| STEP AnalysisThe STEP analysis of the
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| | rock, country, jazz, classical,
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| Colorado Creative Music aims at analyzing
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| | traditional and other, and have formal
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| macro-environmental factors of the music
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| | and reliable national and international
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| business the company is engaged into.
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| | channels of distribution. The examples of
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| These factors fall into political,
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| | such companies are Columbia, Sony Music,
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| economical, social and technological
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| | EMI, GMG, Warner Brothers, Atlantic
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| groups (Pearce, Robinson, 2000).Political
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| | Records and some others. As the mater of
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| factors affecting music business in whole
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| | fact, such companies are not numerous and
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| and CCM in particular: strong political
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| | their recording equipment is rather
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| stability in the United States;
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| | expensive, amounting to no less that
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| regulatory and legal issues concerning
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| | couple million dollars, since these
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| music business including copyright laws
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| | studios record music with analogue and
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| for copyright protection of both music
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| | not digital equipment, thus receiving
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| writing and recording, copyright-related
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| | three-dimensional, saturated, rich sound,
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| legislation touching upon the issue of
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| | instead of correct but plain digital
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| virtual internet promotion and
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| | sound.Independent labels have 10-100
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| distribution, such as The Audio Home
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| | artists under contract, focus on
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| Recording Act (1992), No Electronic Theft
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| | recording of one or two major music
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| (NET) Act (1997), "The Digital
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| | styles and have either national or most
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| Performance Right in Sound Recordings Act
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| | often regional distribution channels.
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| (DPRSRA) 1995, The Digital Millennium
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| | Examples of independents are: Higher
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| Copyright Act, "Pending legislation:
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| | Octave, Metal Blade Records, Rhino
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| Music Online Competition Act and the
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| | Records, WAR, Windhan Hill, Soundings of
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| Consumer Broadband and Digital Television
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| | the Planet. Such companies are more
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| Protection Act (CBDTPA)" and others.
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| | numerous than first-rank companies and
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| Environmental regulations and employment
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| | can use analogue equipment as well as
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| requirement do not affect business CCM is
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| | digital. Generally, independent labels
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| engaged into. As for the tax policy, in
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| | strive to grow into major ones, but for
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| 2000, from total income of $216,614.05
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| | that they need to invest large amount of
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| the company had to pay $4,744,97 of
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| | money into amelioration of their
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| taxes, which is not high rate and amounts
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| | equipment.Microlabels have less then 10
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| to nearly 2 percent from the total
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| | artists under contract and are tightly
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| income. In whole, it should be noticed
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| | focused on definite style of music. They
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| that political factors are favorable for
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| | are characterized by small staff and
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| music recording industry and for CCM
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| | manager performing as the leading artist
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| particularly.Economic factors include
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| | of the studio. Microlabels have rarely
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| indexes in the macro economy that can
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| | formal distribution system and heavily
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| affect music recording industry. Here
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| | rely on direct sales to fans and
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| also, macroeconomic factors, such as
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| | wholesale to clubs and specialty
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| economic growth, interest rates and
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| | retailers. On American market,
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| inflation rate are favorable for CCM.
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| | microlabels are presented with Etherian,
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| Thus, the U.S economy kept growing
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| | Evol Egg Nart, Cuneiform Records, CCM and
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| steadily since 1995. CPI falls down in
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| | a large number of others. Generally, such
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| 1997, 1998. Unemployment rate decreased
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| | companies survive competition due to low
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| gradually from 1995 to 2000.Social
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| | cost of digital recording.Vanity labels
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| factors, covering demographical and
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| | are the fourth, the last and the most
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| cultural aspects of the environment
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| | specialized segment of the music
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| external to music recording industry are
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| | recording industry. They are founded by
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| rate of population growth, age
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| | independent artists for recording and
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| distribution and carrier attitudes. The
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| | selling their products. Examples of
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| population growth in the United States is
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| | vanity labels are Bob Culbertson, Watson
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| steady and age distribution also favors
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| | and Company, Lao Tizer, Esteban Ramirez
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| the music recording industry. It should
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| | and many others. (Darren & Winn , 2003).
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| be noted that for music industry in
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| | At present, CCM is the microlabel that
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| whole, teenagers and 20-years-olds are
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| | strives to convert into independent
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| primary customer segment, but CCM aims at
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| | label.In the first place, the competition
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| attracting people of 40-60 age range.
