1 / 12

53-701-03 E-Commerce Internet and the Music Industry

53-701-03 E-Commerce Internet and the Music Industry. Jacques Robert. DIGITAL PRODUCTS. Books, News, Music, Video, Knowledge, Software. CHARACTERISTICS. Information is costly to produce… but inexpensive to reproduce (Variable costs / Fixed costs ratio is very low)

howard-avery
Download Presentation

53-701-03 E-Commerce Internet and the Music Industry

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 53-701-03E-CommerceInternet and the Music Industry Jacques Robert

  2. DIGITAL PRODUCTS • Books, News, Music, Video, Knowledge, Software

  3. CHARACTERISTICS • Information is costly to produce… but inexpensive to reproduce (Variable costs / Fixed costs ratio is very low) • Digital goods can be altered, transformed, manipulated … at low cost (ex. Compression and error correction) • Production of digital goods entails major sunk costs • Digital goods are either very fleeting… or very lasting (they don’t wear out) • There are fewer capacity constraints

  4. DIGITAL PRODUCTS • All bits are alike (convergence) • Can add bits that describe bits i.e metabits or "headers" • Television program + description of the program have the same format and can be processed by the receptor • Moving intelligence from the sender to the receptor

  5. INDUSTRY STRUCTURE Technology

  6. MAJOR PLAYERS (Big Five) • BMG (Arista, RCA) • EMI (Virgin, Blue Note, Capitol) • Sony (Columbia, Epic) • Universal (Decca, A&M, Geffen) • Warner (Elektra, Atlantic, Warner) • 80% of retail sales

  7. SOME DATA • Need to sell 500,000 copies to break even • In 2001, 6,455 new albums were released and only 112 sold more than 500,000 copies • 5% of releases are profitable • Royalties: between 5% and 13% • Costs of a CD: $350,000

  8. COST STRUCTURE

  9. QUESTIONS • Who has the power? • Is it efficient? • Who makes money?

  10. IMPACT OF INTERNET AND MP3 Technology Law Economics

  11. MP3 Format • WAV file (50 meg) • Motion Picture Experts Group-1, Level 3 • MP3 about 1/12 of the original file • Near CD quality • MP3 players • Computers with MP3 Player (Real, Windows Media, etc.) • CD players can now play MP3 • IPod

  12. IMPACT OF INTERNET AND MP3 • How does file sharing create value and for whom? • How does file sharing destroy value? • How can file sharing capture the value it creates? • How should the industry react? • Pricing model for Digital music? • ITunes, MusicNet, EMusic • Shouldn’t recorded music be free?

More Related