NEWS

Business strategy class takes in-depth look at the embattled music industry

By KIM WEAVER SPURR
Kenan-Flagler Business School

CHAPEL HILL -- The music industry today is plagued by the things that would make for a great country song — falling album sales, piracy issues, dwindling shelf space in retail stores, sluggish growth and radio consolidation.

The intricate challenges of the industry are the stuff of news headlines, and these same issues are great fodder for an in-depth strategic class study, says Dr. Anne York, a management professor at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School. Her undergraduate strategic management class is undertaking a semester-long project on the changes in the industry, including legal, ethical and strategic challenges. The case-study method challenges students by exposing them to business situations in the real world.

"Many students download music from the Internet. They don’t see themselves as Robin Hoods, but there are ethical and copyright issues involved," York said. "We’ll look at the music industry from all sorts of perspectives. Is prosecution the answer, or is it more an issue of ethics and integrity?"

York said she chose the project because it’s very relevant to students, who are among the target consumers for the music industry.

"This presents students with a real-time, complex, global, multi-stakeholder issue," she said. "I want them to come up with a creative strategic position for the firms who are struggling with these issues, and I want them as consumers to think through the issues and consider the ethical implications."

York will bring in guest speakers to represent various stakeholders in the industry, including Jay Boberg, former chief executive officer of MCA Records, a division of Vivendi Universal. Boberg, who just stepped down from his post in January, will speak to the class on April 21. He has been credited with helping to discover acts such as R.E.M. At MCA, he helped to shepherd hits from artists Shaggy and Mary J. Blige, among others.

Other guest speakers include:

• April 14: Durham Barnes and Noble Store Manager Dan Kosse and Laura N. Gasaway, UNC-Chapel Hill law professor and director of the law library. Gasaway teaches courses on intellectual property and cyberspace law.
  
• April 16: Edward Freeman, director of Darden Business School’s Center for Applied Ethics at the University of Virginia. Freeman, a professor and musician, has written cases for Darden on the music industry.
  

Students have "virtually" studied one of the most outspoken, longtime critics of the recording industry, rocker Tom Petty. His latest album, "The Last DJ," offers a scathing commentary of the music industry, bemoaning disc jockeys who have their hands tied by corporate owners and cynical executives getting rich off disposable pop stars. The album has been met with mixed reaction from radio stations, some of which have refused to play it.

As a culminating class assignment, students will be divided into teams and will take on the role of consultants at one of six major music companies. Their team paper will answer the following questions: What’s your company’s current strategy? What changes do you recommend and why?

Business student Alona Tolentino said it will be interesting to follow the strategies that recording and distribution companies develop in order to combat the loss of sales due to Internet sharing.

"The legal conflicts and changing policies in the music industry affect how our generation obtains, distributes and shares any form of musical communication," she said.

Student Neal Chandoke, who is interested in a management career in the music industry, said the class is thought-provoking because students are charged with recommending strategies for the industry’s future, and that future is uncertain.

"These companies are at a crossroads in their lifespan, and the next few years will be critical in their survival, as the Internet, MP3s and CD burners hamper their revenues and net income," he said.

Master of accounting student Brian Bruchs is working with York on an independent research study. They’ll be writing an updated case on the music industry and its many challenges.

"We’ve been analyzing the financial statements of some of the music companies and researching the issues facing the industry, namely piracy, the economy, CD-burning and file-sharing," he said. "We’re trying to determine how companies might adjust their strategies to be more successful."

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Kenan-Flagler contacts: Management professor Dr. Anne York, (919) 962-3141, yorkan@kenan-flagler.unc.edu and Kim Weaver Spurr, Communications office, (919) 962-8951, spurrk@unc.edu