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Marketing Mix of the Music Industry

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Marketing Mix of the Music Industry MARKETING MIX OF THE MUSIC INDUSTRY IN THE UNITED STATES AND SOUTH KOREA RUYI ZHAO TUTOR: DAVID ARNOTT CODE: EWI13 INTERNATIONAL BUSINESS ECONOMICS – FINAL YEAR PROJECT UNIVERSITAT POMPEU FABRA 2015/2016 RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea Index Abstract ................................................................................................................................................ 3 Introduction ....................................................................................................................................... 4 1. Music Industry .......................................................................................................................... 5 1.1. The U.S. Music Industry 6 1.2. The South Korean Music Industry 7 2. Study Framework ..................................................................................................................... 8 2.1. Conceptual Framework 8 2.2. Study subjects 9 3. Empirical Study ....................................................................................................................... 10 3.1. Product 10 3.2. Place/ Distribution 13 3.3. Price 15 3.4. Promotion 17 4. Conclusions .............................................................................................................................. 19 References ......................................................................................................................................... 20 Annex .................................................................................................................................................. 25 ― 2 ― RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea Abstract Even though many (probably most) people, would think that the music industry is still growing, figures show that this sector is shrinking. However, the United States and South Korea reported good trends on their revenues. This paper aims to provide a better understanding of the music industry of an emerging country (South Korea) compared to the leader in the industry (the United States). The four elements of the marketing mix are used to explore their music industry and to identify the differences and similarities behind their successes. This study shows that their promotion of the music industry is fairly similar, the place is similar, but the distribution strategy is different, and their product and price are completely different. The similarities found are mainly related to the globalization through the internet. By contrast, the differences are derived from historical, cultural and economic aspects. ― 3 ― RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea Introduction Can you guess which is the common point between: a family watching a TV show in Beijing (China), a woman shopping at a mall in Durban (South Africa), a businessman taking a taxi in Toronto (Canada), a couple eating in a restaurant in Bogota (Colombia), a group of friends in a nightclub in Ibiza (Spain) and a model strutting in a fashion show in Sydney (Australia)? Well, the answer is that all of them are hearing American popular music. Unquestionably, thanks to technological advances and globalization, the American popular music has spread around the world and holds a dominant global position in the music market. However, during the last decade, the popular music from South Korea (known as K-pop) started gaining attention in the global music industry. Furthermore, PSY’s “Gangnam Style” (2012) triggered its global expansion. Although the global music industry is shrinking, the industry in America and South Korea is increasing. Hence, the question that arises is “How differently (or similarly) is the music industry in the United States and South Korea marketed to achieve worldwide success in times where the global music market is shrinking?” Previous studies have shown the characteristics of the music industry in South Korea and its key success factors, but it has never been addressed from the marketing point of view. Moreover, there has been little work done about the American music industry. Therefore, this paper aims to address the previous question by exploring the marketing mix used by the music industry in the United States and South Korea. Furthermore, Justin Bieber and EXO are taken as subjects of example. The paper is structured in 4 sections. First, it provides a first glimpse of the music industry in the U.S. and South Korea. Next, it introduces the conceptual framework that will be followed and the subjects studied. Then, it presents the marketing mix of the music industry of the two countries. Finally, it concludes the paper by providing some of the reasons behind the findings. ― 4 ― RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea 1. Music Industry This section is devoted to providing a general outlook of the music industry in the United States (hereafter U.S.) and South Korea, as well as their global presence. Nowadays, thanks