The Rise of E-business in the Music Industry - Term Paper Example

? Rise of E-business in the Music Industry The Rise of E-business in the Music Industry A diverse range of companies have availed the opportunity of e-business and have offered their customers with different products and services. Music industry has even made benefitted from this technology as they offer the music lovers efficient platforms to buy digital music, CDs, artists’ merchandize, concert tickets etc on the internet. However, reliable and efficient management systems are required to manage the e-business infrastructure to ensure that transactions are executed successfully and smoothly. Management information systems store and organize data such that useful analysis can be done on it for the betterment of the respective e-business company. 1. Introduction The advent of computers has caused an effect on almost every walk of life. The technological advancement has created many opportunities in numerous fields, ranging from medicine to education, travel to business. The field of business has seen revolutionary changes that have made it more structured and accessible. The invention of e-commerce or e-business has given the organizations an excellent opportunity to access millions of consumers on the web. SearchCIO.com, (2010) explained that e-business can be defined as the conduct of business by means of the incorporation of technology; it also refers to the buying or selling of products and services on the internet. E-business has made its place in a diverse range of areas for example, book stores, hotel booking, airline tickets, movies and music etc. E-business has not only provided convenience to the consumer but it has also generated new avenues for the organizations to earn profits since it tends to reach a greater market segment than the conventional mode of business. 2. Overview The 20th century witnessed the evolution of different types of formats of music. The long playing (LP) record albums were famous and adapted by people for many years. A gramophone was needed to play the records. Then, the music lovers saw the advent of cassettes that could be played in comparatively smaller players. The size of the cassettes was smaller than the records therefore it was considered to be more manageable by the people. Cassettes became the main source of revenue for the music companies between the 1970s and 1990s. Later in 1990s, the invention of compact discs (CDs) improved the quality of music and became a new source of income for the music companies. The quality of sound improved with the invention of the CD therefore that technology started gaining more fame than cassettes. The advent of the 21st century brought an unexpected change for the music business. It was a new music format that did not depend on any physical device like a cassette or CD- MP3. MP3 format could be saved in any computing device thereby changing conventional form of music to digital music. 3. Negative side of Digital Music The concept of digital music took a negative turn in 1999 when a young man named Shawn Fanning created the platform of ‘Napster’. According to Greenfeld, Taylor and Thigpen (2000); Napster was a file sharing platform that allowed the users to share files amongst each other on the internet. Instant messaging and search options were some of the features that allowed the users to find their desired music on the web. This platform gave the users an opportunity to listen to music without any expense. It is due to this reason that Napster became very famous and starting harming the music companies to a great extent. It was a centralized platform which became the reason for its downfall. Olsen (2003) provided the information that Universal Music Group and EMI filed a suit against Napster for the illegal downloads that were allowed under the respective technology. The website was shutdown in the early years of the 21st century and stopped piracy of digital music. This was a big step for the music label companies as they were able to put a stop to a huge piracy hub and save their companies from great losses. 4. E-business of Digital Music Due to the court orders against the illegal sharing of digital music, the rate of piracy diminished to a great extent and the legal distribution of music improved. The music companies began selling music via e-business. The rate of revenues and demand for digital music has been very encouraging for the companies. Sisario (2008, December 31) provided the fact that CD album sales have declined by 45% since the year 2000 but there has been a great increase in the purchase of online music. He also stated that over a billion songs were downloaded in 2008; this is considered to be a 27% increase from the figures that were recorded in 2007. This kind of response from the internet users has given hope to the music companies that faced great losses due to the music piracy on the web. Figure 1: Digital downloads exceed physical media sales (Arango, 2008 November 25) Figure 1 shows that the year 2007 witnessed great increase in the digital downloads of music as compared to the conventional format/media of music. These figures refer to the growth of e-business of music. According to a recent survey by Pew Internet & American Life Project (Spiegel, 2010 December 30); 65% of the sample pay for the content that is present online. The content that was focused to be inquired about included music and articles. This is an encouraging figure that indicates the awareness among people about the importance of right protection of digital music and data. 4.1 Music CDs and Other products Digital music is a very famous form of music in the modern world, however there are other products related to the music industry as well, for example album CDs, artists’ merchandize, concert tickets etc. These kinds of products have also found their way on the web and are bought on the basis of conventional e-business methods. The e-business operations of such items are different than the methods for digital music. 