Marketing is a tricky game of finding the right niche and market in order to gai
ID: 454027 • Letter: M
Question
Marketing is a tricky game of finding the right niche and market in order to gain consumers. Ultimately, the goal is to increase demand for a product thereby increasing sales and total revenues overall. A good marketing campaign can do this often for companies. From Hyundai's "First Date" commercial this year with "Another One Bites the Dust," to Missy Elliott releasing a new song via the Amazon commercial. The ads can serve to increase sales of songs, or products offered by the company itself. This week's discussion revolves around the music industry and commercialization. With the popularity of cell phones now able to stream music or songs to become ring tones, is the music industry a standalone any more? Does it require a third party industry to support itself? Is this a situation in which trade is benefiting both parties? Licensing as noted by the New York Times, can cost ad agencies nearly six figures for a 30 second spot alone. Google some other articles this week to offer up to classmates to discuss the music industry and advertising industry in detail. Discuss if this can be a complimentary market, or are both industries in a down turn within the business cycle?
Explanation / Answer
Music industry and advertising industry has largely influenced eachother in the last few years.
Uncertainty rocking both the broadcast radio and record industries has opened an enormous opportunity for recording artists and record labels. Growth for the music industry will come from expanding the overall online radio audience and ad pie at the expense of broadcast radio.
Despite their prodigious “MadMen” legacy, advertising agencies these days seem to be on a similar track. Too slow and too expensive, the advertising agency’s list of services in 2015 has been distilled down to the role of content provider. And today, such content can be had for free. Like Napster, consumer citizens hack through the system and tell us everything we need to know about products, services and the companies who supply them. Through a sense of righteous vocal transparency the consumers rate, rank, sort, measure, hashtag, Pin, Yelp, read, review, test and troll. And, as Huffington Post, YouTube, TEDx and others have proven, such “non-professional” content can be amazingly good.
No industry has been altered by the Internet like the recording industry. For over 10 years, the entire format of how music is bought and sold has been forced to change. Gone are the days of driving to the record store to purchase an entire album. Now fans can pick and chose individual tracks from a myriad of websites and the industry has had no choice but to bow to the whim of the consumer.
But they did fight the change for a while. From the moment we gained the ability to stream and download music, it changed everything. At first, no regulations were in place and there was anarchy. Illegal file sharing sites like Napster and LimeWire were popping up everywhere thinking they had unlocked the key to free music forever.
Rightfully so, it sent the entire industry into quite a tizzy. A countless amount of time, money, and talent had been taken to create this art, and it was being robbed from them. Artists spend their lives practicing, performing, and creating for our enjoyment. Why shouldn’t they be compensated?
It wasn’t long before the recording industry got a hold of all the insanity. File sharing quickly became illegal and well-needed regulations were put in place. But still, not everyone was happy about it. You mean, we don’t go to the record store and buy an entire album? We can choose individual tracks for 99 cents?
All was not well on the artist end either. They were painstakingly creating this complete work of art, called an “album” only to have it chopped up in some iTunes store. Tracks were leaked before the artist was ready to have it heard by the public. They felt a huge lack of control.
Ad-supported and subscription streaming services have tripled revenue paid to artists and labels, growing from seven percent to 21 percent of digital revenues in the last four years, according to the RIAA. Strengthened by investments of more than $432 million dollars just last year, streaming radio services like Pandora and Spotify are booming, while broadcast radio struggles. And many of broadcast radio’s top ad-sellers have jumped ship to these Internet radio companies, helping to capture the dollars now fueling an important growth category for the music industry.
Forty-four percent of online radio listeners say their online listening comes mostly at the expense of their FM/AM listening. Seventy-five percent of people age 12 to 24 listen to online radio monthly, and almost two-thirds of them listen weekly.
In fact, radio broadcasters are not only seeing their FM consumers listen less, but, according to Triton Digital, at any given moment among online listeners (Monday-Friday, 6 am to 8 pm), Pandora has more than three times the audience of all of the thousands of radio stations owned by Clear Channel (iHeart), CBS (Radio.com), Cumulus, Entercom and the next six broadcasting companies combined. Borrell Associates predicts “time spent listening” to pure-play mobile services will grow by 38 minutes over the next four years — while broadcast radio will decline 42 minutes over the same period.
In fact, while digital and social formats project steady revenue increases, traditional media spending is predicted to flatten over the next five years. According to new stats from CMO Council Worldwide, 28% of advertisers have reduced their advertising dollars to fund digital marketing programs. Social network ad spending increased 45.3% between 2013 and 2014. And by 2018, Internet advertising will be ready to overtake television as the largest advertising segment.
Advertising holding companies have cushioned this transformative change by buying up available digital agencies and social experience companies. This will buy time to assess, pivot and assume a likable margin of relevance. But the primary pain points for advertising agencies are that they cost too much and take too long. In addition, their entire culture is built around producing the 30-second T.V. commercials they are famous for. This top-down content has lost relevance in the face of the consumer’s bottom-up postings on Facebook FB +1.42%, YouTube, Instagram and Twitter TWTR +1.98%, which are either come free of charge, or at much lower cost.
But despite all these , can both these industries be complimentory? This is a big question even now.
Trouble is, companies will always have trouble paying for what they can have for free. Is a $1 million television commercial worth more than a hand-made selfie shared among millions? Or even a $100,000 blogging program that achieves a similar number of engagements?