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

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