Can the drop in music sales be explained by Michael Porters Product Life Cycle and will the CD in the near future be replaced by mp3?

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Contents

1. Contents

2. - Introduction

- Objectives

- Problem definition

- Sub-questions

3. - Demarcation

- Has the quality of music decreased?

4. - What were the causes of the CD replacing vinyl?

- What advantages does mp3 have over CDs?

5. - What advantages does mp3 have over CDs? - continued

6. - Are there any similarities between the transfer from vinyl to CD and the suspected transfer from CD to mp3?

- Do mp3 downloads affect CD sales in a negative way?

7. - Literature review

8. - At which stage of Porters Product Life Cycle model is the product CD?

9. - At which stage of Porters Product Life Cycle model is the product CD? - continued

10. - How saturated is the CD market and what are the consequences?

- Conclusion

11. - Abstract

12. - Appendix

13. - References

1

Introduction

The music industry blames mp3 downloading for the loss of CD sales. However, research (Oberholzer & Strumpf, 2004) has shown that the effect of downloads on music sales is indistinguishable from zero.

This is very much alike the 70's, when vinyl was replaced by CDs. Music sales had slumped significantly by the end of the 70's, but thanks to the introduction of CDs music sales soared again. The music industry was at first very skeptical about this new technology, but as soon as they realized that CDs were going to be the new way of selling music, they turned to CDs quickly and music sales increased dramatically.

Objectives.

My aim in this paper is to find out whether the CD is at the end of its Product Life Cycle, or is there another cause for the drop in CD sales, for example mp3 downloading, which is increasingly popular. Will music in the near future no longer be transported on a fixed carrier, and will mp3 replace CDs as the way of music distribution, or will it be suppressed by the music industry because it is easy to copy and reproduce, which gives difficulties on property and license rights?

Problem definition.

The problem definition that will result in meeting our objectives is the following: "Can the drop in music sales be explained by Michael Porters Product Life Cycle Model and will mp3 replace the CD?"

Sub-questions

In order to contribute to the answering of this main research question, the following sub-questions have been drawn up:

* Has the quality of music decreased?

* What were the causes of the CD replacing vinyl?

* What advantages does mp3 have over CDs?

* Are there any similarities between the transfer from vinyl to CD and the suspected transfer from CD to mp3?

* Do mp3 downloads affect CD sales in a negative way?

* At which stage of Porters Product Life Cycle model is the product CD?

2

Demarcation

In order to allow for reproduction and create clarity, we must demarcate the wide topic of this paper.

Many causes for the drop in CD sales can be named, for example market saturation, decrease in the quality of music, disadvantages of the product itself, and mp3 downloading, both legal and illegal. Research on this topic has been done especially on the effect of downloads on CD sales. Taking into account the difficulty of proving these causalities and previous researches, I will limit the causes to evaluate to the following:

* Decrease in the quality of music

* Product disadvantages

* Mp3 downloading

* Porters Product Life Cycle Model

Market saturation is a factor of the Product Life Cycle Model, and will be discussed accordingly.

For statistics on record sales, worldwide record sales will be used, and not only the United States, unless stated otherwise.

Has the quality of music decreased?

This is a question that has been tested by Stan Liebowitz in his 2003 study Will mp3 downloads Annihilate the Record Industry?. He noted that it is very difficult to measure whether music has become less interesting for consumers, but one of the ways he used is the time spent listening to the radio. He made...
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