The music industry has been disrupted by IT advances. We used to listen to music on mp3-players and nowadays we stream music and listen to music everywhere we are. The music industry became a newly vulnerable market. This market was newly easy to enter through technological changes, a drop in costs and through the ease of spreading music online. It was a cheap small step to streaming services. Furthermore, the industry was attractive to attack because of the high fixed costs the record companies had to cover. Record companies made it difficult to defend themselves, because the companies did not compete with the new online distribution strategies, which left them far behind in the market.
We analysed Deezer and Plugify to get a better understanding of the disruption in the music industry. Deezer is an independent online music streaming provider, has 6 million subscribers and is available in 180 countries. Deezer operates as a multi-sided platform business model. One segment finances the other segment. The user is looking for music, while the advertiser is looking for an audience to advertise their products. Deezer focuses on a long tail strategy. Because there are no stocking costs online, Deezer could provide an unlimited amount of songs, what means all niche tastes can be served. Also the lower costs of making music support the niche market. Plugify is an online platform to book live music. The customer searches for a desired artist and can book and pay online. The business model of Plugify consists of two key players, the customers and the artists.
When we look at the comparison between Deezer and Plugify, we see that Plugify has a first mover advantage in their field and that Deezer faces a lot of competitors who supply similar services to their customers. For Plugify the power of supply is high as they need as much artists as possible and they only operate in the Dutch market. The power of supply for Deezer is low. There are only a few artists who refuse to deliver their music. The power of buyers of Plugify is high as customers can easily find artist online. The power of buyers of Deezer is low, because Deezer has a large customer base also due to their partnerships with telecom companies. Besides, when a customer has to pay for their account, they often don’t want to leave. For Plugify there is a high threath of new entry in comparison to Deezer where this is low, because the market is already dominated. The revenue model of Plugify consists of a 8-12% commission per booking as Deezer focuses on subscription fees and advertisement income. The cost structure of Plugify and Deezer is quite the same.
In the future there will also be changes in the music industry. Artists will earn money through performances instead of selling music. There will be more music experience through virtual reality, more music personalisation and sharing music through social media channels will become easier. And of course music streaming will become mainstream.
By:
373396 Florine Koot
365545 Christianne ‘t Hart
376005 Elisabeth Kuyf
376482 Emilia Mertens
References:
Retrieved 14 september 2016, from http://opim.wharton.upenn.edu/~clemons/files/JMIS-.Online_MusicV3_doc.pdf
Plugify (2016) Retrieved 14 september 2016, from http://www.emerce.nl/interviews/plugify-online-bands-boeken-fluitje-cent.
