Management of Technology – Revolution in Audio Distribution

Management of Technology – Revolution in Audio Distribution

What industry conditions led to the revolution in audio distribution described above? Which stakeholders stand to benefit most (or least) from this revolution? (1.5 marks)

Fraunhofer set a revolution in motion within the music industry through the innovative MPEG-1 layer 3 (MP3). This new invention led to a drastic change in the consumption, distribution, and storage of music. The new algorithm/codec enabled the compression of audio files to a tenth of their original size. This compression did not have any significant impact on the quality of the audio. This innovation widely revolutionized the distribution of music in various ways. First, users or consumers could carry their music on hard disks and other external hardware as files. Secondly, it was possible to share the music online, promoting easy distribution from producers to consumers. Thirdly, the conversion of songs to the new format was now possible, widening the audience that could access music. The invention of MP3 changed the distribution process entirely, making it more efficient for sellers, consumers, and producers (Schilling, 2020).

Consumers benefitted from the revolution most as they could now access music easily. It was possible for listeners to share music with others online and actually store the music on various hardware such as hard disks, flash disks, and computer hard drives. It also improved the storage process, making it possible to retain music for longer without losing it or distorting its audio quality. The use of compact discs to store music was quite unreliable due to loss and inability to transfer this music to others. Consumers could now enjoy music from their friends through online sharing. Producers, songwriters, and musicians also benefitted tremendously as they could sell their music to consumers through different platforms, such as internet-based or physical. They could also copy their music onto different hardware for consumers to consume. However, they became more vulnerable to piracy, which led to the loss of revenue because of the unlimited sharing of music. Consumers did not have to buy the music as they could easily get it from their friends.

Why did the music stores created by the record labels fail to attract many subscribers? What, if anything, should the record labels have done differently? (1 mark)

The birth of Napster initiated illegal access to music through sharing and downloading files on the platform. When Napster was pulled off the web, peer-to-peer fans globally suffered a major blow. This opened up an opportunity for other players to provide legal platforms that would enable music sharing. These record labels failed to attract consumers because they failed to offer a wide selection that such users had experienced on the illegal platforms (Waldfogel, 2012). The labels provided proprietary files to control the music catalogs. In addition, these labels confused users as the severe limitations of digital rights management continued to occur. The users were expected to pay for the services but had their access to music controlled. This aspect did not amuse most of the consumers who had already experienced unlimited sharing, access, and downloading of music files on Napster and other platforms such as Kazaa and Gnutella.

The record labels should have provided the consumers with unlimited selections. Seeking to control their access to music and still collect payment from subscribers was an abuse of their legal platform. Having the legal platform to offer the services that Napster offered provided the labels with a head start over other players in the sector. However, their failure to offer clients value for their money put off most potential users. The lack of a variety of music that the subscribers could download frustrated individuals. Therefore, the labels should have provided a variety of music for subscribers as they were already within the legal provisions that controlled the downloading and sharing of music (Schilling, 2020). The record labels should also have provided simple platforms that do not confuse users. Providing a model that was similar to Napster’s, the pioneer, would have attracted more subscribers. It would also have offered value for their money.

What factors led iTunes to be successful? (1.5 marks)

Firstly, iTunes provided a wide catalog of songs that amounted to 200,000. Users can access more songs on their iPods at only 99 cents. The low/affordable cost increased the number of people who purchased the songs. These results manifested in the form of 50 million downloads in the first year of operation. Secondly, iTunes was acknowledged by the recording industry because it promised that songs’ files would not be shared illegally on the Music Store. This protection was made possible through the Fairplay Digital Rights Management strategy. This entailed offering two formats of each song (modified MP3 and advanced audio coding) (Schilling, 2020). The sharing of songs was limited to five computers. MP3 players that were not iPods could not play the files. Users were prohibited from sharing the files over the internet. Furthermore, it was impossible to copy songs from a friend’s gadget. Therefore, users had to buy their own songs and use iPod MP3 players

Thirdly, Apple had a cool public image that enticed users and recording companies as well. The company’s use of the MP3 algorithm facilitated the process of accessing music at affordable rates. Fourthly, Apple’s strategic collaboration with five major record labels placed a large number of users at its disposal. Fifthly, Apple’s FairPlay offered a more relaxed DRM, enabling users to access the songs easily. In addition, Apple’s presence of iPods made the process easier. These gadgets were sufficiently marketed to the public, portable, and well-designed to handle the client’s chosen files. Despite a few issues regarding the quality of sound and life battery, the exclusive compatibility protected the songs from piracy and made it possible for recording companies and singers to gain financially. Apple’s ability to utilize the gap and package the solution attractively led to the ultimate success of iTunes.

How do you think a move away from owning music led to record-setting music revenues? (1 mark)

As Apple began to relax its DRM restrictions, more users could now purchase the music digitally. Eventually, the DRM restrictions were removed after Apple convinced the major record labels. This led to the introduction of price tires, a decision that was congruent with the record labels’ wishes. The invention and increased usage of smartphones facilitated the increased revenue from digital sales. Users could now store music on their phones and use the same gadgets as players as well. Music streaming was the chief revolutionary idea for the industry. Using sites such as Pandora, Spotify, and Apple Music, users were able to stream and listen to music without any restrictions (Schilling, 2020). They could also play this music on various devices. This idea eliminated user ownership, which initially occurred through purchase. In addition, users could not share this music. However, they could all get onto the various sites and listen to the music. This meant that users listened to more music than earlier, leading to higher revenues. With a paid subscription, users were free to access and listen to music as they wished. These subscriptions led to a 6 percent growth by 2016.

The elimination of ownership led to such growth in various ways. Firstly, a user could use a friend’s subscription while in the same location. This sort of sharing led to more clients who paid their own subscriptions eventually. Secondly, users can listen to songs for as long as they wish. They were no longer limited to the songs they had purchased. Thirdly, the increased variety attracted more subscriptions to either of the streaming sites. The users had a better experience than they did while using Napster. These aspects reduce control and significantly increase access to music. The adoption of streaming also provided recording companies with an opportunity to constantly make money from the music they put on the market (Sinclair & Tinson, 2017).

References

Schilling, M. A. (2020). Strategic Management of Technological Innovation. New York: McGraw-Hill Education.

Sinclair, G., & Tinson, J. (2017). Psychological ownership and music streaming consumption. Journal of Business Research, 71, 1-9.

Waldfogel, J. (2012). Music Piracy and Its Effects on Demand, Supply, and Welfare. Innovation Policy and the Economy.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Students are requested to read the opening case of chapter 9 “Protecting Innovation” from their book Strategic Management of Technological Innovation (Page Number-197-200) of e-textbook. Based on your understanding of the case and concepts studied until now, answer the following questions in 300-500 words each.

Management of Technology

1. What industry conditions led to the revolution in audio distribution described above? Which stakeholders stand to benefit most (or least) from this revolution?                    (1.5 marks)
2. Why did the music stores created by the record labels fail to attract many subscribers? What, if anything, should the record labels have done differently? (1 mark)
3. What factors led iTunes to be successful? (1.5 marks)

4. How do you think a move away from owning music led to record-setting music revenues?