5. E-business Concepts E-business does not simply involve the presence of a company on the web by means of which products and services can be utilized, rather it involves many more aspects such as online business transaction, processing of orders in a certain order, supply of the orders in the designated time period etc. Burke (2008) stated that e-business also provides the opportunities to companies to collaborate their services for their mutual benefits. Dembla (2007) explained that the e-business systems can be broadly categorized into two types of systems; front-end systems and back-end systems. There are different types of operations that are handled by these systems. 5.1 Front-end systems These systems deal directly with the customer and serve as an interface. Customer has certain control over this side of the system since the products are chosen by them. Some of the operations are order placement via shopping cart, customer support. Front-end systems are web server-based; these are the websites processes that are used by the customers to choose their products and thus initiate transaction requests. 5.2 Back-end systems Back-end systems deal with the transaction processing aspects i.e. order processing, customer record keeping, inventory management, shipping and delivery management etc. Customers have no control over these back-end systems since all the operations are dependent on the performance of the respective company. Back end systems are database driven since different types of data is necessary to complete the transaction; this information might include the customer history with the company, number of units that might be present in the warehouse of the organization etc. 6. Management Information Systems in E-business According to Brown and Vessey (2003); the management systems that are relevant to e-business can be divided into four categories; Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Supply Chain Management (SCM) and Sales Force Automation (SFA). Each one of these systems has different functions and relevance in e-business transactions and management. However they are all interrelated to each other to ensure consistency in the information and process flow. 6.1 Enterprise Resource Planning (ERP) system ERP systems tend to streamline the business processes and procedures in the organization. They might be used for reengineering the existing systems and procedures or they might be used for the structuring of the e-business from scratch. Functionality Different operations and functions are utilized in e-business that are facilitated by the ERP systems. Some of the functions are: product planning, inventory control, distribution of the products, tracking of the order that is initiated as per the customer’s request. Financial as well as human resource operations can be managed and thus structured with the help of ERP systems. According to Farrell (2003); ERP systems provide the organization with effective data that can be helpful to introduce new products or discontinue failed products on the basis of the buying behavior of the consumer. The order details are saved in the database of the system; this information can be useful to track the status of the order so that the delivery time can be measured. Broadbent and Weill (1997) stated that the analysis of the delivery process in terms of the durations for each step can be analyzed and thus improved to provide a better service to the customers. With respect to the music industry, the inventory would include album CDs, artists’ concert DVDs and artists’ merchandize. These products will be managed according to the expected buying pattern of the customers for example; the artist that would be famous in the prevailing times will be more likely to get more orders than the others. Therefore their album CDs and other products will be kept in abundance. As stated earlier, all the transactional data is recorded in the database as the sales data. This data can identify the buying patterns as well as provide correct figures about the number of sales in a certain time period. Orders can also be tracked and corresponding entries in the database are updated with respect to their place in the delivery process. The sale of digital music is rather simpler than the conventional physical album CDs etc. The customer is required to enter the transactional details i.e. personal details, payment details etc. Upon verification of the details, the user is granted the permission to download the music file. An extensive database of the digital music is maintained with the music companies and the quality of which is evaluated at different periods of time. This process is simpler since no delivery process or order tracking activities need to be performed. However, such transactions are also recorded in the database and account as a part of the revenue for the company. 6.2 Customer Relation Management (CRM) system The main goal of this system is to acquire and retain as many customers as possible. Customer information is collected from the order processing operations so that the sales, marketing and customer relations employees can develop good relations with the customers. Functionality Customer data is updated at some intervals of time to ensure that reliable customer data is present. When the customer is finished with the selection of the products on the e-business website, customer details are inquired and saved in the database. Frequent customers can be identified from the database and good deals can be offered to them to retain them. Customer relation staff can use this data to contact the customers and develop a good image of the company in front of the customers for example; send season greetings or free samples. Marketing and sales staff can use this data for direct marketing and target the customers according to their demographics for example; older customers can be contacted about good deals on classical albums while the younger customers can be contacted for merchandize of newer artists. Another important aspect of CRM within e-business is the feedback of customers to make their service better. 