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Marketing Management II

Polyphonic HMI: Mixing Music and Math

CASE ANALYSIS

Section B GROUP 8
Venkat Vinod Madaka- 169278096
A Santosh Kumar 169278108
Chaitanya Kilaparthi- 169278092
Priyaranjan Parida- 169278074
Chandan Singh- 169278021
Q1. If you were McCready, the CEO of polyphonic, which target market-
unsigned artists, producers or record companies-would you pursue?
As per Polyphonic research, it has identified three target markets
Artists
Producers
Record Labels

Out of these all segments, Polyphonic will benefit most from Record Labels. The
important factors of this decision are
Record groups have the ability to take HSS to a scaled-up position
HSS can integrate the sophisticated technology to create a process of
selecting hit songs
So, these are the two reasons, both record labels and HSS will form a right
combination regarding business.
As industry performance is declining because of rising online piracy and falling
sales of music, it has become imperative to be cost effective to maintain the
sustainability. For record labels, it is very costly to select a hit song. As per
research, call out will cost $5000-$7000 and internet polling costs around $3000
and focus group research costs around $10000. So considering the price, it is a
massive expenditure. But on the other hand, HSS can help in analyzing ten songs
for $300 only, which is a massive reduction in cost. This will also save time and
will help record labels to release hit songs at a faster speed to generate more
revenue. The analysis of this will assist in determining the sales level and decide
which artist to invite for their next song. As seen the success rate of prediction
hits via analysis is 80%, HSS can help record companies to increase their
revenue. So, we can conclude that HSS should target Record labels as their
primary market for business.
Q2.How would you serve this market segment? What is a suitable
marketing plan? Specifically. What positioning do you choose? What
considerations underlie your pricing decisions? And how do you plan to
approach the selling process?
Among all the possible options, Record label companies will be our target
market. Polyphonic can provide the HSS services to these companies. Below are
the strategies available for Polyphonic to help Record label companies
understand the importance of the HSS.
Cost saving benefits - HSS is used to get ratings for the songs. If the ratings
are high, the record label company will offer to record or sell the albums. If the
ratings are medium, then the company can schedule a new hearing on a later
date. Record label companies can use HSS to identify if the album has the
potential to be successful in the market. This will save marketing and
advertisement costs for record label companies.
Identifying best single song Since HSS can be used to identify the best song
in an album, It can increase the sales of the album and thereby generating huge
profits to record label companies. All album releases are accompanied by a
single which is played all over radio and music television. The record label
companies spend at least $300K (which may be as high as $1 million) on the
release of the single. This amount is recovered from the album sales. HSS will be
marketed as a service which will enable the record label company to choose the
best potential single which will be a hit.
Album potential - HSS can be used to predict the success of albums based on
the ratings of the individual songs. An album with a potential Singles Top 40
contender is expected to perform better financially. This can be marketed as a
financial tool helping record label companies gauge the potential earnings from
an album and market it accordingly.
Polyphonic can position HSS as a scientific method to understand the hit
potential of songs. Since it mentioned that few companies were asking for trail
version (free of cost), polyphonic companies can make an agreement with record
label companies. Polyphonic can ask for a percentage of sales share if the album
is predicted to be successful by HSS and it is successful in the market.
Total fixed expenses : $ 750K
Cost per song : $300 per song
Polyphonic should price the HSS service at $3000 and advertise it as an effective
substitute for call out studies at a much lower price. The price is kept equal to
the internet polling so that the lowest substitute in the market is priced at par
with HSS.
Based on above data, BEP for the company would be 278 songs.
Q3. What value does hit song science create? Specifically, to what
extent does a hit song science increase the expected revenue and
profitability of albums and songs by new and established artists?
Polyphonic HMI has expertise in the field of artificial intelligence and natural
sciences like Maths and physics which is coined as Hit Song Science(HSS). This
HSS is used in the music industry to analyze and select hit songs from a bunch of
records. HSS can isolate different aspects of music( Melody, pitch, tempo, chord
progression, etc.) and compare with the music of previously hit songs to
determine the hit potential of the song.
As per current market research, it has been revealed that traditional market
testing techniques have success rate of 10%, whereas HSS has a success rate of
more than 80%. This is a huge difference in the ability to predict the
acceptability of a song. This result gives the record companies to choose whether
to launch the album or not and select which song to release first. HSS also
enables the music producers whether to offer a new song to a new artist. This
helps the producers to reduce cost and make many changes during the
production process to increase the acceptability among the listeners. The central
value creation HSS offers is growing the accuracy with a technical analysis and
reducing the cost associated with this process.