to the technological advances, people can listen and hear music everywhere, from restaurants to stadiums. Therefore, many (probably most) people, would think that despite the decrease in physical revenues, the music industry is still growing. However, as depicted in figure 1, the shift from physical to digital spending happened together with a significant decrease in the music industry revenue (Parry, Bustinza, & Vendrell-Herrero, 2012) by 31.64% from 2004 to 2014. This is because the absolute increase in digital sales is smaller than the absolute decrease in physical sales. Synch Performance Rights Digital Physical Trade value in U.S dollar figures in billions 0.5 0.6 0.4 0.6 1.2 0.7 2.2 0.8 0.8 3.1 0.3 0.3 0.3 0.3 0.3 4 0.7 0.8 0.9 4.4 0.9 0.9 4.7 5.3 6 21 6.4 19.6 6.9 17.8 15.4 13.1 11.5 9.9 9.1 8.4 7.4 6.8 Years 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total 21.9 21.4 20.7 19.2 17.9 16.7 15.7 15.5 15.6 15 14.97 Revenue Source: Billboard, IFPI Figure 1: Global Recorded Music Industry Revenue 2004-2014 ― 5 ― RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea 1.1. The U.S. Music Industry Despite the decline in the global recorded music revenue, the U.S. is still one of the countries that have experienced an increasing trend in the industry’s revenue (see Annex 1). The U.S. market with $4.9 billion in trade value, which counts for 33% of the global revenue, is positioned as the largest music market (see Annex 2). In fact, according to the IFPI’s “Recording Industry in Numbers” report, since 2000 the U.S. has always been the leader in the ranking of the top 20 largest music markets. This dominant position is expected of a country that, with Thomas Edison’s invention of the “talking machine” (1877), gave birth to the recording industry (Toll, 1982). Furthermore, the U.S. is also the place where the music industry grew up, raised by other inventions such as the radio, recording discs, cassette tapes, Compact Discs and MP3 (Weissman, 2015). Large global corporations were the first and main ones operating in the recording industry. Alternatively, new independent producers emerged with new music genres. These companies recruited and marketed people with talent, both inside and outside the U.S. while simultaneously spreading the American music to the global audience (Crothers, 2013). Since large producers were more likely to survive, the major record labels soon conquered the American music industry. Nowadays the music industry in the U.S. is dominated by the “Big Three” record labels (Universal Music Group, Sony Music Entertainment, and Warner Music Group), which are also the leaders in international music production and distribution (Burkart, 2014). The worldwide diffusion of the American music owes a great deal to the distributional and promotional media launched in the U.S., such as MTV, YouTube, iTunes, Facebook and Twitter (Sahlman, 2014). The preeminence of the American music can be seen in the world’s top 10 selling digital singles (2014), as 7 of them are sung by American singers (IFPI, 2015a). ― 6 ― RUYI ZHAO EWI13: Marketing mix of the music industry in United States of America and South Korea 1.2. The South Korean Music Industry South Korea is another country that has a quite prominent increasing trend in the music industry (see Annex 3). In 2014, South Korea with a revenue of $265.8 million (an increase of 19.2% with respect to the previous year) was ranked 8th in the top 20 music sales market while, at the same time, it was the country with the highest percentage growth in that ranking (IFPI, 2015b). Moreover, during the last years, South Korea had improved its position in the global music industry significantly, from 15th (2009) to 8th (2014) (see Annex 2). South Korea’s music industry revenue mainly comes from its mainstream popular music genre, K-pop (abbreviation for Korean Popular Music), which comprises a wide range of styles, such as pop, dance, rock, electronic music, R&B, and hip-hop. (Um, Sung, & Fuhr, 2014). K-pop was first introduced in the 1990s by S.M. Entertainment, YG Entertainment and JYP Entertainment (known as the “Big Three” in K-pop) (Meza & Park, 2015). K-pop went step by step in building its global presence: China, Vietnam, and Taiwan in 1999, Japan in the mid-2000s and America in late 2000s (Tuk, 2012). By 2011, the total amount of K-pop videos’ views on YouTube reached 2.3 billion in 235 countries (Seo, 2012). However, the global success of K-pop is due in great part to the social media and its associated participatory culture, which contributed to the global hit of Psy’s “Gangnam Style” (Um, Sung, & Fuhr, 2014). Since then, “Gangnam Style” became the most viewed (2.4 billion) and liked (10 million) video on YouTube (officialpsy, 2012). The takeaways from this section are (1) the global music industry is shrinking, (2) the music industry in the U.S. and South Korea is increasing and (3) the American and South Korean music are disseminated around the world. Therefore, the question that arises is “How differently (or similarly) is the music industry in the U.S.
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