The music industry – Business Essay
The music industry has evolved over the years. From the days of Beatles to Bon Jovi and from then on to the Backstreet Boys the music industry has gone through a sea change. Music no longer is just a work of art; it is a business. People make career out of this industry. Various levels of professionals are now involved in this booming industry. Moreover, music is everywhere. The radio, the television and now the internet, all are engaged in popularizing different genres of music to the world. One can say that music will become a necessity for every day living, just like water, electricity and food.
The music industry can see people accessing music from every nook and corner of the world at their own convenience and need. It will be in a central database and customers will just have to access it from the source. This format of music sharing will be an excellent business opportunity and will create a whole new form of music industry. With the advent of the internet things have changed a lot. People can now communicate through it, order their daily needs over the internet or make business transactions online. Thus accessing music on
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It will be quite easy for a person, to just log on to the website and download his/her preferred music. But it will require lot of effort and planning to set up a sustainable and successful business model. First we need to understand how the music industry works and how the revenue is generated. When a music or song is created and then marketed, lot of people gets involved in the process. At the initial stage the band or the songwriter is involved. Now here also different aspects need to be checked. If the music is done by an individual the copyright lies with him/her.
But in case of a band, the situation is a bit different. Each member will have their own share. It depends upon the band to decide whether the share will be equal or will be according to some Music Industry 2 predetermined agreement. Lot of conflicts can arise due to this at a later stage if such agreement is not present beforehand. When a band becomes successful the problem tantamount to a higher level and history has witnessed the downfall of many bands and rock groups due to this. Most of the bands in their initial stage are not seasoned in the business of music and does not know the nuances of this industry.
One needs to check with different sources and people in order to have a better understanding of this industry. Next, we have the publishing company and the record companies. Both these factions are different from each other. A publishing company deals with the lyrics and getting them recorded and make money by distributing the lyrics to the recording companies. The recording company is the, the most important aspect of any genre of music. These companies are responsible for recording, promoting, distributing and marketing the music.
They will take all the trouble of giving a promising artist or a band a breakthrough, but will also charge a hefty amount for the service. Now let’s see the way the revenue is generated in this business and distributed. The band or the artist earns money mainly from the royalties. They earn from the performance royalties, mechanical royalties and synchronization royalties. They also earn a lot from the endorsements, but that is applicable only for the successful artists. These royalties comes from the record companies, which markets and distributes the music.
They are also responsible for live performances and pay the artists a royalty against the same. However, they also incur a huge cost while doing such activities. The first cost is the recording cost, which are usually borne by the artists. But in most cases, where the artist is new, the recording companies give an advance for the same. This will later be adjusted from the revenue generated by selling the records. But at times, if the artist is not successful, the cost can no longer be recouped and is treated as a loss by Music Industry 3 the recording company. After that the manufacturing costs needs to be taken care of.
This includes the cost of CDs and making mass replication of the recorded number. After this comes the packaging cost and later on the promotional costs are also borne by the recoding companies. The royalty costs are also taken care of by these companies. Once the revenue is generated from the sales of the album and from live performances, the expenses are recouped and profit is earned. Keeping this revenue structure in mind we have to decide, how the subject business model can work. In the first instance, we need to understand the need of such a business model.
In the present generation, most people prefer to access music at the comfort of their home. Thus numerous websites, like Mp3. com, Cdbaby. com has gained immense popularity among music lovers. Various websites have started offering live music from different clubs and live performances. Hence, the future is digitization of music. Thus this business model is a sure success, if implemented properly. The initial revenue will come from the publishing and recording companies who would love to have a different business aspect. This will also reduce lot of hassle and will also be cost effective.
The promotion will not be a big hindrance, and hence marketing will be a lot easier. Later on public issue can be utilized as well to raise money. Since the key to success in this industry lies with enthralling music and excellent promotion the effort will be given to ensure these two aspects. Thinking in realistic terms one can expect a huge cash flow from this business. One needs to understand that in present orthodox music business the initial and recurring cost both are on a higher side. However, in this business proposal only the initial cost is on a higher side. The Music Industry 4
recurring cost will be mainly the database administration and the necessary promotions, which are not very high. In normal circumstances, when a record company sells about a million copies of an album, they incur about 60%-70% of the revenue earned, to recoup costs and royalties. The balance, which is about 30%-40%, is their profit. This taking into consideration the SLRP (Suggested List Retail Price) is US$10 for a CD. Keep in mind each CD will consist of about 8 to 10 songs. Now consider that each song is sold online for about US$1 to US$1. 50 and then thick of the millions of music lovers downloading the songs.
Each song, alone, can earn millions of dollars as revenue. Moreover this will be paid instantly. One need not wait for the first CD to be sold. This is actually an immediate revenue churning business model. Also, each and every song will have a customer, so if an individual likes only a particular song, he/she has the option to choose only that particular song. They need not bother to buy the entire CD. This is an age for flexibility and choice and this business model just follows the same. The revenue thus generated will be shared among the artists, composers and the management on a predetermined percentage.
Each unit price will have breakup of this revenue share and the number of times an individual song is downloaded the unit price will be multiplied with the same. This will be a very clear form of revenue sharing, with no hidden costs and loopholes. The enterprise needs to be managed and governed by professionals of the music industry with independent representatives from each faction of the music industry coming together to give the business a professional get up. The organization should also have experts from the information technology field, those who will assist the enterprise with the latest technology and systems.
Upcoming artists will be given a chance and can be judged by experts from the industry. They will also have the option to upload their music online and can be judged by the public, which will give a fair result. Thus, no bureaucratic rules will be applicable. Last but not the least, this business model will almost eliminate the threat of piracy. With the customers given the option to Music Industry 5 choose and that too at a reasonable price, this is will be an extremely successful and profitable business venture. However, we also need to understand the copyright problem.
This has been a menace in the music industry. Billions of dollars are being lost due to this problem. Even, DJs (disk jockeys) are also involved in this business. For this business model, we need to keep a tab of the number of downloads and make the internet security more strong. Another way of fighting this problem and keep the industry more secure is to make the songs and music available at competitive rates. The rates should not be as low as the pirated music, but it must be reasonable, while providing high quality music to the worldwide customers.
The advantage that this business will have is it can make world premiers for new songs on the same day. It does not require to be released in one country and then go to the next. Every music connoisseur of the world can download the music at the same time. This will lead to less piracy of the music; hence make the industry more secure. Music Industry 6
1. http://mediawebsource. com/ I have gone through this website and have studied the music related articles and have compiled the article from it. All the statistics has been taken from the articles.