CD sales and Universal Music Group market dynamics

Universal Music Group

CBP is based on past consumption values as a way to forecast the sale of future goods and services. In regards to the music industry, CBP planning from before the internet would look quite different than from after. Before the internet, there was no way to digitally download a music CD. Thus, all music purchased had to be in the form of an in-person transaction resulting in a customer purchasing a physical CD. Right after the inception of this new technology, CD sales skyrocketed. This can be seen in the following graph of sales of different music mediums. This meant that for this time period, music suppliers and record companies, like Universal Music Group, were continuing to bump up inventory levels based on the massive increases seen in previous sales. Using CBP, the previous increases in sales would recommend an future increases in inventory.

(Leibowitz, 2004)

However, just as CD sales were at their highest point, the internet began to change the nature of the market environment dramatically. Unfortunately, "more than 20% drop in the number of CDs released since 1999" (Lessig, 2012). This was a huge decrease, with trends for the future continuing to show major declines in the number of CDE sales around the world. Even worse, "album sales falling an average of 8% each year" (Goldman, 2010). The reason for this massive decrease in reported sales is primarily because of the invention of digital music, which can be easily downloaded from the internet and played immediately upon purchase. According to the research, "industry insiders and experts argue that the main culprit for the industry's massive decline was the growing popularity of digital music" (Goldman, 2010). With more and more of the population gaining access to the internet and having the appropriate technology to burn their own CDs at their leisure, CD sales have then dropped dramatically. Here, the research suggests that "in September 2002 estimated that 60 million Americans had downloaded music -- 28% of Americans older than 12" (Lessig, 2012). The following illustration demonstrates this sharp decline.

(Goldman, 2010)