From Table A it is evident that,


A single reaching singles top 40 is $200,000 and a single not reaching
singles top 40 is $10,000
A single with-out use of HSS becoming hit is 10%, and expected value is
$29,000
A single with the use of HSS becoming hit is 80%, and expected value is
$162,000
So, the total value addition per single is 162,000-29,000 = $133,000

For New Artists:


In 2002, there were many established and new artists, and the number was
around 10,000. But music companies were focussing on their established artists
for revenue generation. For Warner Music Group, around 90% of the revenue
came from established artists. But for a long-term business, record companies
were always looking for new talents. Label companies used to receive demo
recording from new and old artists every week. So, for new artists, there was
always the challenge of competing with the established artists. HSS had the
ability to analyze previous hits. This high success rate predictive analysis helped
the new artists to test the hit potential of their demo songs. So, it was helpful for
the new artists to check and improve their song.

For Established Artists:


Established artists were given thousands of dollars as a loan by the record
companies. The artists had to repay the loan after the launch of the music from
the revenue of the album. In some cases, artists were given sale based payment
in the range between 5 to 15% of the albums retail price. In both, the cases lot
of money and risk was involved. Given the amount of money invested in
recording and promoting an album the cost of failure was very high. HSS was
able to help the established artists in analyzing the albums hit potential. So HSS
can reduce the risk. This was also helpful in saving a lot of money.

Q4. What are potential benefits and drawbacks of hit songs science for
each player in the music industry? Who stands to gain or lose from this
technology? How does that impact your plan? Potential Benefits

Record Labels - Can easily identify the songs which have a high potential to
become a Hit. With this they can channelize their efforts properly to the
identified songs. As mentioned HSS with a scientific backing has a success rate
of 80% which is much better than the existing 10% success rate. This will help
the record labels save millions of dollars annually on songs which were plainly
identified as hit potential but didnt perform up to expectations.

Producers - They are the people who help the artists in various scenarios like
writing the song, recording the song, mixing, editing, and making sure that the
song has the right vibe. With HSS the producers would be able identify the songs
more accurately and help the artists and the record labels secure bigger hits.
Artists - They are the ones looking for a break to make it big, get some
recognition and commercial success in the Music Industry, with the tool they can
easily identify what the song is lacking in, accordingly changes can be made in
the song so that the artists can align the song with a particular cluster. Tempo,
pitch, beat everything can be identified here making the identification process
simpler and smoother.

Potential Drawbacks

Record Labels - Out of the three, it is the Record labels which ends up making a
sizeable investment in a song hoping for its success, as such there are no
immediate drawbacks to be seen for the labels, to use HSS

Producers - The major drawbacks of this product will be seen for the producers.
Since their major job revolved around helping the artists by improving the song,
by using the HSS it may be very much possible that the Artists can skip on the
help provided the Producers and tweak the songs as per the findings of the HSS.

Artists - The major drawback is the cost factor which will be associated for the
Artists, another will be the psychological factors associated that the song that
one has produced, doesnt have a potential to be a hit. With this another thing is
that with HSS, an artist will try to get the same type of songs in the market,
leading to high number of songs of similar variety in the market.

The major beneficiary of the product will be Record labels who will be able to
identify the songs with high hit potential and able to direct their marketing
efforts for the same, leading to higher profits. The Chances of label going wrong
on a possible hit song will also be reduced as HSS shows a success rate of 80%.

Since we are focussing on the Record Labels as the primary market, and it seems
that it would be highly beneficial for the record labels, hence we can say that it
wont affect our plan which we are currently formulating.

Q.5 What are the ideal customers for Polyphonic? Is giving away free
trials a good way to stimulate adoption among these customers? What
does it take to satisfy customers who try HSS?
Record labels are the ideal customers for Polyphonic because even though
artists require insights from HSS but it is an expensive service for them to opt for
HSS. Producers can take advantage of HSS and generate hit albums but in the
long term it affects the job prospects of producers which makes their job
redundant and they are going to take a hit. Record labels are the ones who are
going to market the albums where they may high financial risk. HSS address
their core problems by suggesting hit patterns so that risk can be minimized.
Yes, giving free trials is a good way to simulate adoption among the
customers, since its a new product and the Industry itself offers a very low
success rate of 10%, initially the customers are bound to be skeptic by the idea
being presented.
With free trials, there is a possibility of reaching a broader segment of the
market. Providing trials would result in a solution where everyone benefits. Since
HSS offers a success rate of 80% it is highly probable that the results will be
correct and it will lead to higher profits for the record labels. This will ensure
business over a longer period.
It takes results to satisfy the customers who are trying HSS as until now the
Music Industry is predominantly based on Gut Instincts, and if HSS turns out to
be correct then it will be very beneficial for ever yone involved.