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| | among rivals is carried out on the basis
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| Thus, the considerable share of American
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| | of popularity of the performer and songs
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| population fits this target
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| | recorded by their companies. Recording
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| market.Technological advancements in
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| | studios intensively compete to attract
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| music recording, promotion and
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| | popular of promising artists to sign
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| distribution have several effects on the
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| | contracts with them. If the songs or
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| recording industry. One aspect of the
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| | artists are highly popular, price is
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| issue is that musicians are no longer
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| | secondary factor which may influence the
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| dependent on major recording labels to
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| | competition. However, if the artist is
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| create or distribute their products.
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| | lesser-known or songs recorded are not
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| (Viljoen & Dann, 2000) The MP3 software
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| | very popular, price does play role as the
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| alternative to the CD becomes more
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| | competition and strategy factor. In the
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| popular since 1998. In the space
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| | distribution process of the rivals, the
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| traditional audio can fit 12 to 15 audio
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| | particular importance is attached to
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| tracks; MP3 software can store
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| | getting access to traditional channels of
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| approximately 150 music tracks. "The move
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| | music distribution, such as retail
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| towards MP3 as the new format to replace
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| | musical stores, major chain record
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| CD just as the CD replaced vinyl albums
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| | stores, independent record stores and
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| have been accelerated by the rush of new
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| | Internet distributors such as These
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| portable MP3 players on the market - some
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| | means are very important for selling CDs
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| for less than conventional Sony
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| | of the artists apart from direct sales on
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| Discmans." (Viljoen & Dann 2000, p. 173).
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| | their performances. Also, another factor
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| On the other hand, new digital
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| | that greatly influences CD sales is
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| technologies which appeared in late 20
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| | advertising of songs and radio promotion
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| century not only facilitate the process
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| | and transmission.For CCM, rivalry is by
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| of music recording, but make it
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| | far the most important competitive
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| considerably cheaper, providing the
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| | pressure source. The strong competition
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| possibility for multiple firms with
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| | from rival producers and sellers of music
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| limited resources to enter the market.
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| | can be explained by the fact that the
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| Thus, if in 1980s, professional recording
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| | performers of CCM are not known to the
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| studio with all recording equipment,
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| | wide public in comparison with the
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| working on vinyl or tape carriers, cost
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| | artists of the first-tier and independent
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| several million dollars and therefore was
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| | labels.The competitive threat of new
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| a domain of 5 or 6 major recording
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| | entry, is, to the opposite, by far the
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| companies, in 2000, assembling
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| | weakest competitive force, ranked between
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| professional recording studio could be
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| | weak and moderate. Barriers for entry are
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| carried out at cost of only $5,000. All
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| | not high for the new producers of
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| the equipment and hardware, due to the
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| | recorded music, especially those
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| global advancements in technology, are
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| | targeting limited segment of the market
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| much more affordable for an average
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| | and employing cheap digital technology of
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| artist or businessman.SWOT
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| | recording. CCM can serve the brightest
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| AnalysisStrengths* Cost advantages
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| | example of such entry. Such cheap digital
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| with new technology arising from the
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| | recording technology can be assembled
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| digital revolution. Not only assembly of
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| | nowadays for no more than $5,000. Still,
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| studio with all necessary equipment and
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| | expensive analogue technologies keep
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| hardware is cheaper, but duplication of
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| | costing hundreds thousand or even
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| CDs, storage and shipping are less
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| | millions. The technology employed by the
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| expensive as well. Low cost of
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| | firm automatically determines its
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| production, duplication (duplication of
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| | resources and rank in the music recording
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| 500 CDs ranges from $1.90 to $3.63,
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| | industry. Besides cost of the equipment,
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| duplication of 2000 CDs costs about one
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| | the main subject of the competition for
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| dollar per CD), shipping and storage
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| | new entrants will be distinct market
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| makes the final product less expensive
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| | share and sales volume. Considerable
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| and more affordable for the customers,
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| | sales volume, in its turn, depends on the
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| thus widening the range and scope of the
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| | ability of new entrants to attract
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| target market.* Positioning of CCM in
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| | famous, popular or widely known
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| a distinctive market niche. CCM is
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| | performers and singers whose songs are
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| microlabel recording company which
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| | able to get to the top of the popularity
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| specializes on classic and traditional
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| | charts. Given the fact that virtually all
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| instrumental music.* Growing
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| | popular artists have already signed
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| customer base and customer loyalty within
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| | contracts with major recording studios,
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| target group. Customer base growth due to
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| | this is significant barrier for new
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| expansion of product lines (4 already,
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| | entrants. Another important barrier is
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| each year 2 new product lines emerge),
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| | gaining considerable channel of
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| and geographical coverage of listeners.*
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| | distribution. Generally, large
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| Good customer service shown through
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| | distribution centers and music CD
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| the direct contact between Darren and his
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| | retailers are interested in selling the
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| fans.Weaknesses* No clear strategic
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| | music of famous performers and unwilling
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| vision: CCM needs a long term vision
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| | to accept the products of relatively
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| which includes all areas of the business,
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| | unknown artists. For the CCM, the threat
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| from marketing and management to
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| | of new entry is not very strong, since
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| distribution and human resources. At the
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| | the company targets rather narrow market
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| moment the company faces a dilemma of
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| | segment. Though, if the new entrant uses
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| further strategic development, which will
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| | the same recording technologies,
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| be focused on either enhancing or
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| | distribution channels and targets the
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| developing the recording company or more
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| | same niche in the market, the fact may
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| active promotion and distribution of the
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| | become an issue of major
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| products through the possibilities of
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| | importance.Competition from substitute
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| other companies (the company is currently
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| | products can be considered moderate
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| regarded by its management as potential
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| | competitive force in the music industry.
