Prediction and Strategy in the Music Industry

“Record sales as we know them are in long-term decline […] whereas the wider music market – live, merchandising, streaming video and music social networking- is in rude health. After seven years of gradual change, we are about to see a major shift. Record companies are, at last, in a hurry to transform themselves into proper consumer marketing companies.” Keith Jopling, London 2007.

The potential of brand marketing and strategic alliances with non-music industries lies in the fact that the music industry has been experiencing an ongoing phase of transition. This has at the end of the day caused album sales to exponentially turn down over the past decade, including a consecutive 20% drop the past two years (www.ifpi.org, 2007). Traditionally the music industry has been fully dependent on the sale of recorded music. Now it will have to reinvent its standard practices so as to compensate for a loss of revenue. As sectors begin to carry out trial with new ideas that add value to music, we music companies need to develop concepts with extraordinary potential to expand business opportunities for music to be marketed. Brand marketing and strategic partnerships situations with companies outside the music industry are described under the following scenarios:

i. The music market will expand because of brand marketing.

ii. Partnerships with non-music industries will expand the music industry presenting the case of technology and media.

This document proposes strategies for the scenarios mentioned above predicting marketing and music industry trends. For the scenario I. the situation described presents market prediction assessments for the live sector assuming the role of brand manager focusing on music sponsorship and opportunities to successful connect artists as brands to the market. The strategic decisions will be presented taking off from the recognition given to the value in the influence  that musical properties have over their audience, particularly at a live event. On the second Scenario the situation described presents market prediction assessments for the music distribution sector assuming the role of marketing manager focusing on delivering music content in a rapid and efficient manner to consumers on the digital hemisphere and technology driven market. For both scenarios historical and current trends are taking into consideration to predict future situations.

Seeking to monetize this influence  by strategically connecting sponsors to musical properties through creative marketing campaigns is the main focus of strategies presented on the scenarios. From expertise, contacts, industry knowledge, and market research the music market expansion will effectively enable the strategies to create more mutually beneficial relationships.

i. The future on branding Live Acts

With the downturn of record sales, the music market will focus on live music concerts as one of the main sectors to expand the market and increase revenues over the next 3 years. This scenario will present new opportunities to connect brand’s consumers and artists’ audiences as well as fan bases growing accessibility to music. Brands will be expose as artists and bands increase brand awareness at both sides of the market; consumer products and music audiences. It is the one element of artistic content that can t be effectively disseminated over the digital landscape.

More bands will be touring throughout music sponsorship agreements, enabling to present their act and reach more audiences than ever before.  With brands supporting artists’ live acts this will constitute the main vehicle to gain market recognition transforming it in market share and revenues for both bands and brands. Associating with bands on the rise is very important to brand’s success and vice-versa.

Marketing Industry Trends

Traditional mass-media advertising and promotion in magazines, TV, and radio have been increasingly less effective as consumers become more discerning. The internet age has developed scenarios offering new business opportunities where a segment of young consumers who are product savvy and are skeptical of major media campaigns, not to mention that they spend less time with those mediums. Marketing agencies have been observing that clients have begun to shift spending from mass media to alternate forms of marketing that reach consumers where they are – at the office, on the internet, playing games, using cell phones and DVRs, in stores, and on the street. Clients seek innovative platforms to reach their target demographic in a memorable manner. The growth rate of music sponsorship outpaces by 11.7% the overall sponsorship growth (www.sponsorship.com, 2007). Clearly, marketers are increasingly recognizing the value of utilizing music to raise awareness of their brands. According to Bill Chipps, senior editor at IEG, traditional media doesn’t work like it used to and, as a result, a growing number of companies are turning to nontraditional marketing platforms, including music.  (Fricker, Gamarra, Seidenberg and Lizarazo, 2007).

While marketers noticeably continue to capitalize on the appeal of music to other generations – witness the success of Cadillac’s rockin’ TV ads in helping the revival of that once-troubled General Motors brand, or the tight association between United Airlines and ‘Rhapsody in Blue’- brand stewards exploiting music mostly will aim at the youth audiences to increase market share.

