sales because the effects of recession in 2009 as well as the appearance of digital factors. Furthermore, cloud storage access and streaming retail models will be invested as digital channels by music retailers to provide more options for customers in approaching music products. a) Finding 1: Forecast value of UK music & video purchase during the period 2007-17 will be pessimistic.

Figure: Forecast value of UK Music & Video purchases (Gee, 2012) The data show that there was a decrease in sales from 2007 to 2012, however, the sales may increase again from 2012 to 2017 in both music purchase and video purchase. The overall picture presented by the graphs is the music purchases will be increased even in the worst case whereas the video purchase in UK will be predicted to rise in best case and decrease in worst case.
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b) Finding 2: UK physical music product sales might be decreased from now on whereas there will be a significant increase on sales of digital products.
Confidence intervals 95%
1,200

1,400

2,500

90%

Market value (m)

1,000 800 600 400

200 0 0 2007

50%
(m) 741 Best case (m) 853

Market value (m)

70%

2,000

(m) 1,587 1,500

Best case (m) 1,987

Mintel forecast (m) 1,332

Mintel forecast (m) 530

1,000
Worst case (m) 676

Worst case (m) 207

500

Confidence intervals 95%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0 0 2007

90%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

70% 50%

Est. Actual Forecast

Est. Actual Forecast

Figure: Physical & Digital sales of Music & Video Product (Gee, 2012) As it is shown in the report by Gee (2012), both digital music and video sales have an predict to be grown in later years. The differentiate sales between best and worst case is not much, about 610m in music case and 212m in video case. On the other hand, the sales for physical product may be declined in the worst case for both types of product. Generally, Mintels expert estimated that there will be a not good situation for the sales of physical ones in future when the number of music and video products sold fall out.

c) Finding 3: There was a change in consuming music product by costumer. People changed from purchasing a CD directly to downloading from the internet sources.

Figure: (Gee, 2012)

Figure: (Gee, 2012) During the period from 2009 to 2011, there was a decline in purchasing a CD by costumers, from 52.5% to 46.6%. Meanwhile, percentage of consumers who purchased music via downloading was increasing in three year from 14.4 % in 2009 to 17.1% in 2011. Similarly, percentage of video retail value contributed by physical and digital formats also had a switch. From 2007 to 2011, people still consumed more physical video products but there was a slightly increase in digital ones.

d) Finding 4: People still keep the habits buying a music CD and DVD much more than download or stream.

Figure: Frequency & Attitudes of obtaining music and video (Gee, 2012)

According to the report by Mintel, costumers still are familiar with obtaining CD, DVD or Bluray disc. However, the frequency is quite different. The number of people who consume music and video product within the first 6 month of 2012 is around 50%, followed by streaming a song or downloading from iTunes. The frequency of purchasing DVD and Blu-ray disc is highest compared with others. An important point to mention is there were many people say that they had already stream a song or download from iTunes, especially about 75% answered that they had never stream or download video. People still have the habits in consuming a music CD, even though 33% of them purchased it but not in that period time and 21% of people bought once every three to six months (higher than consuming through internet). The number of people who prefer to own physical copies of music they buy including CD and VCD is also twice higher than people who prefer using download.

e) Finding 5: People will consuming more physical media if they are sold in more convenient store location. Younger consumers suggest a chance to meet favorite bands or artist to encourage them to the store whereas the older ones prefer money saving offers.

Figure: Factors that would make consumers purchase physical media more often (Gee, 2012) There are many recommendations by customers which will help them visit the store more and consuming physical product. Firstly, 32% of costumer thought that the location of the store should be considered and they will go to the store if it has good location. Exclusive store-based discounts and a points or reward scheme across multiple stores followed with 31% and 28% agreement. Other suggestion are a quick collect kiosk and longer opening hours while some younger consumers recommended the visit by famous and favorite artists at the store. f) Finding 6: Many people want to own CD singles and albums and they agree to pay more to own. People who want to download only want to pay a little of money for this services.

Figure: Willingness to pay for different music product/services (MattKing, 2010) The report by MattKing in 2010 illustrated that people were ready to pay much more money to own a physical music product. About 65% of respondents said that they agree to pay for CD singles as well as more than 80% respondents pay their money for CD albums. Around 50% to 60% of people in the research stated that they have paid money to download music. However, the money they paid when using this service almost not much, about 1p to 1.
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3. Evaluation from experts. The development of high technology and Internet result the convenient for music lovers to purchase music via download or streaming. Consequently, the sales of Music retail companies have been affected. HMV, the biggest music retail company in UK have to face with lots of difficulties and challenges. As reported by BBC NEWS (2012), the company has a continuing sharply fall and music download is a stiff competitor to HMW which is the main reason lead to the decline in sales. It is worth pointing out that the decrease of physical music products and the appearance of digital kinds of music affects strongly in music retail business. In the report about UK Music and Video purchasing early this year, the technology analysis Samuel Gee also concluded that the value of music and video market consistently falls year-on-year. Therefore, the business activities of these music retailers have to adjust for surviving. On the other hand, supermarkets also took advantage this situation to create a greater share of the total retail space. People can purchase recorded music easier in outlet retail and in contrast, they can buy some vital products in HMV store as well. The decrease of physical sales in recorded music and video has happened on a broader scale, not only in UK area. In 2010, digital piracy took its toll on the industry meanwhile global recorded music sales declined by almost 930m (Sweney, 2011). In 2012, as showed by BBC News, sales from physicals format dropped by 15%. Last 2012 is also seen as a milestone when sales of physical formats such as CDs and records has been overtook by digital music revenue for the first time. Music lovers may also intend to change from listening music by physical products to live music besides using download or streamed music as concluded by PRS music in 2011. They have the rights to enjoy music worthily with the money they spend.

