As the presence of the Internet becomes more predominant as an everyday activity In people’s lives, the way consumers access, select, buy and listen to music continues to evolve, being the likely cause of the fall of the traditional record industry (Barfe, 2004). One key aspect that is influencing these changes is technology. Technology has been a major characteristic of the music industry throughout the last century as to how music has been and is being accessed: from acoustic, through electronic to digital recording techniques, going through vinyl, tape and CDs (Murray, 2012).

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However, the mergence of the Internet has created a new channel of music provlslon (Dilmperl and King, 201 2) that enables individuals accessing and downloading music files more easily and efficiently (Bockstedt et al. , 2005). Therefore the music industry is a marketplace that Is In transition from physical to digital (Barnes, 2009).

Although we already find an established online music retail market, given the large illegal activity, in the form of digital music piracy that took place through the peer-to- peer websites (Dilmperl and King, 201 2), and streaming sites (Miravos TV, 2009), the usic Industry has seen the Internet as a threat to the business (Kunze and Mat, 2007). Consumers, on the other hand, have been fast in adopting the new tools of exchanging music via the internet with file-sharing platforms such as Napster and KaZaA that quickly emerged allowing users to exchange digital music with one click (Kunze and Mai, 2007).

While the Industry placed most of the efforts In trying to reduce the Illegal usage of the Internet, by placing law suits against the most popular platforms such as Megaupload (Miravos TV, 2009), the steadily increasing number of onsumers became more accustomed to download music for free (Walsh et al. , 2003). The growth In file-swapping systems forced the Industry to readdress how it will derive Its future revenue streams (Meisel and Sullivan, 2002) In the face of the decrease in global CD sales (Edison Media Research, 2002).

Additionally, other non- traditional competitors such as Apple and Microsoft

Page 2 Consumer Behavior and Music Essay

also became present in the industry (Kunze and Mal, 2007) with electronic music players such as the iPod, which engaged a younger generation of consumers who saw In these devices a trendy and ashionable item, which also implied new patterns of music consumption (Kunze and Mai, 2007). With music consumption as strong as ever, and even more so in the form of streaming (McGlade, 2013), the popular saying that “the genie is now out of the bottle” Is even more valid as eliminating such services will have little Impact In the overall business (Hansen et. l. , 2000). However, the appearance of a wide range of compelling products out there, such as Spotify, Pandora or Songza, that are free and catering for its users, are getting consumers hooked and even transforming them Into paying customers when they were initially “stealing” (Parks, 2013). As consumers are looking for ways to maximize the utility and beneflts that come 1 OF6 Trom snopplng ana mlnlmlze tne costs related witn It, not only In terms 0T money, Dut also time and energy spent (Dilmperi and King, 2012), the internet has become a preferred platform that adapts to these needs.

As the Chief Content Officer of Spotify, Ken Parks (2012), explained during the panel on “The Future for the Music Industry’ at the Creative Content Summit, due to the diverse platforms available through the internet, consumers have experienced music at a speed of light, and aving tried this, will not want to stop. He also explained that companies and artists need to find a model that adapts to this new behaviour and that only those business models which do not force users to change how they consume music, but look at what they are doing and satisfy those needs, will become successful.

While any change in music format presents a significant challenge to the industry and consumers alike, as stated by Kunze and Mai (2007), the research suggests there are a wide range of motivations, such as novelty seeking, experimentation, impulsiveness and playfulness, which influence consumers’ adoption of new roducts or services (Hirshman, 1980; Littler, 2001). While traditionally users discovered music either through the radio or from friends, and only consumed through album purchases, users are now increasingly experience music through social media, and consume digital versions of songs and albums.

New social media driven by user-generated content is starting to displace traditional forms of media distribution. Social media is increasingly used for sharing information about the artist, music albums and song, and also for the sharing of the music itself (Dewan and Ramaprasad, 2012). This social component about music plays an mportant role and acts as a resource through which people make sense of a place and its social reality (Karnik, 2011).