Music Industry Trends

As music is increasingly digitized and democratized, the old structure associating music and branding is crumbling, being replaced and opening up the marketing charms of music to a whole new roster of players. A growing number of brands that started out with no connection to music are rushing in, using tunefulness to build their brands in a still-proliferating variety of ways. Traditional music retailers are going down the drain. Therefore the game would change markedly even more for record labels and their acts than for independent artist (Fricker, Gamarra, Seidenberg and Lizarazo, 2007).

Consumption habits have also been altered with the advent of digital innovations.   The digital landscape has enabled consumers to obtain music for free, whether it is through peer-to-peer software, burning CD’s, or transferring hard drives. Consequently, music is more popular then ever, as consumers have the ability to listen to an endless variety of music (Crupnick, 2007).  With this in mind, the prediction points out that there will be an exponential increase in the number of independent influential artists (potential marketing platforms) who will seek sponsorship to help support their growth.

Key Success Factors

For this scenario the strategy will effectively provide solutions for both marketers and independent influential musical properties. Enabling marketers to provide effective and creative marketing solutions that utilize music to reach their desired demographic. Over 80% of 14-25 year-olds believe that music has had more influence on their lives than movies or sports, while 31% think it’s more important than anything else, including where they grew up (www.proquest.com, 2007). Marketers increasingly have to create memorable campaigns that fight through the clutter to reach their demographic. In a world that is full of mass media, the key is able to utilize music to create a memorable and lasting impression for marketers. Music in general is a sexy proposition with which to be associated, something that rouses the emotions, especially when it has the in-the-moment factor of a live performance (Waddell, 2007).

In addition, specializing on marketing research will provide the right tools to analysis accurately the demographic certain brands will have an opportunity to be marketed.  With this information, brand marketing campaigns can finely be tuned effectively associating brands to artists. The marketing research must create comprehensive ROI reports once the sponsorships have been implemented.  Marketers would be increasingly interested in this type of feedback, considering that traditional marketing doesn’t provide any gauge to the value of dollars spent (Kumar, 2007).

On the musical property side, brand marketing strategy will work closely with each artist to find a sponsorship opportunity that keeps them relevant with their fan-base and doesn’t diminish their brand. At this level it is a key factor to provide all the experience and knowledge to even go one step further and advise musical properties to associate with brands that will actually strengthen their image enabling them to position as a brand on the market.  The success and growth of many lifestyle brands, which happen to resonate with music fans, will support this objective. Finally, the strategy focus on ultimately create solutions that are mutually beneficial for all parties involved as simply the one-stop shop for music sponsorships, all in one.

ii. The future on music distribution

With the downturn of record sales, the music market will continue increasing consumption over user-generated content focusing in strategic partnerships with traditionally non-music organizations. This will create possibilities for music content generators to develop partnerships with technology companies to efficiently distribute and deliver music content to the market generating new sources of revenues over the next 5 years.

Digital innovations, including peer-to-peer software, the MP3 format, portable players, and digital retail have altered the face of the music industry. The recorded music industry completely controlled national / global distribution, which enabled the industry to internally control pricing and available product. Technological advances have caused tectonic shifts in the traditional business model by creating alternative distribution channels. The availability of global distribution and promotion will allow more artists to manage their own career and content without being connected to a record label.

Key Success Factors

The success of music distribution for the situation on this scenario lies in the:

1. Ability to identify music trends and upcoming influential artists

2. Ability to create custom mutually beneficial partnership packages with peer-to-peer networks creating and sharing music content.

3. Ability to associate with entertainment and key technological players to distribute music content.

Artist-run and small indie labels developing valuable music content will continue seeking direct distribution channels to connect directly with the audience. The ability to analyze and identify trends and artists on the rise will give a sustainable competitive advantage. Traditional distribution channels drive awareness, but intimate engagements on peer-to-peer networks make the connection more meaningful. Sharing generated content beyond traditional available channels will unleash possibilities to connect up-and-coming musical artists among them resulting in more intimate, exclusive, and memorable experience.

