Topics: Music industry, Record label, Universal Music Group Pages: 7 (2666 words) Published: January 25, 2013
Seminar Innovation and Marketing
Polyphonic HMI: Mixing Music and Math

Marco de Graaf 350111
We Fong Ma 375268
Oliver Müller 373496

Instructor: Dr. G. Liberali
Master Business and Economics, Specialization Marketing
Erasmus School of Economics

Rotterdam, January 22, 2013

The management team of Polyphonic is entering a market, which is currently facing permanent changes and a lot of pressure. Rapid technological changes, like the development from CD to DVD and movements towards digital downloading, forces recording companies to adapt their business models consequently. In addition, the music industry is facing negative annual unit sales growth in their most important markets: North America, which accounts for 41% of global music sales, showed a decline in demand of enormous 10.4 % in 2002. The European market, which is the second most important market, also showed a negative trend in most regions. This situation puts a lot of pressure on the recording industry: Funds have to be allocated wisely and it cannot be afforded to waste and risk any money. In an industry, where the average success rate is approximately 10% and where a lack of tools to measure the potential of a song/artist efficiently is immanent, the task of not wasting money is a difficult one. The industry has to rely on the feelings, ears, guts and experience of its producers. The most popular scientific alternative currently available is the so-called “call-out research”. Depending on the method, this form of research can cost between $5,000-7,000 per song. Internet polling starts at $3,000 and focus research at $10,000 per song. Despite these traditional research techniques, only one out of ten songs that get promoted as a single actually charts. Hit Song Science (HSS) could dramatically alter the business. The test of the software showed, that HSS is able to predict if a single reaches the top 40, eight out of ten times, which means a success rate of 80%. The accurate potential measurement that Polyphonic offers with its HSS-Software, would allow its customers a much more efficient allocation of marketing budget. The potential of a song can now be identified more precisely, reducing the risk of the whole business. However, even though Polyphonic offers great possibilities with its HSS, resistance is found too. For many people, especially the ones that are directly involved in the creative process, it is hard to believe that science can measure the potential of their art. They do not believe, that a computer program can act as a good predictor of music-success. Therefore, it might be easier to convince people of the usefulness of HSS, who are not involved in the creative process, but are concerned about the financial aspects in the industry. Despite of the possible resistance, the company faces another challenge; Polyphonic has an obvious lack of time and money. Polyphonic is armed with a “shoestring budget” of $150,000 to launch HSS, which strongly limits the company’s possibilities. Nevertheless, one of the company most valuable assets is its Management Team and Advisory Board. As the sacrifices of the CEO and Developer show, the team is convinced of their idea and product. Furthermore, the Advisory Board is mounted with prominent figures of the music industry. If the company successfully manages to borrow and leverage their credibility, this “asset” could be more valuable than any amount of money. Due to the very low variable costs, the company has a broad range of possibilities to position its product. The main challenges will be the choice of the right target market combined with a suitable marketing plan, that can be covered by the small budget of $150,000. Analysis of target markets and recommendations

Polyphonic has identified three potential target markets namely: record labels, producers, and unsigned artists. These three markets will be analyzed and on the end there is a recommendation to Polyphonic regarding the most...
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