Position of the Music Industry Prior to Introduction of Internet Essay

In the music industry prior to the introduction of internet marketing in that respect were different roles be played by different actors of the market. The usual way a product is disposed(p) for market is to contract the artists. The artists who were the suffice providers record materials which are either their own or provided to them by opposite writers. This is clearly depicted in the figure below. Traditional Value Chain in the Music persistence Source John B. Meisel and Timothy S. SullivanThe saves will be done on the basis of the contracts entered into with the recording companies. because the power and control everyplace the supply of the product re primary(prenominal)ed with the record company. The recording company thus would be regarded as the holder of the major item of value in the supply chain being the easy lay rights over the recorded artists content. (Hardaker and Graham, 2001) Most of the part of the scattering is in the hands of the record companies and the y also take hold the rights to select the suppliers.The distribution and supplier selection is based on the record companies perception about the character reference of the recording and the music, past reputation of the suppliers and the contract price for the recording. In return for the content in the digit of recording, the artist is compensated by the provision of promotions for the recording and its merchandising in connection with the sales at that place of and the distribution of the content as a saleable commodity CD for example. It was usual in the handed-down music industry that the major record companies endure their own distribution channels and businesses.Hence it would require necessary for a retailer to source his music products from different sources. Sometimes the retailer may have to place orders with major record companies and up to 20 early(a)(a) firms from the independent sector. The new releases of music albums or other sales of the record companies are ordinarily handled by the wholesalers. If the retailer would like to follow the wholesaler route then he might have to order through only one wholesaler. The main wholesalers also offer another service called rack jobbing which is a different method of supply being adopted by them.The function of a rack jobber includes the supply of complete package that contains records and other promotional and display materials. It is also the duty of the wholesaler to keep a regular stock usually on a sale or exchange basis. Just as the advancement in the telecommunication had its effect on all the other sectors from airline reservations to banking and related financial services the music recording industry has also been severely oppositioned both positively and negatively observes Eric de Fontenay. In fact the impact of internet on the music industry is much more profound than on any other industries.Despite the fact that the entertainment related products and services have taken their o wn time to maturate and take advantage of the improvements in digital applied science over the decades, during the intervening period the overall twist of the industry has remained dormant. The reasons for the industry to remain without major changes can be traced to the following reasons 1. The cost of creation of content has always remained higher and this prohibited any new entrants in to the industry. 2. The structure of content ownership and rights of licensing governance remained unaltered thereby keeping the structure of the industry in tact.3. There has been a continuous urgency for the presence of a distribution network almost everywhere in the world irrespective of the geographic barriers. This has restricted the existing firms to make any changes in the structure. There was no possibility of new firms accounting admittance the market in view of the high capital intensive nature. 4. Similarly there had always been a constant scarcity for the distribution networks wh ich also prevented any new forms of distribution or change in the structure of the distribution networks. (Eric de Fontenay) The internet has shamed the music industry in so many ways.It has do the industry incur additional costs in completely restructuring itself. Further the internet has reduced the entry barriers. This was possible by a considerable increase in the number of downstream outlets having varied nature. At the same time the internet has provided the actors in the upstream end to enjoy greater control over the aspects of content ownership, production and distribution. This has created a distinct fear in the record labels that they cannot eliminate the possibility of acquire bypassed by both the markets in the downstream and upstream.This impact has created the following reaction on the part of the traditionalistic industry actors. They tried to impose the existing rules and procedures to the new medium so that they could exercise the same leverage and control over the market. The process by which they attempted to do it involves a twin aspects strategic approach. At one end they used legal channels to restrict the availability and use of the new technology in the Industry. On the other end they adopted new technologies to tackle the potential legal threats that would affect the control derived by them from the traditional systems.This strategy backfired and left them high and dry in the market firearm new information technology players like AOL, Microsoft, E Music and MP3 took advantage of the stalemate. They reacted aggressively by structure their infrastructure and systems for the online marketing and distribution of music. They also involved themselves in the retailing of music over internet. The distribution of revenues in the music industry involves the portion of the performer. As per the contract terms the performer is to be paying(a) a portion of the revenue each time there is a sale of the record.Before the cash is paid to the pe rformer the revenue is to be apportioned towards the expenses incurred by the company for marketing and distribution. This gives an opportunity for the artists to put on considerable amounts from the sale of products. For gaining maximum revenue the artists should control the publishing rights to their songs or they have the capacity to bring off contracts with terms that are favourable to the artists. In the case of revenue distribution Internet has its impact on the industry in the following respects.