6.3 Supply Chain Management (SCM) system The three main figures in the supply chain management are suppliers, distribution partners and trading partners. The main goal of the system is to create an end-to-end systems between all of these concerned parties. Functionality E-commerce Program.com (2007) described one of the important aspects of the supply chain management as ‘demand management’; this accounts for the demand of a certain product at a certain time. The other side of the system involves the supply management that includes the products and services required for the completion of the order. The last major function of the system is the logistics of the orders i.e. the management of the transfer of the order from the suppliers end to the customer. It involves the determination of the intermediate sources that might be involved in the transferring process. These functions need to be highly integrated with each other to ensure a successful e-business transaction. Figure 2: Relation of Supply Chain Management and Customer Relation Management systems (E-commerce Program.com, 2007) 6.4 Sales Force Automation (SFA) The main goal of the system is to manage the sales accounts effectively so that more sales opportunities can be converted into sales deals. Leads are tracked with respect to their status and later analyzed if they were handled in an effective manner or not. Functionality Sales force automation enables the sales and marketing team to track their performance in terms of successful deals and missed opportunities. Proactive strategy can be formulated by the sales and marketing resources on the basis of the sales data and future opportunities can be forecasted. It is necessary for e-business organizations to formulate strategies that would help them attain first mover’s advantage since there exist great competition in the existing markets. Sales opportunity forecasting proves to be effective in attaining competitive advantage among the other e-business companies. 7. Requirements for E-business systems E-business systems are similar to other information management systems except a few things; Shutdown E-business systems cannot be shut down for maintenance for a longer period of time (or other purposes) like the management systems at other organizations. E-business companies need to offer their customers with a reliable service throughout the day since otherwise they will start losing their customers. There exists immense competition between e-business companies therefore they need to ensure that they are able to provide uninterrupted service to their customers. Security E-business systems need to be deployed with extensive security measures because they are accessible by millions of online users. The organizational systems have limited access and number of users therefore it is important for the e-business companies to safeguard their systems and databases with effective security tools and techniques. 8. Conclusion The evolution of computer technology has transformed the conventional sources of music into digital forms. Digital music is the latest form of music that is preferred for its convenience and quality. It has become an increasingly famous source of revenue for the music companies. Like many other online businesses, the music industry has also developed an online presence with their digital music and other conventional sources of music including album CDs, concert DVDs etc. The successful business transactions are not possible without effective management systems. E-business systems basically include four types of systems; ERP, CRM, SCM and SFA. These systems need to be integrated with each other to ensure successful business transactions and greater revenues. Information management systems that are required for e-business companies should be directed towards the achievement of their unique goals and targets. References Arango, T., (2008, November 25), Digital Sales Surpass CDs at Atlantic, The New York Times, Retrieved from: http://www.nytimes.com/2008/11/26/business/media/26music.html?_r=1 Broadbent, M., Weill, P., (1997), Management by maxim: How business and IT managers can create IT infrastructures, Sloan Management Review; Vol. 38, No. 3; pg. 77 Brown, C. V., Vessey, I., (2003), Managing the Next Wave of Enterprise Systems: Leveraging Lessons from ERP, MIS Quarterly Executive Burke, J. E., (2008), The E-Business Model, Prudens, Retrieved from: http://www.prudens.com/patens/ebusiness/busmodel.html Dembla, P., (2007), Understanding the Adoption of Web-Enabled Transaction Processing by Small Businesses, Journal of Electronic Commerce Research, Vol 8, No.1. E-commerce Program.com, (2007), Ebusiness - Supply Chain Management, Retrieved from: http://www.ecommerceprogram.com/ecommerce/Ebusiness- SupplyChainManagement.asp Farrell, D., (2003), The Real New Economy, Harvard Business Review, October Issue, pg. 38-46 Greenfeld, K. T., Taylor, C., Thigpen, D. E., (2000), Meet the Napster, Time, Retrieved from: http://www.time.com/time/magazine/article/0,9171,998068,00.html Olsen, S., (2003), Record labels sue Napster investor, CNET News, Retrieved from: http://news.cnet.com/2100-1027-997860.html Sisario, B., (2008, December 31), Music Sales Fell in 2008, but Climbed on the Web, The New York Times, Retrieved from: http://www.nytimes.com/2009/01/01/arts/music/01indu.html SearchCIO.com, (2010), E-business, Retrieved from: http://searchcio.techtarget.com/definition/e-business Spiegel, R., (2010, Dec 30), Survey Surprise: Online Content Doesn't Have to Be Free, E- Commerce Times, Retrieved from: http://www.ecommercetimes.com/story/71557.html Read More