World Music Industry †A Background Essay Example for Free

World Music Industry – A Background Essay There are three major segments in the world music industry; the industry that deals in the recorded music, the industry that is involved in the broadcasting of the already recorded music and the industry that attends to live performances. There are other less significant segments which are concerned with the broadcast rights for live performances and so on. Revenue is generated at each of these stages of the value chain. The earning of the revenue starts with a composer and lyricist with a song written and composed. In some cases the lyricist will sell the music on his own or he may decide to sell the rights may be transferred to another party. Then the song is played by the performers and at this point the revenues start flowing from two different directions – one from the performance recorded in a studio and the other from the live performances. In this process there are certain costs incurred which makes the presence of the companies specialized in the recording business as a prerequisite for channelizing the music performed. These costs include: Cost of rent for studio time and recording equipments Professional service charges payable for the sound engineers, technicians and operators Cost of transferring the recordings to tapes or compact discs and Cost of distributing the music as saleable commodities Since these costs are very high it is not possible to complete the value chain without the participation of these high profile companies. Usually these recording companies sign a contract with the performers. Under the contract the performer agrees to produce a certain number of recordings. The performer also agrees to take part in the promotion of the music product and is also under an obligation not to take part in recordings with other companies during the contract period. The record company undertakes to incur the cost of â€Å"producing, duplicating, packaging, distributing and marketing† of the products. The record companies distribute the products to the retailers who further sells to the consumers. In this value chain the authorized listeners who purchase the music product by paying the specified charges as remuneration to the copyright holders share their copy of the product with other listeners who do not make any payment for listening to the music. Traditionally the occasions on which the copying of the music was done were less which was in an informal way by making illegal tapes to share with friends and relatives. In this case there will be no earnings for any party in the value chain including for the â€Å"publishers, performers, recording companies and retailers†. There may not be any revenue arising for the person who has purchased the product legally and this depends on whether he charges for the copies he makes for the use of his friends. With the rapid changed in technology, the traditional market for the music was changing its dependence from cassettes, LPs, singles, compact discs, mini discs, MP3 and DVDs. These changes in the selling media have acted as strong barriers to the new entrants in to the market due to the reasons like: The international distribution network had proved very capital intensive involving huge investments. Despite the large investments, there was always the risk that the network must suit to the sudden changes in the customers’ demand. This often necessitated the trading off of international rights to music to international distribution as a measure to avoid the risk of change in preferences. (Kretschmer et al. , 1999). There were large costs associated with the marketing of the music worldwide. Firms had to incur marketing expenditure running in to millions of dollars in this respect. This is evident from the fact that releasing chart-bound albums have resulted in huge marketing costs in the national markets of UK and Germany. The composition of the products is so vulnerable that sometimes as low as 10 percent of the music products would account for almost 90 percent of the turnover and nobody could really assess the reasons for the success of certain products. (Caves, 2000) The competition from large players from other industries like consumer electronics, television and other media, entertainment and telecommunication industries using latest technologies of digital and networking also act as a barrier for new firms entering the music products market in the traditional set up. Examples of such organizations include the Time Warner, Disney, and Sony etc.