Introduction
The music industry loosely known as the recording industry is comprised of individuals and entities that create and sell music to make money. The music industry has in the past decade changed significantly because of the growth experienced in the internet and digitization. Due to these changes, traditional business models and existing value chains have been disrupted. It is important to determine the effects these changes have had on the music industry. This is necessary especially if one hopes to start a business in the music industry. Consequently, a situational is necessary in order to stay abreast with the industry dynamics when choosing a particular business. The situational analysis will involve an industry analysis, market analysis, consumer analysis, competitor analysis and SWOT analysis.
- Industry analysis
The music industry is a two-tier market comprising music companies and retailers. The music companies select, publish and market records and singles. The retailers sell the music to consumers via different channels. The music industry is driven by hits and has uncertain demand. There is one dominant business model in the music industry. In the dominant business model, recording companies provide recording artists with the requisite resources for creating music. In return, the recording company gets the right to take advantage of their copyrights. As result of this dominant business model, large conglomerates like Sony Music Entertainment and Universal Music Group has risen up to fund a myriad of promotional and distribution channels and record labels (Wikström, 2009).
- Market analysis
The market structure in the music industry is divided into three phases. The first phase is where publishing houses are at the epicenter of power. The second phase features recording companies as the alpha-powers in the music industry. The third phase features powerful transnational entertainment corporations that exploit copyrights in the promotion of music. Currently, the music market is in the third phase. Even more interesting, the current music market model is transforming into service based model where digital music is availed everywhere through ubiquitous music service providers. The main market segments in the music industry are music publishing, live performance and music recording. The music market is dominated by four major companies; Warner Music Group, Universal Music Group, EMI Group and Sony Music Entertainment.
- Consumer Analysis
One aspect that is used in the analysis and assessment of the attractiveness of the music industry is the bargaining power of consumers. The consumers in the music industry can be divided into two groups; individual and corporate consumers. Corporate consumers include offline and online retailers who make bulk purchases from record labels. The bargaining power of corporate consumers is low because the price of the music is agreed upon during the contract signing. Individual consumers are those that purchase and listen to music from offline and online outlets. Unlike the corporate consumers, individual consumers have been experiencing a rise in their bargaining power. This is because in the recent past, escalation of piracy has cause record labels to reduce the prices of their albums. Considering both the corporate and individual consumers, their collective bargaining power is high. This is evidenced by cutthroat competition for consumers that as resulted in the reduction of prices in the online outlets.
- Competitor Analysis
Ideally, there are many competitors in the music industry. However, the main conglomerates in the music industry have so many subsidiaries. The main competitors in the global scene are four major music companies. These include Warner Music Group, Universal Music Group, EMI Group and Sony Music Entertainment. The four companies control 70% of the global market and 80% of the music market in the United States. These companies control the music industry as is evidenced by their revenue (Pitt, 2010).
Another indicator of the size of the competition is the market share controlled by these companies. In terms of album sales, Universal Music Group had a 31% market share in 2010 in the United States market. They were closely followed by Sony Music Entertainment with a 28% market share, Warner Music Group with a 20% market share and at fourth EMI with 10% market share. All this is testament to the kind of competition present in the music industry. Collectively, the independent companies control a measly 11.02% market share.
- SWOT Analysis
- Strengths
Some of the strengths of the music industry include the ability of the record label and artist to produce good music. In the same level, working capital, marketing capability, proper utilization of information technology and management are also industry strengths. The innovativeness of artists and recording labels is also a strength of the industry. For instance, income can be generated from merchandising and from tours.
- Weaknesses
Consumers in the music industry are very quality savvy. As such, bad and poor production features as some of the weaknesses of the music industry. Adding to this list is poor marketing, mismanagement and low capital. Another weaknesses features when there are too many concerts in a certain geographical area, a feature called overbooking. This is because it stretches the fans out and any bands performing in the area at the time do not make as much money as they would have. Some record labels have not yet changed to the digital format from the compact disk format. This is a major weakness that might devastate the music industry (Groucutt, Forsyth & Leadley, 2004).
- Opportunities
There are many opportunities in the music industry. Some of them include retiring competitors, new technology, niche markets, cultural movements and new customer segments. Unlike the royalties that recording artists get from airplay in radio stations and live concerts, online radio stations do not pay royalties. This is an opportunity that artists are trying to exploit presently. Other opportunities present in the partnership of independent record labels with major recording companies. The partnership allows independent labels to get an infusion of working capital while the major record labels get access to new and trending music.
