Audio and Music Sector

Team SBC
-Shilpa Gautam (09BM8085)
-Sujit Singh (09BM8054)
From Phonographs to Mp3

• Until the 90’s the development of music industry and its

innovation was guided by the industry itself.
• In 1935 magnetic tape started to be used for recording ,
while in 1963 Philips introduced the first music cassette and
standardized the first 8 track’s music players
• 1983 Sony and Philips joined forces and created the
Compact Disk( CD ) Player , which became the standard for
physical music storage
From Phonographs to Mp3
• The release of the first sound cards for the consumer
market in 1991 , changed the attitude of people towards
the use of computers to listen to music.
• The commercialization of the internet was becoming
more and more evident at this time.
• In 1996 was the official release of the first popular
compressed format MP3. That was the turning point of
the music industry , which took it to the new age of
digital distribution of music.
Old Vs Digital Music Industry Model
Old Music Industry Model Digital Music Industry
Model
 The Industry in Numbers
• Global digital music trade revenues reach US$4.6 billion, up 9.5% in 2010 with 400
services licensed worldwide by music companies with ISPs, mobile and other partners.
• Digital music, as defined by the Recording Industry Association of America (RIAA),
includes mostly music downloaded over the Internet for a fee, music downloaded from
subscription sites, and music downloaded to cellular phones and
other mobile devices.
• There is almost 33 % decline in the profits of the record studios , while online distribution
channels have a growth of more than 1000% in 2004-10
The Industry in Numbers
• 95% of the music downloaded online is not legally obtained.
• The digital supply chain for music Is becoming dominant in the music industry.
• Sales of music downloads, the dominant revenue stream in digital music, are seeing steady
growth. Single track download sales increased by an estimated 10%, while digital albums rose
an estimated 20% in 2009
• The report shows that, while the music industry has increased its digital revenues by 940%
since 2004, piracy has been the major factor behind the overall global market decline of
around 30% in the same period

Source: IFPI publishes Digital Music Report 2010

 What has changed in music
industry in recent years?
1600 0
Business profile

1400 0

1200 0

1000 0
p hys i
8000
d igita
6000 to tal

4000

2000

0
19 97 199 8 1 999 2000 2001 200 2 2003 20 04 2 005 2006 2007
Revenue in music industry in mln USD
Big Players
Types of Online Music business
• Subscription services (Rhapsody, Online Radios)
• Ad-Revenue (Grooveshark)
• Pay-per-song (ITunes)
• Streaming services with application
on mobile
• Artist Communities Online (MySpace)
• Music Tax (ISP taxing)
About Players
• Apple iTunes
▫ biggest selection of music tracks on the planet
▫ over 6 million collections available
▫ biggest downside is that the vast majority of the music is in the .MP4/.AAC format, and that
means it will only play on the provided digital player or an iPod
▫ Prices: $0.99/track, ~$9.99/album

• Napster
▫ become one of the powerhouse download destinations.
▫ download individual tracks and entire albums from the service at $0.99 and $9.99, respectively
▫ once your subscription lapses, they’ll no longer play on computer
▫ $0.99/track, $9.99/album, Subscriptions: $9.99 and $14.95.
About Players
• Rhapsody
▫ currently has the second-largest catalogue of any download service, with around
four million tracks.
▫ the application includes an excellent search facility
▫ program also allows you to listen to a number of songs completely for free
▫ $12.99 and $14.99, respectively. With the former, you can only play tracks on your
computer, but the latter allows you to transfer them to your portable player
▫ $0.99/track, ~$9.99/album. Subscription rates are $12.99 and $14.99

• Amazon.com Music
▫ Amazon’s a late entrant to the music download market
▫ Downloads are simple too
▫ Allows dumping to and playing it on compatible devices like the iPod
▫ $0.89/$0.99/track, albums from $4.95
About Players
• eMusic
▫ Catalogue now approaching three million track
▫ Everything is in MP3 format, with no copy restrictions
▫ If your subscription lapses the tracks you’ve already bought remain yours
▫ $9.99/month for 30 songs

