CCM Music Recording Company Case Study Part 1 - Company Overview

History, development and growth of CCM over time

CCM, Colorado Creative Music, is music recording studio, founded in 1995 by Darren Curtis Skanson, primarily established as vanity label for producing, promoting and selling his own records, and consequently developed into microlabel with 4 product lines and 11 different albums. In 2000, the company sold 30,000 of Darren Curtis Skanson CDs and received net profit of $4,292.00. The company aims at expanding its customer base, acquire more popularity, and develop the company from microlabel to the independent one.

Vision/objectives

The business vision of Colorado Creative Music consists of three components - Core Value, Core Purpose and Visionary Goals (Thompson, Strickland, 2003).

Core values of CCM are quality, creativity, and excellent customer service. The core purpose of this organization is to make more people listen to classical and light acoustic music and admire it. As for the visionary goals, the strategic dilemma of the business arises. Thus, one of the visionary goal is to make the music produced, played and recorded by CCM musicians, heard by larger audience. The other visionary goal that doesn't completely go in line with the first one is to win the large custom market for the company's products and services. The collision here is in the primary value and target of the business: in the first case the attention is attached to the product, music, while the second one is focused on the development of the organization. This dilemma is the subject of strategic choice of the organization, which will be outlined and discussed later.

At the present moment, the main objectives of the company are: positioning the business against its rivals, development of distribution channels, development of the products and enhancement of the product line, anticipating changes in demand and adjusting the firm's strategy to respond to them.

Operating environment

The firm operates on American market which is characterized by political and economical stability, technical advancements in producing and distribution processes, large number of potential customers, broad demand and intense competition.

Business model

Business model is the mechanism for the company to generate the revenues and profits. It includes strategy and implementation thereof and should answer such questions as how the firm selects its customers, how it differentiates its products from those or rivals, how it creates utility for the customers, how it acquires and preserves them, promotion and distribution strategies, how it allocates its resources and derives profit. As for promotion and distribution techniques for Colorado Creative Music, the particular attention is attached to Internet aspect of the distribution and its capabilities.

Internet is not only alternative way to traditional methods of music distribution, but also a great opportunity for artists and music-recording companies to expose these products to broad public. The advantages of such means are low cost of entrance and enormous size of potential customers market. Traditional chain of music distribution includes such components as writer/performer, publisher, musical instruments company, live performances, venue equipment and services, recording, studio equipment and services, recorded performances such as night clubs, bars, business music, broadcast, film and music videos, and retail. These are traditional stages through which the song or other musical product must pass to get to the final customer. Internet makes this chain of distribution shorter and simpler, and therefore internet-based promotion, advertisement and distribution can be considered a new business model to base the business on. Further information on virtual distribution will be discussed in relevant section.

CCM business model includes following components:

Value Proposition: satisfaction of customers' needs in quality classic music;

Market Segment: white females (predominantly) and males of 40-60 age range. The market segment needs to be further expanded.

Value Chain Structure: structure of the firm to be described below

Revenue generation: through sales, direct sales in particular; revenue generation roots need to be expanded.

Position in the value network: enters the most specialized industry segment. A large number of competitors from all 4 segments of the industry; business may be complemented through alliance with larger recording company.

Competitive strategy: company's strategy primarily focused on differentiation rather than cost leadership strategy, through internet distribution allows making the products of CCM cheaper than those of competitors.

Market segmentation, targeting, positioning

The music recording industry has 4 clearly identifiable segments: major recording studios, independent labels, micro-labels and vanity labels. Major companies have large quantities of artists under contracts, reaching the number of 100, specialize on multiple types of music - rock, country, jazz, classical, traditional and other, and have formal and reliable national and international channels of distribution. Independent labels have 10-100 artists under contract, focus on recording of one or two major music styles and have either national or most often regional distribution channels.

Micro-labels have less then 10 artists under contract and are tightly focused on definite style of music. They are characterized by small staff and manager performing as the leading artist of the studio. Micro-labels have rarely formal distribution system and heavily rely on direct sales to fans and wholesale to clubs and specialty retailers.

Vanity labels segment is the fourth, the last and the most specialized segment of the music recording industry. They are founded by independent artists for recording and selling their products (Darren& Winn, 2003). At present, CCM is the micro-label that strives to convert into independent label. Therefore, CCM currently occupies rather narrow market niche of classic and traditional acoustic music admirers within the age of 40-60, predominantly white, middle class females throughout the territory of the United States, though the major part of the customers is focused in Colorado region. This is the result of market targeting, when the studio developed the measure of segment attractiveness - loyal customers and fans of performers; music, and selected appropriate target segment.

Today, the company wishes to change the segment it operates into. To expand the company's market segment it should develop product differentiation aimed at selling various products with different characteristics to different market segments. So far such differentiation is not developed.

On the basis thereof, the positioning approach now applied by the firm is differentiation positioning, which lies in filling less competitive, smaller market niche in which the firm locates its brand and attracts its customers.

Products

At present, the company disposes of 4 product lines and 11 different records. The brand names of the Company are: Darren Curtis Skanson, Acoustictherapy, Andrew Thomas Harling and Music for Candles. The style of the music offered is the same throughout all the brands: light classical guitar.

Distribution channels

The distribution channels of CCM are predominantly direct sales. These include sales in the gig, shopping mall distribution and in the back end (which includes CD order through 800 number, website sales, mail order). In 2000 CCM sold 30,000 Darren Curtis Skanson CDs, predominantly through direct sales. Though, traditional chains of distribution are more effective and they include major distributors, one-stop distributors, independent record stores and major chain record stores. Developing traditional distribution methods is one of CCM's primary tasks.

Financial positions

CCM is a micro-label, the third of the four segments in music recording industry. Therefore, in contrast to the premier recording studios as Columbia, Sony Music, EMI and BMG, which possess enormous financial actives, financial position of CCM is rather modest. In 2000, the company reached total income number of $216,614.05 and net income of $4,292.00, which, though, was 4 times less than net income in 1998 (amounting to 20,626.70) and nearly the same as in 1997 and 1999.

Major strategic issues

Major strategic issues of the company are formulated by the manager of the company, Darren Skanson, in the Case Study for Colorado Creative Music (Darren & Winn, 2003) and include the following: - create a profitable music recording label with expanded range of artists and performers; - position Darren Curtis Skanson label to compete with major artists who have contracts to Sony Classical. For this, acquiring traditional distribution methods is necessary; - create new product line similar to Acoustcitherpay which would be saleable and provide funds for the previous two goals.

The strategic tasks and ways of their implementation are not uniform and completely complementary. Thus, the first aim of growing the company contradicts the easiest and most possible way of accomplishing the second goal - promote the music by selling CCM's product lines to recording studio larger then CCM, independent of major label with access to traditional outlets. Thus, the company has to define its prerogative - develop the recording label or promote the music by means other than within CCM capabilities