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| object of acquisition or investment)*
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| | Such substitute products are be presented
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| Competitive disadvantages: CCM are not
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| | in the form of providing consumers with
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| able to enter the retail market due to
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| | possibility to listen music with other
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| its current level of sales. Competitors
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| | that CD means such as radio, cable TV
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| such as major labels have advantage
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| | music channels, live concerts, local bars
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| because they have major market power and
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| | or night clubs with live performances or
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| influence. Such firms can specify when
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| | recorded music, and internet. Internet
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| their music should be played on radio and
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| | has become by far the most important and
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| negotiate large contracts with
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| | strong substitute to traditional buying
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| distributors and retail outlets, hence
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| | CD, since music provided on the web is
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| giving themselves broader appeal.*
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| | most often cheaper or completely free and
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| Limited channels of distribution: at
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| | is not much inferior in quality than .wma
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| present moment the company heavily relies
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| | format of CDs. Therefore, for certain
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| on such distribution sources as direct
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| | amount of people these means serve as
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| sales, which include sales at the gig,
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| | effective substitutes, but for music fan,
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| shopping mall distribution and sales in
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| | buying official CD is obligatory. In the
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| the back end (800 number order, website
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| | case of Colorado Creative Music, people
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| order processing and mail orders). These
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| | can enjoy the performance on live
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| channels are major sources of profit for
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| | concerts of these artists and decide not
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| the company. Nevertheless, to expand its
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| | to buy their CD. Therefore, from CCM's
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| consumer base, the company needs to
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| | viewpoint, this may be regarded as fairly
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| acquire formal distribution channels,
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| | significant competitive force.The forces
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| such as sales through traditional music
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| | left are bargaining power of suppliers
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| distribution networks and others.*
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| | and bargaining power of buyers and
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| CCM is short in financial resources to
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| | collaborative buyer seller relations,
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| pursue new opportunities. Profits are
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| | which are both strong competitive
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| thin, meaning new opportunities may be
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| | force.The first, bargaining power of
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| unobtainable and long term improvements
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| | suppliers depends on the popularity and
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| may not be afforded due to initial costs.
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| | reputation of artists. Those who are
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| To conclude a contract with major labels,
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| | popular and whose recordings sell well,
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| which would provide the company with the
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| | have strong bargaining power, they can
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| access to traditional product
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| | chose among numerous recording studios.
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| distribution, the firm needs to sale at
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| | CCM specializes on recordings of infamous
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| least 15,000 copies of its products per
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| | artists, and therefore it enjoys weak
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| year. From the other hand, high sales
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| | bargaining power, since artists involved
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| numbers are impossible to obtain without
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| | with CCM do not have many alternatives
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| good traditional distribution channels.*
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| | for studio record and CD
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| CCM is losing ground to larger firms
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| | distribution.Bargaining power of buyers
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| because of limited exposure. CCM at
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| | and collaborative buyer-seller relations
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| present does not reach global or national
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| | is very strong competitive force. The
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| audience like independents and major
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| | major distributors of recorded music
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| labels. CCM needs to broaden its reach
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| | supply CDs to the leading music stores
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| and widen its customer
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| | and other retailers of music, these
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| base.Opportunities* Serving
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| | leading distributors stock about 40,000
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| additional customer groups by expanding
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| | copies of a CD and work on 60-90 working
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| co-operation with other artists and
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| | schedule retaining the privilege of full
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| enlarging the Acoustictherapy and other
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| | return of investments for the unsold
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| product lines with new marketing
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| | copies. So called "one-stops" are
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| strategies.* Internet through
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| | distributors which provide products for
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| expanding e-commerce and releasing MP3s.*
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| | the independent music stores in smaller
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| Expanding sales nation wide.*
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| | quantities and very often with limited
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| Acquiring channels of traditional
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| | range of music types. Generally such
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| distribution to reach wider customer base
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| | distributors prefer to handle stock CDs
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| exposure* Developing new technologies
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| | of the very popular artists or at least
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| to cope with the driving forces of the
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| | well-known artists and often they are not
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| industry.* Releasing compilations
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| | interested in going into distribution of
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| with other artists has proven popular.
