Marketing Plan for Ammersee Music Distribution Company - Case Study Example

MARKETING PLAN FOR AMMERSEE MUSIC DISTRIBUTION COMPANY (Entertainment Business Management) Full November 3, 2009Executive Summary Our music distribution company strives to be the market leader in providing talent management services to new and independent bands in San Francisco. We will approach bands who have the potential to become successful artists, by offering our music distribution services to them. The target customers who will purchase the CDs we release are teenagers (18-19 years old) to early twenties (20-23 years old). CD revenues have been for the past few years on the decrease worldwide, while digital music revenues are increasing. However, older consumers will still need to get accustomed to the new technology, which will mean that CDs will continue to be the major format for years to come. Our competitors are the other independent labels showcasing group band music. Nevertheless, we believe that by concentrating on San Francisco bands we will gain a reputation of releasing the best artists in this genre and help the Bay Area gain a reputation for this style of music. We will price our CDs at 10 percent below the prices of the major distribution companies such as Universal Records. This will be our strategy in order to penetrate the market and gain exposure among our youth target consumers who are generally price sensitive. We plan to initially sign three bands in our first month of operations. We plan to market the first CD release by gradually expanding distribution in the Bay Area region for at least 3 straight months, or until our three bands’ sales, publicity and promotional activities have been coordinated. We plan to build our business in the initial year to earn around $100,000 in annual revenues. 1. Mission Statement (a) What do you want to achieve? Our music distribution company strives to be the market leader in providing talent management services to new and independent bands in San Francisco. Our goal is to make the connection between the independent band talents in San Francisco and the fans, increasing the talents’ visibility and earnings with CD or individual track sales. Our goal is to discover independent band talents in San Francisco. We will approach bands who have the potential to become successful artists, by offering our music distribution services to them. (b) What is your vision for your product or service? Our vision is to build a good reputation among independent bands and, as a result, attract more talented artists by successfully distributing their musical compositions. Our plan is to grow the company in the first 2 years to bring in around $100,000 in yearly sales by the end of our second year in business. We will reach our target customers of late teens to early twenties, who prefer band music, by distributing the CD records through smaller record distributors and music retailers. 2. Product Description Our company, Ammersee Music Distribution will specialize in providing band releases from bands that write their own music. Our main goal is to discover independent band group talents in San Francisco by scouting at local shows and performances by musicians, and the Internet such as You Tube and My Space. We will approach these potentially successful bands by offering our music distribution services to them. We will reach our target customers of late teens to early twenties who prefer band group form of music, by distributing the CD records through smaller record distributors and music retailers. 3. Situational Analysis (a) Market Analysis: Demographics: Age: 18-23 Student Gender: male and female Educational level: high school, some college, college Psychographics: Interested in music Enjoy listening to pop music Geographics: San Francisco and California The target customers who will purchase the CDs we release are teenagers (18-19 years old) to early twenties (20-23 years old). This segment of the United States population accounts for 18 percent of the total population. We estimate that there are over 2 million people who enjoy and support the many independent group bands’ CDs and audio releases annually in the United States, (Government Census 2005), and the band genre brings in millions in revenue from sales of CDs. (b) SWOT Analysis: What are the strengths, weaknesses, opportunities and threats that you might face (e.g. competition) Strengths Lease for our label’s office are priced at an affordable rate because the office is owned by the family of one of the partners of Amersee Sounds. Weaknesses Since we would be starting with a small capital, we would not have enough financial resources to market CDs we produce on a complete scale. Hence, we must use volunteers to help us grow, and we must be ready after the first year in business to employ and commission at the minimum one full time publicity person, and one part-time sales agent to assist us. Threats Our Company faces two identifiable threats in our first year: First, current increase in recorded products has likewise come from music on Digital Versatile Disc (DVDs), which are quickly becoming substitutes for video recording, and this evidences a change towards a more `visual entertainment of music (Kotler 2004, p. 235). Secondly, the youth is increasingly obtaining music through their computers or televisions, having been raised on MTV and other music channels in the present digital media scene of multi-channel television and radio. Opportunities 1. We are communicating with a computer store to request for a donation of one Personal Computer and it appears that there is a big chance that we will get the computer because we have talked to their representative and we have qualified for their business assistance program. 2. A local (San Francisco) music bar has offered their premises on Wednesday evenings for an “Upcoming Band Series” which will provide us an important opportunity to cast our latest signed band, and also potential bands we may want to manage. 