jakobgoesblogging | Enablers are the development of advanced hardware and software products as well
as the increased importance of internet and especially social networks.
During my research, I found a number of interesting statistics about
recent changes in the music industry. Based on this data I will try to
analyze each step of the value chain to explore how new technologies and
the change in customer behavior affect the companies’ business models
as well as the music industry as a whole.
Approach: After a short description of the music industry as it was some years
ago, I will have a look at the most recent trends. Based on that I will
point out the changes in the business model of record labels and
identify some important areas in which companies have to act in order to
stay competitive. To make this analysis more practical, I want to
include the income statement of Warner Music Group, a leading record
label to show how it is affected by recent industry chances.
The typical value chain in the music industry shows five steps. It starts
with creation of the content by the artist. Traditionally, the artist
tried to raise awareness by sending demo tapes to the record companies
and participate in band contests. The artist and repertoire (A&R)
unit is the division of a record label that is responsible for talent
scouting, contracting and overseeing the artistic development. Once the
contract is signed, the record company takes care of the financing and
records the songs. The next step is the promotion and PR of the album
done by the record company. The distribution traditionally was done
through merchants and retail stores. Most of them were independent but
there were also big retail chains, owned by the major record labels.
