Every commodity ends up in the hands of the user who is the consumer of the particular good or service. However, in some instances, a product may have to go through intermediaries before it finally gets to its end user. Intermediaries are normally used by companies for the purposes of distributing its products to the consumers. This may involve a few procedures in the course of distribution and these are what we refer to as distribution channels.
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Distribution channels are the paths that a ready to sell product goes through before it reaches the final consumer. Channels of distribution are characterized by the presence of middlemen who include wholesalers, retailers and distributers. The internet has been the latest entry in the industry and is increasingly been used as a distribution channel by many companies. Distribution channels are categorized into either direct or indirect channels.
A direct distribution channel which is not very common allows the consumer to purchase goods directly from the manufacturers without having to go through the intermediaries. This has its own benefits and limitations too. The advantage of direct distribution is that it eliminates the chances of consumer exploitation by unscrupulous middlemen hence reducing the overall price of a commodity. Nonetheless, this type of distribution is a burden to the manufacturer because the manufacturer has to incur the distribution costs like transport.
Indirect distribution is the most common where the consumer purchases his or her products from the middlemen. To the manufacturer the indirect distribution channel is more business friendly. This paper seeks to develop a research on the distribution of music in the music market, its growth from the past and its feasible future.
Distribution channels in music trade
Music trade has made tremendous advancement with regard to distribution in the past decade. With the present growth in technology, distribution of music has seen great transformation in the last ten years. The emergence of peer-peer networks was the initial stage from which the growth of digital music sharing began (Passman 51). The uses of computers have influenced the growth of the music industry especially through marketing and distribution.
Development and introduction of applications such iTunes that provide legal downloadable music have contributed immensely to the shift of distribution strategies. In thee music industry, direct distribution is very common and almost the absolute distribution channel. Musicians have embraced the idea of Doing-it-Yourself in the distribution of their music rather than use middlemen (Passman 66). Competition is a major factor influencing the competitive distribution strategies as experienced in today’s market.
Distribution of music has gone digital with artist availing their music on every social network in the internet. The internet has created an unmatched platform for music market players in the last few years. Although there are some artists that are still going for the historic album sales, they find it not yielding as mush as it would in the past. Consumers are opting for downloads for their favorite song in a particular album from the internet.
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This has rendered other forms of distributions in the music market almost obsolete. Music distribution has been facilitated by the growing popularity of the social networks where consumers can purchase or listen to any of their favorite musicians. Other channels of distribution that are still operational include hiring distribution companies. These are companies that engage in the business of distributing music albums on behalf of the music label.
For a client to sign in to a distribution contract, he or she had to be a signed member of a record label. Nevertheless, in the recent past these requirements have been dropped due to the competition created by the internet as a platform for distribution. This practice is however very infrequent as it is a costly and not a very effective channel of distribution as it was traditionally. Shipping is another channel of distribution that players in the music industry are using.
This is however in some cases facilitated by online functions. Through the internet, buyers from other continents can place orders for particular records and the orders will be delivered via shipping transportation. This practice is however not very sustainable and the economic implications are not practical considering the options available in the market. For this reason, this channel might not in the long run compete with other offers in the market and very soon it will be obsolete.
This leaves the industry with only one feasible distribution channel; the internet platform which not only offers cheaper rates, but also provides an effective channel that delivers products very fast with unmatched efficiency. Internet therefore remains the best option for the music distribution industry.
Changes in the distribution channels
In the United States of America, sales of recorded music experienced a major decline from $13Bn to $10Bn between the year 1999 and the year 2003(Bockstedt, Kauffman and Riggings 1). This was influenced by the tremendous growth in popularity of the digital music. Digital distribution has become an essential distribution strategy in the music market today. Looking at the purchases made through digital platforms such as iTunes, there has been an increase in the number of customers within a one year’s timeframe (Bockstedt, Kauffman and Riggings 1).
According to Bockstedt et al., between the year 2003 and 2004, the customer base for digital music rose from 861,000 to 4.9 million customers (2). This indicates the extent to which music distribution has shifted from the old album sales to the new digital dispensation. Music distribution through the characteristic compact discs is slowly fading away with the introduction of live online streaming. As he predicts, Bockstedt et al., maintains that in the near future, the total music sales will be through digital distribution rather than the cell of compact discs(2).