II. The existing and potential competitors There are nearly 8 10 music shops selling recorded music products such as CDs, VCDs, Videos and other music accessories in Leicester. In this group, HMV Leicester is the biggest one providing a lot of products and services to customers. Furthermore, the store also has a beautiful and convenient location, at the city center and near two crowed shopping center High cross & Haymarket. The rest stores have different styles but in smaller scale compared with HMV and located around the city center. The products are also less diversified. Moreover, only HMV Leicester provides online services calling Click & collect, a type of pre-order to help customers to shop more conveniently. Two existing big outlet retailer in Leicester Morrison and ASDA also has the area selling CDs and music recorded products. These supermarkets are not in center of the city but attractive to many local people thanks to its cheap price for others daily products. Both supermarket and consumer may benefit when the physical music are sold there. The former make use of the space to provide more entertainment goods for their consumers and the consumers can save time by purchasing their favorite artists album when they shopping. However, the space in these outlet retailers might not satisfy all music lovers due to the less products exhibited.

III. The relevant customer patterns of recorded music purchase As a matter of fact, people who like listening to music are the main objects purchasing music products. Nevertheless, there are different kinds of consumers and these different groups have not the same buying habits. Perry et all (2011, online) identified 4 types of music consumers. The first type is explorative consumers who are likely to find a new music faces and open to purchase music of unknown artist. Secondly, the phrase early adopters names people who have an enthusiasm and follow fashions in music. They want other people define their style base on the music they listen. The next one is cautious consumers who are financially constrained and consider carefully their purchases. The last one is band fan. The purchase behavior of this group depends on products release of the bands they choose to follow.
Explorative Consumer Early Adopter Cautious Consumer

Band Fan

Part 2: Primary Data

a) Recorded music buying behavior of existing customers in Leicester.

b) Customer awareness of possible on-line and retail store outlets as options for purchasing recorded music.

c) How consumers select from amongst these options and what influences their decision-making.

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C. CONCLUSION AND RECOMMENDATIONS I. Conclusion II. Recommendation Finally, based on your findings, you need to Offer your best evaluation of the future potential of the market for recorded music in the UK. Identify the most critical aspects of customer decision-making towards recorded music buying and/or retail music store selection in Leicester. Evaluate the relevant market conditions that exist in Leicester that would encourage or discourage the opening of a new retail music store there in late 2013/early 2014. 4.1 Managerial implications 4.2 Limitations and future research

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References: BBC News Business, HMV sales continue to fall sharply, available from http://www.bbc.co.uk/news/business-19671901 accessed 2 January 2013

BBC News Business, Digital music sales outstrip CDs and records, available from http://ww.bbc.co.uk/news/entertainment-arts-18278037 accessed 2 January 2013

Gee, S (2012) Music and Video Purchasing, UK August, London, Mintel, available from http://academic.mintel.com/display/590263/?highlight=true, accessed 25 November 2012

Gee, S ( 2012) Media Consumption, UK July, London, Mintel, available from http://academic.mintel.com/display/606103/?highlight=true, accessed 26 December 2012

Matt King, M (2010) Paid-For vs Free - Consumer Attitudes to Pricing in Media and Music, UK April, available from http://academic.mintel.com/display/480755/?highlight=true , accessed 24 November 2012

Parry, G. Bustinza, O. and Vendrell.F(2012), Servitisation and value co-production in the UK music industry: An empirical study of Consumer Attitudes, International Journal of Production Economics, Vol. 135, No. 1, pp. 320(13).