3. We are obtaining the assistance of the Music Production Department at the University of San Francisco. They have a student internship organization which will, in the short term, provide us with the work that needs to be done in our business, in order to address our limited funds to hire many employees. These student interns will assist us in the aspects of promotion, publicity, and distributing our CDs into different music retailers. (c) PEST Analysis: What are the Political, Economic, Social and Technological issues that need to be addressed? Political Factors Based on our research, our start-up music distribution business may be qualified for subsidy from the government to assist with expenses like travel to international music conferences to assist in the exposure of San Francisco Music. Economic Factors CD revenues have been for the past few years on the decrease worldwide (Government Census 2005), while digital music revenues are increasing. Loan interest rates offered by banks are currently low, compared to past years, due to government action to induce borrowing and spending. Hence, it is a good opportunity for our company to apply for a loan to support our business growth. However, due to the current financial crisis, consumers are spending less and, as a result, CD sales may be affected. Technological Factors Recorded music still commands the industry, but this huge market is on the verge of a technological transformation that will soon change the method by which most people purchase music. In 2006, music was largely purchased as compact disc (CD) albums. But `legal downloading, even if only in the beginning stages, is increasing very quickly. According to Kotler (2004, pp. 156), legal downloading will amount to more than a quarter of consumer purchases on recorded music by 2011. However, older consumers will still need to get accustomed to the new technology, which will mean that CDs will continue to be the major format for years to come. Social Factors The youth is increasingly obtaining music through their computers or televisions, having been raised on MTV and other music channels in the present digital media scene of multi-channel television and radio. In addition, current increase in recorded products has come from music on Digital Versatile Disc (DVDs), which are quickly becoming substitutes for video recording, and this evidences a change towards a more `visual entertainment of music. (d) Competition Analysis: Provide a description and analysis of your competition in terms of both direct and, indirect competition outlining their competitive strengths and competitive strategies. Our competitors are the other independent labels showcasing group band music. Nevertheless, we believe that by concentrating on San Francisco bands we will gain a reputation of releasing the best artists in this genre and help the Bay Area gain a reputation for this style of music. Group band music has been an essential of youth music at large since the 1990’s. We believe that with sales of this genre generally steady over the past 15 years, it will continue to be popular. There are two other independent record labels in the Bay Area releasing similar band CDs. Nevertheless, neither of them is presently signing any of the latest talent in this category. Thus, we will have to monitor these two competitors if they are beginning to distribute CDs similar to ours. Legal downloading, even if it is only in the beginning stages, is increasing very quickly. According to Martin (2005, p. 109), legal downloading will amount to more than a quarter of consumer purchases on recorded music by 2011. 4. Marketing goals, objectives and strategies (a) Describe your short term goals for the first 12 months We plan to build our business in the initial year to earn around $100,000 in annual revenues. We will employ independent record distributors and music stores as our means of distributing the music to our target market, while likewise employing to good use the growing digital consolidators such as iTunes to connect to our target consumers of late teenagers to early twenties men and women. (c) Describe your long term objectives for the next 3 - 5 years We plan to initially sign three bands in our first month of operations. We plan to market the first CD release by gradually expanding distribution in the Bay Area region for at least 3 straight months, or until our three bands’ sales, publicity and promotional activities have been coordinated. We plan to expand our marketing of the label’s first release into other areas of California by the end of our fourth year. Our objective of earning $1,000,000 by the end of our fifth year (c) Describe the specific promotional concepts that you will apply to your project and the overall marketing strategies that you will implement to achieve your long term objectives Our main goal is to discover independent band group talents in San Francisco by scouting at local shows and gigs (performances by musicians), and the Internet such as You Tube and My Space. We will approach these potentially successful bands by offering our music distribution services to them. We will reach our target customers of late teens to early twenties, who prefer band music, by distributing the CD records through smaller record and music retailers. The small retailers will accommodate us because of our lower price (10 percent lower than the major music distributors). Additionally, we will use volunteers to help us grow, and we must be ready after the first year in business to employ and commission at the minimum one full time publicity person, and one part-time sales representative to assist us. (d) Product goals and strategies Our CDs will focus on new band groups that have high potential popularity among the youth. We will price the CDs lower in order to encourage retailers to carry our CDs and to target the price sensitive youth. Our goal is to achieve at least $10,000 revenues in our first CD release. For the first year, our aim is to earn $100,000 in revenues. e) Pricing goals and strategies We will price our CDs at 10 percent below the prices of the major distribution companies such as Universal Records. This will be our strategy in order to penetrate the market and gain exposure among our youth target consumers who are generally price sensitive. 5. Budget Gross revenues from first CD Release $10,000 Expenses for first  year Costs Marketing expenses $1,000 CD label expenses $ 700 CD graphic design $ 1,000 CD recording/ mastering $ 2,000 Publicity/ campaign of band group talents expenses $ 700 Copyright/ publishing expenses $ 500 Miscellaneous expenses $ 700 TOTAL OPERATING EXPENSES $ 5,900 6. Measuring Success In the first year, there will be strict monitoring of the financial profitability of the business. There will be a detailed audit computation of the total expenses after every CD release. This will also include the expenses used to distribute to retailers. The actual and forecasted revenues will also be compared after every CD release to gauge the accuracy of our sales projections. Finally, profitability of the sales will be measured by subtracting each CD release expenses from the revenues from the CD release. This will enable us to see if profits or losses are being made and we would be able to achieve a return on investment after the first year. References Antonini, Orlando J. (1993). Getting a Business Loan. Delaware: Crisp Publications. Baumbach, Clifford M. and Lawyer, Kenneth. (1989). How to Organize and Operate a Small Business. New Jersey: Prentice Hall, Inc. Government Census. (2005). Fact Finder. American Community Survey. Retrieved October 31, 2009 from: http://factfinder.census.gov/servlet/STTable?_bm=y&-geo_id=01000US&-qr_name=ACS_2008_1YR_G00_S0902&-ds_name=ACS_2008_1YR_G00_&-_lang=en&-redoLog=false&-format=&-CONTEXT=st Kotler, Philip and Armstrong, Gary. (2004). Principles of Marketing, 10th Ed., New Jersey: Prentice Hall. Martin, Keith (2005). Starting Your Music Business:A Guide for Music Entrepreneurs. Delaware: Crisp Publications, Inc. Read More