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| | CDs of unknown performers. Therefore, CCM
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| One strategy could be to assembly the
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| | faces great difficulty in acquiring
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| songs (such as Accoustictherapy) at the
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| | decent and formal distribution,
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| studio, and sell the completed disks at a
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| | especially in getting its products sold
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| discounted rate back to the performing
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| | by such music stores as Sam Goody, Tower
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| artists in their hometowns. This method
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| | Records, Borders Books and Music, and
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| would cover the costs up front and give
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| | Barnes and Noble.Also, a great role in
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| the players a financial incentive to push
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| | the distribution process is played by
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| the product.* Pushing sales into
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| | getting the music heard by people so that
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| non-traditional areas such as weddings,
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| | they would be more willing to buy the
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| shopping center music etc.Threats*
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| | CDs. This includes playing the music on
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| High number of new entrants and growth of
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| | the radio stations, on TV music channels
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| other smaller labels due to the digital
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| | and including soundtracks into movies.
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| revolution. In addition, major labels or
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| | Until the performers and artists of CCM
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| independent labels could decide to enter
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| | become so famous that they are asked for
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| into CCM's domestic markets and try to
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| | in retail music stores, the company has
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| drive the smaller labels out of the
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| | little chances to receive considerable
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| market.* Lose sales to substitute
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| | representation by major CD distributors.
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| products like mp3s or internet downloads*
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| | The manager of the company, Darren
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| Vulnerability to industry's driving
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| | Skanson, has contacted some retailers on
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| forces because of CCM's weak position in
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| | his own and found out that it is very
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| its industry, taking into consideration
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| | time-consuming and onerous task to get
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| the fact that the company occupies
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| | his CDs distributed by retailers in his
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| microlabel segment of the market and is
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| | own local area. The people he hired to
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| profitable primarily due to the low costs
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| | tackle the problem had little luck
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| of digital recording.Five Forces Model of
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| | either. CCM has had some experience of
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| CompetitionMichael Porter's model of
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| | selling the CDs through one-stop
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| competition (Porter, 1980), if applied to
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| | distributor, but it was not very
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| music recoding industry, comprises the
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| | successful due to high markup imposed by
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| following components: Rivalry among
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| | the distributor on the CDs of CCM. In the
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| sellers of recorded music (competition
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| | long run, Darren plans to make his
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| for better market position and
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| | product lines such as Darren Curtis
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| competitive advantage); artists and other
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| | Skanson, Music for Candles and other
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| suppliers of music to producers or
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| | artists, popular enough to have their CD
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| sellers of recorded music; distributors,
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| | distributed through major music stores.
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| retailers and individual customers of the
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| | But at the present moment, predominant
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| music; competitive pressure coming from
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| | part of CCM sales volume stems from
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| substitutes of recorded music towards
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| | direct sales such as sales at the gig,
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| winning customers; and threat of new
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| | shopping mall distribution and internet,
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| entrants to the industry of recorded
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| | mail and telephone orders of the
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| music.Perhaps, the strongest competitive
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| | musicians' CDs.Anastasia Kurdina is a
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| force belongs to such factor as Rivalry
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| | person of manifold gifts. Almost every
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| among producers and sellers of music
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| | her writing is followed by lavish
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| products. The music recording industry
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| | testimonials from satisfied customers.
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| has 4 clearly identifiable segments:
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| | Anastasia specializes in marketing,
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| major recording studios, independent
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| | management, world cultures, and art.
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| labels, microlabels and vanity
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| | Anastasia is not an essay writer in a
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| labels.Major, or first-tier, companies
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| | common sense. She is a Poet, an Analyst,
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| have large quantities of artists under
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| | an Artist, a Critic... Get to know her
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