PRS for music (2011), Adding up the UK music industry, available from https://www.prsformusic.com/aboutus/corporateresources/reportsandpublications/addinguptheindustry 2011/Documents/Economic%20Insight%2011%20Dec.pdf , accessed 3 January 2013

Sweney, M.(2011), Global recorded music sales fall almost $1.5bn amid increased piracy, available from http://www.guardian.co.uk/business/2011/mar/28/global-recorded-music-sales-fall accessed 2 January 2013

The British Recorded Music Industry, The Market, available from http://www.bpi.co.uk/musicbusiness/article/the-market.aspx , accessed 20 December 2012
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HMV sales continue to fall sharply

HMV has struggled with competition from online music downloads

Troubled music, films and games retailer HMV has reported a further sharp fall in sales, citing the lack of new releases over the summer. Same-store sales at its HMV Retail business fell by 11.6% in the 20 weeks to 15 September, the firm said. Sales of portable technological devices grew strongly, but its core business of music, DVD and games saw "significant market value declines". However, HMV said strong releases ahead of Christmas should help trade. "These numbers reflect the challenging markets in which we operate," said chief executive Trevor Moore, who took over the role earlier this month. "However, the like-for-like decline was less marked towards the end of the period and we should be helped in the remainder of the year by a strong pipeline of new releases in the music, DVD and games markets ahead of Christmas." Including the effect of previously announced store closures, total sales across the group fell by 14.8% in the 20 week period. HMV faces stiff competition, particularly from music downloads which have led to sharp fall in the sales of CDs. Last month, it reported an annual loss of 38.6m for the year to April, but it has said it expects to return to profitability in the current financial year.

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Global recorded music sales fall almost $1.5bn amid increased piracy

The UK was overtaken last year by Germany as the third largest music market Global recorded music sales fell by almost $1.5bn (930m) last year as digital piracy continued to take its toll on the industry, with the UK losing its mantle as the third-largest music market after "physical" sales of CDs collapsed by almost a fifth. Global recorded music revenues fell 8.4% last year, about $1.45bn, to $15.9bn according to the annual Recording Industry in Numbers report by international music industry body the IFPI. Overall physical sales, the term used in the industry for sales of products such as CDs, fell by 14.2% year on year to $10.4bn.Digital revenues grew by 5.3% year on year to $4.6bn to account for 29% of all recorded music revenues. However, the rate of digital revenue growth has halved year on year as the industry continues to struggle with piracy and winning consumers over to legal download models. The world's two largest markets, the US and Japan, took a hammering last year accounting for 57% of the total global decline in trade revenues. In 2009 the two countries accounted for 80% of the global decline. In the US overall sales fell by 10% with physical sales down 20% to just over $2bn and digital sales stagnating with 1.2% growth to $2bn. Japan saw an overall market decline of 8.3% with the report noting that "rapidly rising online is threatening the development of the digital market". The UK, which had managed growth in 2009 leading some to believe a "tipping point" had been reached where digital sales take up the slack of declining physical revenues, was overtaken last year by Germany as the third-largest music market. Overall UK sales were $1.38bn, down some $170m or 11% year on year, thanks to a 19.2% fall in physical sales to $920m. Sales through digital channels boomed by 19.6% to $347m. In Europe digital revenue growth increased by an impressive 21.6% with most major markets including Germany, France, Italy and the Netherlands seeing double digit increases. "The demand for new music seems as insatiable and diverse as ever, and record companies continue to meet it," said Frances Moore, chief executive of the IFPI. "But they are operating at only a fraction of their potential because of a difficult environment dominated by piracy." Of the major markets ranking in the top 20 by size, just three saw year-on-year sales increases with Korea up 11.7%, India up 16.5% and Mexico up 0.9%.

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Digital music sales outstrip CDs and records

UK digital music revenue has overtaken sales of physical formats such as CDs and records for the first time. According to figures compiled by the British Phonographic Industry (BPI) digital accounted for 55.5% of the 155.8m spent on music in the UK in the first three months of this year. The impressive growth in digital boosted the record industry's overall market value by 2.7% to 155.8m and helped to offset a decline in sales of CDs. The BPI's figures show income from digital sales has risen by nearly a quarter year-on-year to 86.5m. However, revenue from physical formats, such as CDs and vinyl dropped by 15% and now represents just 69.3m. The BPI's digital music revenues are based on downloads subscriptions and ad-supported music services. They show digital album downloads have risen significantly during the first three months of the year, with digital now accounting for almost a third of all UK albums sales, up from 23.6% They have also overtaken revenues from downloads of single tracks for the second successive quarter.

Brighter prospects
BPI chief executive Geoff Taylor said the results represented a "significant milestone in the evolution of the music business". "UK record labels have embraced digital to their core, supporting innovation and licensing more new online and mobile services than any other country." "As a result, the industry's prospects for growth look brighter than for several years." But he also said cautioned against becoming complacent. "We will need to see the trend repeated for several quarters to say we have turned the corner - demand for physical CDs remains strong in the UK." Music Week head of business analysis Paul Williams warned against writing off the CD just yet. "People get used to a certain way. In the past the shift has been physical to physical but now it's different; it's physical to virtual." "Generally, the older audience prefers to buy the physical format. That doesn't mean everyone, there are some who will download." Mr Williams agreed that the growth of the downloaded album is significant. But it is "not fast enough to make up the shortfall in the albums market". "The CD still makes up the majority of album sales in the UK and that's going to remain the case for some time."

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Last year the UK music industry as a whole was worth 795m, down 3.4% on the previous year. It was worth 1.2bn in 2003.

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