An integrated brand-led business model for the music industry

Abstract

With the invention of the digital technology and the popularisation of the Internet, we have emerged into the new Internet Age where the world has becoming increasingly more interconnected with information and resources available at our fingertips. While the world hails its convenience and resourcefulness, the Internet Age is acting like a double-edged sword that also torn apart the traditional music supply chain and left the powerhouse record company in financial deprivation. After witnessing several failed attempts in reigniting the financial prosperity of the music industry, the need for a reinvention of the music business model to restore balance of the music supply chain is imminent. Through an in-depth examination of the evolution of music supply chain, especially those new developments in the Internet Age, a novel Integrated Brand-Led Business Model (conceptual framework) is proposed in this research, with an aim to improve the welfare of the record companies and provide them with insightful managerial guidelines for decision making. A mixed methodology is adopted in this research in the conception and development of the conceptual framework, including a thorough background study leading to the build up of the conceptual framework, self-selection modelling of the key supply chain parties, and system dynamics in analysing the modelling outcomes. The centrepiece of this research is a three-phase mathematical model offering decision support for the record company at different stages of a musical product’s management cycle. The conceptual framework exploits the music fan community’s tendency for status consumption to formulate a brand premium based pricing approach incorporating individual brand preference into the pricing consideration of a musical product, then integrated this premium pricing approach into the pre-release phase optimal advertising model and the post-release phase optimal pricing and advertising model treating the musical product as a fan collectible. Aiming at maximising the record company’s profit, the effects and dynamics of the proposed models are studied under numerical experiments with different model parameter settings to yield managerial implications. With respect to the results of numerical experiment, this research confirmed the inefficacies of access restriction as instruments to combat the negative financial impacts of the Internet Age, and called for the music industry to fully embrace the free paradigm of the Internet Age. In particular, the results support the notion of targeted differential pricing and advertising strategy based on the characteristics of the market and the musician, and suggest a higher financial prosperity of releasing musical products as collectibles targeting specifically at the fan community. By developing scientific models from the music supply chain relationships and deriving valuable managerial insights from them, this research contributes both in the scientific theoretical aspect and the studies in the music industry. Instead of being passive and acting under the old-school restrictions, this research is set to invoke new thinkings from cross-discipline fields and help the record companies to transition to a more active role in the new music industry.