• Yahoo Music Unlimited

▫ The service is doing a lot of things right and trying hard
▫ Downloads in WMA format, which means iPod won’t handle them
▫ To listen subscriptions are dirt at $5.99 a month
▫ The subscription lapse, you can’t listen to them anymore
▫ $0.99/track, albums $8.00 and up. Subscriptions cost $5.99/month, which allows
users to download tracks for $0.79/tune.
Digital rights management (DRM)
• DRM, often referred to as copy protection, limits what functions a user may
perform with digital media.
• It provides a way to control if and how many times a digital music file can be
copied.
• Apple, for example, reserves the right to change at any time what you can do
with the music you purchase at the iTunes Music Store. For instance, in April
2004, Apple decided to modify the DRM so people could burn the same
playlist only 7 times, down from 10.
• Microsoft, similarly, utilizes Microsoft's Windows Media Audio (WMA) DRM.
• The future: Sony has announced that it plans on shipping CDs with DRM
built-in.
• DRM has become and will continue to be an essential element to control
access of downloadable music.
Store Selection Geographic Platform DRM Preview Trial
(approximately) restrictions
7digital 11,000,000 Some Platform Independent for No 30 seconds None
songs MP3 songs

Amazon MP3 14,815,786 US, UK, and Platform independent for No 30 seconds None
songs Germany only individual tracks and
browsing the store,
Amazon MP3 Downloader
is required for
downloading albums
(Windows 98 or later,
Mac OS X or Linux)7
BuyMusic 1,000,000 songs United States Windows 98 or above, IE Yes,PlaysForSur Unknown None
5.01 or above10 e

eMusic 6,000,000 songs, Varies by track Windows 98 or No 30 seconds 25 downloads

100,000 artists, later;Linux; Mac OS 9/X11
200,000 albums,
40,000 labels
iTunes Store 14,000,000 Some Mac OS X 10.4.11 or No 90 seconds None
songs later; Windows XP
Service Pack 2 or later.

Rhapsody 10,000,000 United States Windows 98 or later, Mac Partial, Real 30 seconds 14 days
songs  OS X, Linux30 DNA31, has
DRM-free MP3s
Walmart Music 1,000,000 songs United States Windows 98 or above No, since Feb. 30 seconds None
2008

Napster 12,000,000 United States, Napster Web application Purchase: no Napster 7 days
songs Canada, (Windows/Mac/Linux), (DRM-free MP3 subscription-
Germany, or Internet Explorer 7.x in some Entire song,
United Kingdom (Recommended), geographical unlimited; Free
areas); Napster-Entire
Subscription: song; Napster
Yes,PlaysForSur MP3 Store-30
e.20 seconds.
Market share
• iTunes, is the largest revenue source in the
online sector and has more than 100 million
accounts across 23 countries.
• Apple has greater than 85% of the market share
of downloadable music, according to Nielsen
SoundScan.
Subscription Cost
• Subscription base music downloading model for
various company’s.
Porter’s 5 Forces Analysis

Rivalry – High

•Numerous services are

popping up
• Partnerships and
shakeouts are prevalent
PESTEL Analysis
• Political
▫ Some countries and locations may not offer ways to expose your
music.
▫ Possibility of rejection due to copyright law.

• Economic
▫ There should be enough disposable income with the people to use
such services.
▫ Useful to new entrants to the sector, as very low initial investment
is required.

• Social
▫ Industry is very dynamic, demand will change with changing
consumer patterns and music formats.
▫ The demographics, particularly age of the target segment is very
limited.
▫ Action, Opinion and Interest of People are shifting towards online
form of music.
PESTEL Analysis
• Technology

▫ Penetration of Internet in percentage terms is still very low.

▫ Technology is changing continuously.

• Environmental

▫ Moving towards online form of music from physical form positively affect the
environment.

• Legal

• Piracy issues
 digital piracy is choking revenues
the net effect of illegal file-sharing is reduced purchasing of music, Overall music sales fell by
around 30 per cent between
2004 and 2009.
To Tap new market
• In order to take the business to the next level and capture the enormous
potential that’s still untapped, we need new services to truly break through
to the mass market. To do that, an attractive user interface, a strong
value proposition and a clear marketing message are essential, as is an
effective way of curbing piracy.
• Consumer education has a vital role to play, and the music industry is
currently involved in more than 70 awareness programmes across the
world.
• A graduated response model is used involving escalating warnings to
infringers culminating, as a last resort for those who refuse to stop, in he
sanction of temporary account suspension.
Thank You !!