These will be facilitated by the increase in the development of devices that play digital music in the market. The increase of the gadgets is triggered by the rise in demand for digital music rendering other forms of distributions invalid. Changes in the value chain have driven changes in the primary market. The digital music suppliers double up as product owners by trading straight with the client. This has seen a notable change in the distribution channels as they were.
Effects of both Distributors pricing on the business models
Due the simple internet distribution platform, the industry players are presented with better and more rewarding deals. In the past the distribution strategies included physical travelling which was a costly venture. Physical distribution was not efficient as it was restraining the distribution of music. These changes have brought life in the industry and now the players can more effectively reach and supply their merchandise with ease. Payment for delivered orders is also in most case done via wire transfer hence transactions can take place with minimal physical movements.
This was not the case two decades ago. However, there are still few companies that are engaging in album distribution and are still running. These companies receive payments from bands and record labels to distribute their products to different retailers around their jurisdiction. The shipping market is also being used in the distribution of music CDs. Nonetheless, the players admit the fact that their market is highly threatened by the replacing of album sales by songs downloads.
There is a rising demand on music videos, a factor that favors the establishment of digital music. Looking at the situation in all dimensions, it is apparent that the digital market is better placed in music distribution than any other form of distribution.
The tradition distribution pricing of music is very different from the current digital strategy. Musicians and bands are disregarding the traditional distribution and pricing in favor of the digital pricing. The traditional physical release and sale of CDs is no longer a viable strategy. Digital music pricing which include two options; purchase and subscription services, is the most appropriate distribution and pricing strategy in response to the changing musical environment. Customers are provided with the options where one can choose to purchase the desired song or alternatively subscribe to a monthly streaming plan.
These pricing strategies are encouraging the growth of the industry and seem to capture the attention of buyers. Buyers who just want to listen to particular song can subscribe to the monthly plan that allows them to have access to digital music online. With the digital music platforms accounting for more than 20 percent of the music sales, the industry seems to have embraced the new idea. This has come with a lot of other services that the industry has to offer. However the industry is threatened by other digital distributers that are not licensed hence illegally distributing music.
The music distributed in such sites does not benefit the owner and this is hurting the industry. The pricing of music online is standardized but with the current consumer preference in demand, this may change. Currently both old and new songs are offered at an equal price which is raising concerns from the consumers. Consumers feel that old music should attract a lower price tag as compared to new ones. This is a fair argument and valid reason to bring the prices down in response to market demand. High prices can be charged on new music to enhance a balance within the industry. May be songs should be priced on the account of their popularity and demand. Though the market is young and still trying to come up with regulatory measures, interim policies to run the market are required as a matter of urgency.
Self distribution of own music has gained huge support from players in the market. However, this has been made possible by the ease in which music platforms are accessible. Unlike in the past, getting an air space for one’s music to be played was almost impossible. The digital platform has provided players in the industry with an easier way of reaching out to fans and buyers. It has become so easy to acquire an album through the internet than ever before.
With this form of platform, musicians no longer require the chains of distribution as was the case before. It has become a personal prerogative to put and avail individual products on the web for funs to access. The social networks have become major targets when it comes to self distribution. The Reverb Nation for instance is a major site for such distribution. Music can be downloaded from the site with authorization from the owner at a fee.
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The site also provides option in the event whereby a musician wants to promote his or her music; he or she can provide his or her music for free. This means that music can be accessed by the customers without charges. This has enabled many bands to increase their popularity and hence increase sales of albums and single songs as well. Tweeter users are more said to engage in music activities compared with other regular internet users. This is yet another avenue where music industry players are exploiting the benefits of the web.
Statistics show that 41 percent of the site users listen to online radio (Brae 205). Tweeter has been used by music industry players to entice customers to purchase their music. It has since worked as the tweeting community accounted for 77percent of the total digital music purchases (Brae 205). Unlike in the past, today artists don’t have to make trips all over the world incurring cost of distribution. The internet has provided a remedy with regards to this tiresome adventure. In the near future, physical launches may have no meaning with most of the musicians hosting launching events online.
Bockstedt, Jesse, Robert J. Kauffman and Frederick J. Riggins. The Move to Artist-Led Online Music Distribution: Explaining Structural Changes in the Digital Music Market. Minneapolis, MN; University of Minnesota, 2004. Print.
Brae, Michael. Music Distribution: Selling Music in the New Entertainment Marketplace. Charleston, SC: CreateSpace, 2009. Print.
Passman, Donald. All You Need to Know about the Music Business. New York, NY: Simon & Schuster, 2000. Print.