Observation of the Music Industry and Market Segmentation, Term Paper Example

Nielson Sound Scan reports there has been a “5% decrease in album sales overall in 2006 in the United States but a 65% increase in digital sales in 2005). (“Music Industry Market Research”).  If you combine albums, tapes, singles, videos and downloads for 2006 overall the music industry sales has increased approximately 20%. The country music industry is proactive where rap industry is not. The younger crowds are the ones making purchases. The digital downloads are actually making a very proactive stance and increase for the music industry. People are using more venues to listen to music and are listening to more music these days. People talk about the music industry in all classes and walks of life and are spending money on music.

Entertainment Industry Record Companies

Market Reader Pros states they can offer music domestically as well as internationally through audio and video capabilities. They can offer clients fast and reliable means to listen to music. They further offer “personalized ways to make music qualitative if needed.” (“Music Industry Market Research”). Market Reader Pros has supplied music to a Canadian industry included with music video testing services. This Canadian company produces over 100 albums a year through this service. Market Reader Pros is proactive with producing music videos and has built in an online survey to their productions. So far they have collected nearly 1600 responses to the online questionnaire related to the production of the music videos. This information is used to determine which song samples will be offered online. They began to see the fruits of their labor just four weeks after commencing the start up of the company. The sales have increased fruitfully.

“According to the International Federation of the Phonographic Industry (IFPI), the worldwide record sales revenues were US $10 Billion less in 2003 than 8 years earlier. In the USA the record revenues have declined more than 10% since 2000. (Sutter, 2005). It is said that the increased of unauthorized distribution of other forms of music is the reason for the decline in the record sales.

Oberholzer and Strumpf state that the sharing of music over the internet has no bearing on record sales. (Obherholzer, Stumpf). (Sutter, 2005). The record companies are fighting to prevent unauthorized copies of music from being released. The Digital Millennium Copyright Act and the UCLA Online Institute Cyberspace Law and Policy have teamed up to warrant this battle against unauthorized music production. This gives rise to the legislation to file lawsuits against companies through file sharing for damage claims in court.

There seems to be a gray area with respect to legislation of what is allowed and what is not. Companies want to establish new rights for the music industry to protect the product. The DMCA is attempting to prevent rights of private copies on audio software. Consumers are feeling very insecure about the attempts to overthrow the current law. This makes them feel quite unstable about the future laws of music copyright. The current laws allow music companies to sue copyright violators and software producers that support infringement of the music industry laws. For example they are not always successful though as seen with the suit by Kazaa which declared by the Dutch Supreme court there was no infringement. The lawsuits are just very expensive to undertake. Music sold by IT companies are thought to be an infringement of music right laws. They simply develop their own downloadable sites and avoid an infringement suit. Property right lawsuits are only attainable at extreme costs to the rightful owner.

The record industry loses moral conceptualization when they attempt to stop people from infringing. Most pop stars do not tend to have a conscience when it comes to infringing others rights to their own music. Hence, “it is unlikely that the volume of sales lost in 1995 and 1996 will ever be recovered to the music industry.” (Sutter, 2005). Many record producers have offered diversification within the last few years such as concerts to try to attain the lost revenues. Record companies have now turned into marketing segments rather than art producers. They offer the artists’ work on television and radio shows as an alternative to simply records.

Diversification Offers Competition and Raises Sales

Since the published LIMA forecasts for record marketing in 2003, the United States sales have grown by as much as 2%. Licensing revenues have also grown by as much as 1%. The audience concert revenues have grown nearly to 36 million dollars per year. There were additional of 6 million visitors to the concerts. With this rise unauthorized copies cannot be simply considered a negative. They may help to rise the attention and participation in concert activity. “In Germany the total consumption of music grew while the revenues of total record sales declined.” (Sutter, 2005). The growth of the consumption of music can only be a positive for the music industry. In Germany although the unauthorized use of music increased the licensing revenues did not fall. It appears unauthorized use of merchandise does not have as large an effect on the music industry as unauthorized use of the recordings do. Businesses must find a means to integrate music from segmentation into a corporation style. Companies can gain high advertising revenues. Music companies need to transform themselves into a marketing industry so that subsequent loss of music revenues is not an issue any longer. A great part of the revenues can be generated by artists’ through different sources and an emerging market. This can be done through not being affected by the unauthorized music marks on the industry.

Two least dominant firms in the music industry in terms of size, investments and income are Capitol Records .With past reputation Capitol was just one step ahead of MCA with a second to last place. Now Universal Music group is heading the industry with the Black Eyed Peas, Mariah Carey, Fifty Cent, Gwen Stefani and Kayne West. The record labels are responsible for the promotion of a particular label. If promotion is not surging then the record company will create its own demise. They have to have the top singers and producers on board in order to keep their success rates up. Universal Music Group accounted for four major conglomerates on board and “70% of the music worldwide and 85% of successful music worldwide.” (Lamb, 2010).  Sony BG Music Entertainment is currently at second place in the music industry with Kelly Clarkson, Alicia Keys, Outkast, Shakira and Britney Spears as the leading artists. EMI Group and Warner Music Group follow at third and fourth place with The Beatles, Coldplay, Gorilla Z, Rolling Stones, Robbie Williams, Green Day, Madonna, Alanis Morissette, My Chemical Romance and Rob Thomas.

“New reports say that the major record labels are losing revenue from variable pricing. Unit sales are dropping to the point that revenue is less as well. That’s just bad business no matter how you look at it — and totally preventable if they knew their own business. Plenty of people made it clear that sales would drop with higher prices, and it’s amazing that the execs were unable to accurately predict how much.” (“Labels Losing Money with iTunes Variable Pricing”).

References

Music Industry Market Research Retrieved December 1, 2010 from, http://www.marketreaderpro.com/Market_Research_Industry_Segment_Music.asp

Sutter, K. Sales and Marketing Trends in the Music Industry Retrieved December 1, 2010 from, http://www.get-it-all.net/indie112-Sales_And_Marketing_Trends_In_The_Music_Industry.htm

Lamb, B. Top 4 Major Pop Record Labels Retrieved December 1, 2010 from, http://top40.about.com/od/popmusic101/tp/majorlabels.htm

Labels Losing Money with iTunes Variable Pricing Retrieved December 1, 2010 from, http://www.techdirt.com/articles/20090504/1438064743.shtml