Discussion Forum 1

Discussion Forum 1 - sell songs directly to online buyers?...

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Discussion Forum 1 a. Does the growing popularity of downloading music from the Internet give rise to a new music industry value chain that differs considerably from the traditional value chain? Explain why or why not? The value chain associated with a music company selling music on the Internet isn’t necessarily different from the traditional value chain. It has a value chain that is nearly identical, to a point, and then ceases. The traditional value chain has a number of additional steps towards the end of the chain, along with an extra step in value chain activity #1.Many of the costs associated with selling music on the Internet are the same as selling traditional CD’s. Some production costs, royalties, marketing expenses, and record company operating still profits still exist in the new value chain. If the artists choose to sell the music themselves, bypassing the record company, the value chain can be shortened even more. b. What costs are cut out of the traditional value chain or bypassed when online music retailers
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Unformatted text preview: sell songs directly to online buyers? Value Chain for Selling Music on the Internet 1. Record company direct production costs 2. Royalties 3. Record company marketing expenses 4. Record company overhead 5. Total record companys cost 6. Record companys operating profit 7. Record companys selling price to consumer Costs cut out of value chain by selling songs directly to online buyers: 1. Pressing of CDs and packaging 2. Wholesale distributor markup 3. Retail markup The 3 main costs that are cut out of the traditional value chain are the cost of making the CDs, the markup from the music company to the retailer and the markup from the retailer to the consumer. The markup from the retailer to the consumer is basically replaced by a markup from the music company to the consumer. Sources: Thompson Jr., A A., Strickland III, A J., & Gamble, J E. (2010). Crafting and executing strategy . McGraw-Hill Irwin....
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This note was uploaded on 07/13/2011 for the course BUS 421 taught by Professor Ness during the Spring '11 term at Edison State College.

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