9. Do a brief industry analysis of the CD music recording industry. Fill in the

Question

9. Do a brief industry analysis of the CD music recording industry.
Fill in the following summary of the analysis. (Note: there is no definitive answer as our assessment is liable to be subjective due to the lack of proper research.) Would you invest in a traditional style recording firm? Why or why not?

Five forces analysis of the International recording industry
Force Threat to profits (Fill in the spaces below)
Internal rivalry
Entry
Substitutes/ complements
Supplier power
Buyer power
Note: the greater the intensity of a force, the greater the threat to profits (i.e. less potential for above normal profits) for the incumbents.

Explanation / Answer

Internal Rivalry This is a major threat to profits. The international recording industry is very competitive a saying goes that celebrities never sleep, those who sign them often do the same. Who is on top at any given second is a big deal because a lot of money, reputations, and livelihoods rely on those decisions. Entry There is very limited entry into to the international record industry. The entire process is very "closed door" so to speak. There are high costs to entry, public relations being one the the highest barriers and may very well be an almost impossible one for new industry companies. Others that can impact entry to the industry are the cost of production equipment which can be one of the highest of almost any industry, advertising budgets, a team of employees to produce records, and a good lawyer because this industry deals with many legal issues either protecting their own work or defending their right to it as their own. Substitutes/Complements There are a few alternatives to the international recording industry. Technology is a big one to name. It is becoming easier for the average hobbyist to buy cheap equipment and put up a song on Youtube, a personal site, or iTunes. However, quality is an issue. Even if quality is not an issue, promotion is. There are few quality artists that are promoted by themselves, most viral videos for example are odd and gain popularity for some reason other than quality. Therefore, the long term ability of these "cheap tech" albums is very limited currently due to popularity issues. Supplier Power Since the recording industry has so many barriers to industry it also makes the ability to expand very expensive and time consuming. They are limited by finances, time, and ability of their workers to produce only a certain number of albums a year. Buyer Power Buyers generally love music, so much so they try to get it for free. This has hurt the buying trends of the music industry but even so consumers have a want for music products and there is a strong buying power for specific artists. Given the following forces and threats to profits, I would invest in traditional style recording firms. In a way they have a very limited number available making their profits increase. They still prove to be very profitable even if their profits are not solely from selling music anymore. This can be seen with the money the receive from advertisements hosting their music for example which could make up for some of the losses of individuals taking free music.

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