Start with the initial enthusiasts like Ken Bunt of Hollywood Records and use their testimonials to win other record labels. Make use of the business connections of the advisory board at Polyphonic to get better reach to decision makers at record labels. Offer free trial reports to convince record labels and an initial lower cost for buyers along with discounts for high volumes ordered over a fiscal year.
In the long run, promote Human Music Interface as a complement for Hit Song Science to maximize the venue earning capability of a song (by ensuring better listener penetration) that is marked as a winner by HAS. Rationale: Target segment rationalization: The record labels constitute the segment with the biggest budget (deepest pocket and hence least price sensitive), highest influence in the music industry and positioned to obtain the greatest benefit out of Hiss’s accuracy in music selection suggestions.
There are initial enthusiasts in this segment who are already Impressed with Hiss’s capabilities. The market peel can be restricted to the USA (Exhibit 1) value for the segment: The Has program will enable record labels to elect only those songs for promotion and advertising that has 80% chances of being successful compared to the 10% success rate offered by the tradition ways of selecting a song. Thus, the labels will considerably reduce the amount spent on marketing (Exhibit 2) and as a result will Increase profit margins (Exhibit 3).
Thus tremendous cost savings and considerable improvement of profit margins are the primary aspects that should be promoted to the record labels. Pricing: Initially price the reports at $7000 per song or 60,000 per album of 10 songs for the first one year of the contract and then go for a $10,000 per song or $80,000 per album. The discounting on album cost over single cost is to encourage buyers to buy in bulk.
Also, offer discounts on high volume of orders – price beyond the 10th single is $6000 and price beyond the 10th album is $55,000. (Exhibit 4 describes the break- even with Initial pricing and exalt 5 describes the profit margin with the post-one year pricing strategies) Promotion or selling approach: The advisory board at Polyphonic comprises of big names in the music industry such as Thomas D. Motorola and IIRC Wake along with the initial enthusiasts like Ken Bunt (executive of Hollywood Records).
While Thomas Is one of the most highly regarded and Influential executives in the music business and has obvious strong connections with Sony Music Entertainment (a major record label), Rick is a highly successful producer and strong influence on a musical empire that has top successes and recognitions under its belt. Polyphonic should use these strong Industry connections to target Sony, universal and Warner for their Minimal promotion. Additional inclusion in the long run: Polyphonic should promote the Human Music Interface as a complement to Its Hit Song Science.
The science that forms the back one of music selection for the record labels will also recommend songs for the listeners thus increasing the reach or penetration of a song to the listener market. It is the record labels who will find the maximum value out of the availability of the partner and get the machines in the retail music outlets. Why the alternate market segments are less preferred? The producers and unsigned artists are not considered as the primary target segment because these groups are going to show the maximum resistant against adoption of the new technology.
Members of these groups consider themselves as artists and hence are mostly not pen to the idea of scientific analysis making a musical Judgment on their behalf. Artists have soft skills that are supposedly not quantifiable and hence the idea of a software application being capable of Judging an artist’s efforts might be less welcome in these segments. Exhibit 6 describes how these groups will have lesser value out of HIM than the record labels. In addition, the software doesn’t produce enough value for the artist segment.
Suppose, HIM promotes specifically to this group and the members show enough enthusiasm resulting in satisfactory initial penetration. Once, the initial curiosity about the quality of her own performance is satisfied the artist won’t find any alternative use of the report. If the report says their song has enough potential to be a great hit, that conclusion does little for them because the record labels are not likely to acknowledge the credibility of the HIM report. All exhibits are restricted to the US Market. Exhibit 1: Why USA is the best choice of geography?
The rationale behind the choice is obvious when we consider that it has the highest music market in the world and is [(12609 – 5001) / 12609] -? more in dollar values Han the second highest, Japan. Graphically, when compared to the top 5 music markets, USA looks significantly higher (for 2002): Exhibit 2: Cost savings to record labels The HAS software will identify potential top 40 singles at an 80% success rate (based on trial run) as compared to the industry average of 10% success rate. However, assuming a conservative approach let us assume that the actual success rate for HAS will be 50%.
Now let’s run our analysis based on Sony where Polyphonic has the highest chances of making a good penetration. There are about 3000 singles released per year; of which 10% make the Billboard Top 40. Roughly 300 singles make the Top 40 per year. For Sony, with 13% market share, 390 singles will be released of which (10% of 390) = 39 will make the Top 40. If Sony embraces the HAS system the success rate in correctly identifying those successful 39 singles will move from 10% to 50% (assuming the conservative rate).
Reduction in number of required single releases to maintain the market share: If 50% is the success rate then it means that for every successful Top 40 hit by Sony, the company needs to release 2 songs. Hence to have 39 hit singles, Sony would need (39 * 2) = 78 single releases. That’s a reduction of 390-78) = 312 songs or a percentage decrease of 80% in the number of singles required to maintain the same market share (given only successful songs make money). Sony, thus, will have huge cost and effort savings in both production and marketing.