MMBA-6253V-2 Case Study: Int’l Business
Application 1: Estimating Value Chain Costs for Recording and Distributing Music CD’s Through Traditional Music Retailers.
Instructor: Verl Anderson
* Does the growing popularity of downloading music from the Internet give rise to a new music industry value chain that differs considerably from the traditional value chain? Explain why or why not. I think it might have an effect in the traditional value chain for the fact that nowadays it is very normal to download music from the internet illegally and legally. Due to this fact the sales in albums in the music industry have decreased. People prefer to download music rather than buy the CD because is more economic and they save money. For the reasons I mentioned before I think the traditional value chain might change. It is harder for artists to sell CD’s and they obtain more profit from the concerts performance. * What costs are cut out of the traditional value chain or by passed when online music retailers (Apple, Sony, Microsoft, Musicmatch, Napster, Cdigix, and others) sell songs directly to online buyers? (Note: In 2005, online music stores were selling download-only titles for $0.79 to $0.99 per song and $9.99 for most albums). The price to buy a song on the internet is cheap, so several costs are cut out of the traditional value chain. Retailers at the moment of sell songs directly on the internet do not have to take into account costs like: record company direct production costs, pressing of CD and packaging, distribution of the CD, stock of CD’s. That is why the final price to consumer online is cheap. The problem is when the people download music from internet programs like Ares, Free music video, Lime wire, among others. In that case the artist is not receiving any gain and that’s the situation that affects the music industry. * What costs would be cut out of the traditional...
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