In order to determine accurate peer-to-peer music content preferences and information, market research is strongly recommended.  After analyzing results, decision on demographic of a particular artist’s audience is crucial to improve user-generated content collaborations. Developing a valuation based on Internet surveys, on-site interviews can substantially increase the impact of music content distributed upon mutual collaboration on peer-to-peer networks creating stronger direct relationships with the audience. In order to encourage an artist’s audience to participate on surveys, the network will provide incentives such as free network access or the opportunity to generate alternative revenues by collaborating within their peer circle rather than coming out of traditional media groups (www.nokia.com, 2007).

Volatility in demand for music products will increase as it becomes easier and cheaper for new firms and authors to distribute content to the market. Financial and organizational barriers to entering the Internet market are already quite low. With the growth of new forms of consumption, the advantages of reputation for some of the older firms are already thinning. Virtual communities are already proving to be a dynamic source of information about new music, compared to the “old” marketing programs. Creating and fostering these communities has become a key factor on the strategy to succeed on Internet peer-to-peer markets (Kumar, 2007).

Fortunately, the artist-run labels and artists – who are, after all, the ultimate brands in the music business – are getting plenty of help in encouraging legal downloading from some venerable technology companies that see the practice as a great opportunity to associate themselves with the charms of music. Cupertino, California-based Apple, previously best known for being the brand that revolutionized the personal-computer business, was the first major brand to recognize and capitalize on the opportunity. Last year, the company introduced iPod, which already enjoys greater buzz among young consumers than any electronic device. Also introducing the iPhone to the market has set clear goals on partnering with music branding its content as one of the main tactics o their marketing strategies to attract consumers.

Following this music distribution strategy presenting innovative thinking out-of-the-box would generate creative and strategic partnership opportunities and utilize emerging technologies and marketing tactics that allows music content to be efficiently distributed from artists in an organic, credible manner to peer-to-peer networks. Revenues should integrate sponsorship agreements and ad-based technology networks.

Plan for Further Action

Meeting up artists, managers, agents, and artist-run labels / companies on the same network would bring competitive advantages on synergies that would benefit the content generated. This will provide the right platform for collaboration creating valuable music content. The content generated would be of unique value and distributed directly within user-generated networks that would operate under sponsoring for music property. In the following years that collaborative networks would be formally establish as partnerships with numerous relationships developed among technology providers, advertisers and artists and understand ways in which they all can mutually benefit.

Because the function of strategic partnership with technology providers generally is cooperatively to develop innovative distribution and bring music content to the market, the ownership of intellectual property is an important issue. Agreeing on the ownership of this property would be the earliest major issue in the negotiation process; the outcome of such process could vary as partners can set the tone for the ongoing collaborations. Ownership has been and will be a complex issue as unanticipated technological innovations occurs or when an innovation emerges alter operations. Therefore, addressing this issue early and formalizing the expectations of partners is a prudent step. If an innovation arises technology would allow partnership to flow with the strongest strategic match in order to benefit the music content distribution (Laermer and Simmons, 2007).

Partnerships with traditionally non-music companies in the technology sector will focus on utilizing the network created to effectively deliver content. Market awareness should look over revenues by efficiently implementing technology to benefit music content distribution that meets the needs expectations of users.

Nevertheless in the following 3-5 year term, there is to expect that technology / mass media and music industries to have continued on their relative paths, which will always open up even more doors for user generated content, seek for partnership for future growth.

Moreover partnerships are an ongoing process that it would continuously be renewed seeking new strategic partners to expand music content for distribution as this is generated as well as technology advances and user access more channels to collaborate with one another. Like today, these would be crucial for the long term growth of the music industry.

Conclusion

Some say the main obligation of music companies in the digital era is to efficiently market creative music content. Consequently there is a fine line between both scenarios presented. The value of brand marketing and business partnerships lies in the ability to strategically link marketers and their brands with influential music properties. One important task is to create influential marketing campaigns, associating sponsoring brands in a credible, organic manner. The prediction over competitive advantage for the future lies in the expertise to integrate brands into music in a compelling way, so that brand association is created without taking the edge off the value of the musical properties. In addition, technology has improve music distribution providing marketers with accurate tools that allow to specifically target a particular demographic and determine the effectiveness of music content all in one, including music sponsorship, brand marketing, live concerts and their impact where technology dictates partnerships as music distribution opens new revenue perspectives.