These dynamics are not only shifting the consumer behaviour but also impacting the size and shape of music sales (Dewan and Ramaprasad, 2012). The music industry has experienced a turning point driven by the Internet’s distribution of music as a digital good, having substantial impacts on the players in the traditional recorded music value chain (Bockstedt, et al. , 2004). The internet and digital technologies have not only changed how music is consumed, but also istributed, and therefore the whole music market structure.

Fast broadband internet connections, new audio formats, and smartphones with the possibility of storing large amounts of data, have provided consumers with unlimited room for choice and changed the way they listen to music (Kunze and Mat, 2007). However, with the advent of digital music formats, there are many opportunities for changes in the recorded music distribution value chain (Bockstedt, et al. , 2004). Bockstedt, Kauffman and Riggins (2004) also argue that digital music is reproducible at a nearly ero cost, which leads to a lowering of distribution costs in comparison to physical formats.

With this change, new opportunities arise for artists to avoid production costs of physical CDs and bypass royalty contracts. In addition, consumers also ene t Trom lower prlces wnlle artists galn a snare 0T tne pronts tnat tney were not obtaining before. Digital music is already gaining ground to the physical format music: the digital music industrys revenue for 2012 was estimated at USD 5. 6 billion (9% increase from 2011), which accounts for a 34% of total industry revenues (IFPI, 2013). Big music labels are therefore experiencing a gradual decrease of control levels over the distribution and artists.

As exemplified by Kunze and Mai (2007), a music band named Arctic Monkeys managed to distribute their music in an independent manner via the Internet without any support from big labels. These structural changes of the value chain could potentially have a broader impact on the distribution of profits within the industry. Digital music is a format with low costs of reproduction and transfer, it is portable and easy to store, and allows for individual tracks to be sampled and remixed into new creations. For these reasons, it is subject to significant Intellectual Property (‘P) right concerns (Bockstedt, et. l. , 2004). However, these traits of digital products facilitate the widespread and often illegal distribution worldwide. (Gopal, et. al. , 2006). Though IP rights are considered as a base for all business models across industries, they must adapt to the changing environment, and evaluated in light of their performance. However, the existing laws and measures regarding IP in the music industry, and the measures being taken to ensure they are being exercised, have proved to be inefficient (Lampel, et. al. 2007).

Lampel, Bhalla and Jha (2007) confirm that activities such as online distribution and sales, increasing visibility and momentum through concerts and events or promoting online communities are examples of how the industry is starting to adapt to the new environment and improve its performance. They conclude that the emergence of these practices are a first step towards fghting piracy and strengthen IP rights. In this regard, the “2016: La Revolucion Musical” film goes a step forward by predicting that in the upcoming years, artists’ IP rights should be limited to five years in order to encourage creativity nd innovation (Claqueta Final, 2011).

With Mintel studies foreseeing that the digital music industry will offset the decline of the CD market, and the positive predictions and data demonstrating the opportunity for growth for paid-for downloads market (Kunze and Mai, 2007), the music industry has the opportunity to offer new products and services that will adapt the new consumer’s behaviours and practices. These companies are reinventing how to consume music founding their services in already established practices, but built into new technologies to expand new ways of making money (Murray, 2013).

While the industrys success will still be heavily dependent on digital sales and concert tickets (Lynch, et. al. , 2009), focus on new services with increased online interaction will be also important. As the Chairman and Founder of Beggars Group, Martin Mills, argued during the Creative Content Summit (2012), music video streaming services, such as YouTube or Vimeo, Internet radios, radio on demand platforms, are Just a few examples of new services that not only allow for interaction, but have reach and power.

These new platforms are focusing all their efforts into creating a pull rather han the traditional push strategy, in a very subtle way. Additionally, as consumers Increaslngly see value In tnose products tnat are tallorea to tnelr needs ana wants, customization and increased level of involvement will also become key aspects of new services (Lynch, t. al. , 2009).

In regards to new models for the music industry, as per a CNBC interview with Malcom Dunbar, Director of Pledge Music (2013), artists will have more choices on how to finance their projects thanks to the appearance of Crowd funding platforms. He argues that with the shift of the industry due to the internet and social networks, here is a clear reduction of labels, and artists must find alternative financing models for their music.

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