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Users
flocked
to
Spotify,
which
connects
to
Facebook
to
enable
easy
music
sharing,
in
2011.
Their
basic
free
service
got
many
users
hooked,
and
many
of
them
upgraded
to
paid
subscription
services.
Consumers
now
choose
to
pay
a
monthly
fee
(about
the
price
of
a
single
album)
for
a
library
of
thousands
of
their
favourite
albums,
which
they
can
easily
share
with
friends.
Also,
artists
now
earn
much
of
the
money
that
was
previously
earned
by
the
Majors
(Clemens
et
al.
2002,
p.27).
This
is
as
a
result
of
their
adoption
of
self-production
(through
tools
like
LogicPro)
and
self-distribution
through
digital
platforms.
The
order
in
which
a
fan
will
interact
with
an
artist
is
Hear-Like-Buy.
In
1970s,
the
major
firms
in
the
music
recording
industry
recognized
they
might
use
payola
as
a
barrier
and
instrument
for
raising
rivals
costs,
the
rivals
being
small
fringe
firms
or
new
entrants
(Alexander
2009,
p.195).
Services
like
Spotify
that
have
a
basic
free
service
(which
includes
product
advertisements
between
songs)
have
changed
this
by
allowing
users
to
listen
to
music
before
buying.
Unlike
the
radio
stations
that
benefitted
from
payola
and
played
only
certain
artists,
these
services
are
usually
indiscriminate
and
promote
product
diversity,
consequently
aiding
fringe
firms.
Also,
studies
have
been
conducted
on
college
students,
who
are
considered
to
be
most
likely
to
engage
in
illegal
file
sharing.
The
results
show
that
the
ratio
of
actual
loss
if
revenue
due
to
an
illegally
downloaded
file
is
not
on-to-one
(Arias
et
al.
pp.126).
The
potential
structural
importance
of
the
transition
to
digital
technology
is
compelling,
since
digital
distribution
diminishes
a
significant
barrier
to
entry
The
costs
of
distribution
should
decline
dramatically,
as
physical
distribution
at
a
national
or
international
level
has
significant
scale
features.
A
competitive
digital
delivery
system
would
reduce
substantially
the
minimum
efficient
scale
of
distribution,
and
likely
stimulate
a
highly
competitive
producer
market
(Alexander
1994a,
p.122).
Digital
technology
offers
new
opportunities
for
promotion.
So,
for
example,
consumer-to-consumer
promotion,
much
less
developed
than
classic
media
promotion
in
the
current
organization
of
the
recorded
music
industry,
but
also
much
cheaper,
could
become
dominant
for
online
music.
The
Majors
can
be
said
to
be
in
some
trouble,
which
will
get
worse
without
some
serious
innovation
by
the
interested
parties.
Sales
in
the
US
the
biggest
market
fell
by
29%
between
1999
and
2007.
In
early
2009,
CD
sales
continued
to
decline
and
digital
sales
started
to
plateau.
This
industry
is
currently
considered
to
be
in
the
mature
stage
of
its
life
cycle
and
is
on
its
way
into
the
decline
phase
of
its
life
cycle.
The
total
revenue
the
recorded
music
industry
has
declined
from
$18bn
in
2000
to
$8.4bn
in
2009.
Given
the
broad
empirical
evidence
that
peer-to-peer
file
sharing
systems
are
sustainable
and
becoming
more
sophisticated,
it
is
likely
that
the
Majors
will
continue
to
face
significant
difficulties
in
the
distribution
of
their
products
(Alexander
2012,
p.160).
The
decrease
in
CD
sales
and
corresponding
rapid
increase
in
digital
music
file
purchases
demonstrate
that
consumers
"prefer
more
convenient
formats,
that
they
resist
having
the
songs
they
want
being
tied
to
songs
they
do
not
want,
and
that
they
want
the
prices
they
are
charged
to
reflect
the
much
lower
costs
of
production
and
distribution
which
new
technologies
make
possible
(Tyler
2013,
p.
2149).
The
reasons
for
this
change
could
also
be
that
there
is
a
split
in
the
consumer
market
for
music.
It
could
be
attributed
to
a
preference
for
penalties
to
paying
a
price
for
buying
the
music;
as
well
as
a
preference
for
buying
singles
as
opposed
to
an
album
of
songs.
This
would
mean
that
available
music
both
vertically
and
horizontally
differentiated
products.
The
intuition
is
that
while
the
product
is
one
and
the
same,
the
costs
consumers
put
getting
the
product
for
free
with
the
risk
of
penalties
is
less
than
the
price
for
paying
for
the
music
leading
to
a
horizontal
differentiation.
One
can
use
the
Hotelling
Model
to
see
that
one
end
we
have
the
costs
attributed
to
penalisation
and
on
the
other
the
actual
costs
of
purchasing
music,
consumers
are
now
divided
in
accordance
to
the
costs
that
they
place
on
either
end
of
the
spectrum
higher.
Alternatively,
it
could
mean
that
a
single
that
consumers
like
is
a
high
quality
product,
while
an
album
consisting
of
some
songs
consumers
like
and
some
that
they
do
not
is
a
low
quality
product.
We
know
that
an
album
is
more
expensive
than
a
single,
making
the
low
quality
product
more
expensive.
Logically,
consumers
will
purchase
the
high
quality
product,
which
is
less
expensive
making
music
is
this
case,
a
vertically
differentiated
product.
Digital
musics
only
distribution
channel
is
the
Internet.
Majors
should
shift
focus
from
the
distribution
sectors
and
consider
opportunities
to
advertise
and
attract
customers
online,
and
explore
the
creation
of
strategic
alliances.
WORD
COUNT:
1197
words
BIBLIOGRAPHY:
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P.
J.
(1994a).
New
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Market
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The
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Journal
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P.
J.
(1994b).
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Behavior,
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Multi-Product
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the
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J.
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