Question 1
Australian music industry has not been substantially impacted by the digital music trend
yet. But the symptoms of perceived impact can be felt by looking at the mass digital music
adoption rate. Digital music has shown tremendous growth of about 250% of value $ 27.8
million and 320 % in volume till end of 2006. This growth has increased the share of
digital distribution from 1.5 % in 2005 to 5.5 % in 2006 in Australia. Amidst global trend
of obtaining digital music online from legal and illegal source growing at a rapid phase.
The Australian music industry on other hand is dominated largely by the physical sources
of music like CDs and DVDs up to 95 % till 2006.
(Source: 2006 ARIA yearly statistics
http://www.aria.com.au/2006AustralianWholesaleRecordSales.htm)
The future forecast of digital music is assumed to be $ 60 million in 2007 and around $
200 million in 2010. The future of music industry is online digitalization, which would
waive off the physical medium in times to come.
(Source: IBIS World http://cyberextazy.wordpress.com/tag/research-statistics/)
Target Markets for Online Digital Music
Internet is the prime medium to download the digital tracks from various online music
stores. Hence understanding the degree of diffusion of internet in Australian consumers
gives vital information about the consumer likeliness to purchase digital music online.
According to Australian bureau of Statistics, the accessibility of internet among the
Australian household have grew from 16% in 1998 to 46% in 2002. In 2004-05, 56% of
households were connected to internet which grew rapidly from 16 % in 1998. While the
age group of 18-24 years forms 70% of total internet users in Australia.
(Source: Australian Bureau of Statistics (ABS) (2004) “Household use of information
technology, Australia”“, http://www.abs.gov.au/Ausstats/abs@.nsf)
Digital Music – adoption
The various factors influencing Diffusion of innovation of digital music:
1. Degree of consumers trying new products *ƒ²*ƒ”€š Digital music and personal
influence.
2. Characteristics of the digital music as Innovation.
3. Organizations readiness to adopt innovations.
Degree of consumers trying new products *ƒ²*ƒ”€š Digital music
This innovation is finding place in market because of convenience factors associated to it,
like above. The consumer adoption process or diffusion of innovation can hence be
understood by applying this innovation on Adoption of innovation model from Kotler and
Keller, 2006e, Pg 659.
1.1 The chart shows the present and future sales of digital music in Australia from
2005-2010
Adopted from: Relative time of adoption of innovation, Kotler & Keller, 2006e, Fig 20.7,
Page no. 659. Source: Statistical figures adopted from (Source: 2006 ARIA yearly statistics
http://www.aria.com.au/2006AustralianWholesaleRecordSales.htm) and IBIS World
http://cyberextazy.wordpress.com/tag/research-statistics/)
The figure 1.1 contains the sales of digital music according to the annual reports of ARIA
for the period 2005 and 2006.While the future sales figures are been taken from forecasts
made by IBIS world. These figures are taken and assimilated into the diffusion of
innovation model to understand the Australian adoption process of digital music.
It can be analyzed that the innovators in adapting digital music were active in the period
2005-2006. While the early adopters have begun to be actively participate from 2006
onwards. The present stage of the Australian adoption process to digital music is early
adapters. There are tremendous possibilities of early majority expected from the period
2007 to 2010.
Innovators: In context to digital music, the innovators were the initial users who found
purchasing online music of there choice very easy in comparison to the traditional way of
buying from a retailer. The rate at which innovators grew over time is 250 % which shows
that the innovation have considerably found acceptance among consumers.
Early adopters: Early adopters in adopting digital music have found to growing with rapid
phase of 115% from 2006-2007. This shows that digital music have been accepted by these
early adopters. Based upon the degree of growth in volume have made the market watchers
perceive the substantial growth of this innovation leading to early majority by the end of
2010.
Characteristics of Digital music as an innovation
The characteristics of any innovation can be determined on various parameters like relative
advantage, compatibility, complexity, divisibility and communicability.
Relative advantage: The degree of relative advantage of digital music over traditional
decides the adoption. Digital music has many solid advantages and convenience factors
over traditional music medium like:
1. Digital music can be obtained via online shopping rather than going to retailer to
purchase saving time & energy.
2. Digital music provides large search options instantly while physical availability of such
collection CDs and DVDs at retail store is very unlikely.
3. Digital music has advantage of storing, accessing and carrying in comparison to CDs
and DVDs.
4. Consumers can buy even a single track rather than buying the whole album in contrary
to traditional CDs and DVDs wherein whole album is required to be purchased. This
relative advantage saves time, money and energy.
5. The overall cost of digital music also reduces for the end users due to removal of middle
links in value chain. The cost of physical medium, transportation and storing are cut due to
the nature of digital music; this makes digital music very much affordable and profitable
for both consumers and service provider.
6. Online comparison of prices, availability and quality of digital music saves time, energy
and money than music from traditional retailers.
Compatibility: Purchasing music online can be explained on individual social value. Like
technology passionate individuals simply do it or find it cool to purchase music online. On
the other hand people, who dont have online shopping tendency for various reasons like
non access to computer or internet, past experience, need or desire to physically touch the
