Discuss about Sonic Records, a market-leading recording studio and production house, had witnessed declining demand for music CD’s.

Sonic Records, a market-leading recording studio and production house, had witnessed declining demand for music CD’s. Five years ago, Sonic experienced record-breaking revenues totaling over $ 15 billion. However, over the past few years, CD burning, international piracy, and a shift in consumer preferences had reduced revenues by more than 30 percent. A recent market survey at universities across the nation (a key demographic for Sonic Records) revealed the over 80 percent of student had not purchased a CD in the last seven years. According to the survey, student either burned friend’s copies of CDs, illegally, downloaded music from private websites, or purchased tracks legally from online music portals for download to digital music players.

Although the past few years’ declining sales have been disheartening, some positive advantages in the fight against international piracy recently bolstered music revenues across the industry. The RIAA (Recording Industry Association of America) initiated lawsuits against hundreds of individuals and pirate file-sharing websites. The results so far have been positive. Fear of litigation has deterred illegal download volume. Further, the exceptionally successful launch of a number of on-line sites selling legal music downloads had demonstrated strong consumer demand. In fact, a recent computer company’s on-line music store launch results in astounding sales. According to the computer firm’s CEO, “We has hoped to sell a million songs in the first six months, but we did that in the first six days.”

Sonic Records, having experienced tremendous success in the recording and music distribution industry over the past 30 years, realized that the rule of the game were changing. No longer would music be distributed solely through the traditional retail store channel. Consumers desired instant delivery of music online and expected a selection of thousands of artists’ work at their fingertips. Further, consumer expected this music to be portable. Today’s listeners didn’t want to be constrained to the physical limitations of a CD. They wanted digital files that could be easily and legally transferred from computer to portable music player to home receiver interchangeably. Although downloads accounted for only 2 percent of music sales in 2004, industry analysis predicted a fundamental change in music delivery methods. Some estimated that up to 80 percent of all music sold might be delivered online in the next decade. Sonic executives understood that their business model needed to adapt quickly, lest they be left behind by other firms who had correctly anticipated this market shift.

In response, Sonic Recorded formed a subsidiary company named e-sonic. E-sonic would be responsible for creating an online music store capable for competing with established players in the industry. Key executives for Sonic Records were chosen to lead the new company. E-Sonic’s mission was to create the world’s leading online music store; ensuring Sonic Records’ prominence in the record industry’s future.