The primary subject matter of this case concerns market changes experienced in the music industry with the advent of the Internet as a vehicle for distributing individual songs. The Internet, as a disruptive technology, spurred an upheaval of what had been a decades old business model for the creation and distribution of music. The music industry's desperate legal battle to preserve an out-moded distribution channel is discussed. Secondary issues examined include copyright protection for intellectual property and behavioral ethics for both individuals and companies. This case has a difficulty level appropriate for senior undergraduates and first-year graduate students (4 or 5). Appropriate courses for this case discussion include marketing management, channels of distribution and buyer behavior. The case is designed to be taught in 1.5 class hours and is expected to require 1.5 hours of outside preparation, not including supplemental readings, by students.
Imagine working in an industry that makes large profits with existing technology; an industry facing unprecedented change driven by shifting consumer demand facilitated by technological innovation. Instead of embracing change, your first strategy is to try banning the new technology. Your next strategy is to eliminate new competitors attempting to satisfy shifting consumer demand, using litigation to put them out of business. Your third strategy is to lobby for new laws restricting consumers from consuming your product in new ways. Your fourth strategy is to use technology to destroy your customers personal belongings and generally aggravate their lives. Finally, your coup de gras is to treat your customers as criminals and sue them for damages; a multi-billion industry settling for thousands of dollars in damages. This is an apt description of actions taken by the music recording industry and its trade association, Record Industry Association of America. Seeking to stave off innovation and squeeze as much profit from an out-moded production and distribution system, the music industry turned its collective back on their customers. They decided that they would rather "fight than switch!"
The music industry is been irrevocably changed by the Internet, but rather than embracing change to better satisfy their customers' needs the industry opted to continue to sell CDs. Music consumer use of the internet and innovation has figuratively dragged the music industry into the 21st century. This case provides an overview of the changes occurring in the music industry over the last decade, allowing for the discussion of innovation's influence on distribution channels, and ethics in buyer and corporate behavior.
The game was on, with the Recording Industry Association of American (RIAA) using a fullcourt press. Tanya Andersen of Beaverton, Oregon, was accused of illegally downloading music files over the Internet (Ward, 2007). Ms. Andersen, a 42 year old mother of a 1 0 year old daughter, was allegedly downloading gangsta rap songs at 4:00 in the morning; a music genre she knew nothing about. When Ms. Andersen contacted the RIAA to report an error, she was informed that unless she paid a "$4,000-$5,000" settlement that "she would be ruined financially." (Ward, 2007, p. 14). Further, Ms. Andersen was advised to pay even though the person at the RIAA support center believed she was innocent of the alleged crime (Ward, 2007, p. 14). So aggressive was the RIAA in the pursuit of Ms. Andersen, the industry association attempted to contact her 10 year old daughter at school by "pretending to be her grandmother (Ward, p. 15 2007)." Clearly the RIAA had entered a new realm where being customer-focused took on a whole new meaning.
From the RIAA's perspective music downloading was the equivalent of illegal drug trafficking, where the focus was on prosecuting the user rather than taking out the distributor (Butler, 2007). …