- Threats
A threat in the music industry is anything that interferes with the record label’s strategy or an artist. Some of these include trends or activities that need increased resources or reduce anticipated gains. The most destructive threat to the music industry is piracy, both online and offline. Finally, artists who get money by boycotting or shutting down concerts are a threat to the music industry (Groucutt, Forsyth & Leadley, 2004).
Business Plan
Based on the situational analysis of the music industry, I would want to start a record label company under the name Caki Records Inc.
Executive Summary
Caki Records Inc. is a multimedia entertainment records label aiming to supply positive, profitable and informative visual and audio entertainment. The company is going to be headed by a president who also doubles up as the chairman of the board. Under the president is a chief operating officer who is also going to double up as the chief financial officer. The processes include licensing, product production, publishing, copyright, legal contracts, advertising, marketing and distribution. The company requires quality producers, band members, and a legal counsel as part of the staffing requirements. The company will draft an occupational health and safety policy that will outline the safety measures and precautions that the company will institute in order to ensure the safety of its employees. The legal issues the company will handle include recording contracts, licensing deals, producer contracts, sample clearance, publishing deals, band agreements, consents, trademarks and copyright notices.
Description of the business
Caki Records Inc. is a multimedia entertainment records label aiming to supply positive, profitable and informative visual and audio entertainment. The company believes in palatable and quality entertainment produced devoid of compromising commercial appeal. The company will work with talented, experienced and qualified management team and human resource in all to achieve success in every facet and operation of a recording company. With a team that has honed their skills in marketing, project production, artist promotion and repertoire, the company aims to create projects that win Grammy and Stellar awards among others.
Management and Operations Plan
Management Plan
The company is going to be headed by a president who also doubles up as the chairman of the board. Under the president is a chief operating officer who is also going to double up as the chief financial officer.
On the same level are a human resource manager and marketing manager who are answerable to the chief operating officer.
Procedures and processes
Various things are required when starting a record label company. As such, various processes and procedures are required and hence it is important for one to be abreast with them. The processes include licensing, product production, publishing, copyright, legal contracts, advertising, marketing and distribution. These are some of the processes and procedures that one ought to be familiar with when starting a record label company (Rudsenske & Denk, 2005).
Identifying staffing needs
Various staffing requirements are necessary when starting a record label company. Some of the staffing needs required are producers who are to create the music with the recording artists. Band members are also required in order to play the instruments required for the background. There are also going to double up as background singers for artists who do not have their own. A record label company also requires a legal counsel to draft legal agreements on behalf of the company and also represent the company in legal suits (Franz, 2003).
Resource/Equipment Allocation
A cocktail of equipment is required when starting a record label company. Here is a highlight of some of the equipment required.
- Recording console
- Compressor/limiter
- Pre-amp devices
- Microphones
- Effect modules
- Outboard gear
- Studio monitors
- Paper handling equipment
Occupational Health and Safety
For the health as safety of the workers in the record label, a number of precautions are required. Different colors will be used for wires carrying electrical voltage, internet connectivity and those carrying sound impulses. This is in order to reduce the risk of harm or injury during the day-to-day activities or during maintenance. Additionally, other precautions will be stipulated in the occupational health and safety policy that is to hang conspicuously on the walls. Constant drills will also be undertaken in order to assess the response to various disasters according to the guidelines of state departments. Most importantly, a first aid kit and a fire extinguisher will be installed and maintained in all the rooms in the office space (Franz, 2004).
Legal Issues
There are a wide range of legal issues that one has to handle when starting a record label. They include recording contracts, licensing deals, producer contracts, sample clearance, publishing deals, band agreements, consents, trademarks and copyright notices. It is paramount that all these legal issues are dealt with before starting the business (Schwartz, 2009).
References
Franz, D. (2003). Producing in the home studio with Pro Tools. Boston, Mass: Berklee Press.
Franz, D. (2004). Recording and producing in the home studio: A complete guide. Boston, Mass: Berklee.
Groucutt, J., Forsyth, P., & Leadley, P. (2004). Marketing: Essential principles, new realities. London. Page.
Pitt, I. L. (2010). Economic analysis of music copyright: Income, media and performances. New York: Springer.
Rudsenske, J. S., & Denk, J. P. (2005). Start an independent record label. New York: Schirmer Trade Books.
Schwartz, D. D. (2009). Start & run your own record label: Winning marketing strategies for today's music industry. New York: Billboard Books.
Wikström, P. (2009). The music industry: Music in the cloud. Cambridge: Polity.
