Steam Records

© 1994
ISBN 0-324-00300-5

Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 10 pages in length and its case teaching package is 4 pages.

Abstract

Harvey Schwartz, Senior Vice President for Steam Records, a small independent record label, felt the growing impatience of the company's ownership. Steam had been around for less than two years, and its performance had been far from spectacular. The company was growing, however, and history had shown that it often takes three to four years for a label to meet with success. Nevertheless, Steam's owners were not keen on the music industry and knew or cared little about history; they bought Steam as an investment, and so far it had not been a profitable one.

The issue of product distribution had been troubling Schwartz for months, and he knew that the imminent decision of independent versus exclusive distribution could prove vital in the success of the young company. Currently, Steam is using a series of independent distributors to disseminate its compact discs. The issue facing Schwartz concerns a switch to a single exclusive distributor.

Record distribution may be the most critical success factor for a record label. Distribution for recorded music can be achieved through major manufacturer-owned wholesale branches and/or independent distributors. Major and manufacturer-owned distributors, and even some large independent distributors, offer guaranteed national saturation, marketing, and business operations such as account collections. Regional independent distributors often do little more than distribute recordings to stores which order from them.

Steam's current network of independent distributors has served them well. The Donkey and Steve Ellis discs are in all metro Atlanta retail outlets and in most southeastern outlets, where both acts have focused most of their touring. The discs have also appeared in other outlets nationwide wherever they are receiving considerable airplay, or where they have stopped on tour. Steam has been reaping $7.50 per disc, a nice margin, and has thus far sold 4,000 copies of Slick Night Out, a relatively successful total considering Steam's neophyte status as a label and marketing entity.

Linkages to Textbooks or Journal Articles/Fit Within a Course

This case is ideal for either an introductory Marketing course or Marketing Strategy and Distribution Management course. The music industry is one that students can easily relate to, and enjoy talking about. In this setting, the instructor can demonstrate the important role that the choice of the distribution channel plays in a firm's overall marketing strategy. This case is also ideal for discussing issues of decision making under difficult circumstances, especially since the company's future may be on the line. Students can also learn about the crucial role of non-marketing or non-financial criteria (e.g. artistic control) in strategic decision making. Finally, the case illustrates the linkages between the different variables of the marketing mix; the decision with regard to distribution cannot be made without considering the other marketing mix variables.

The overriding question in this case is whether and how a switch in the distribution system can improve the long-run well-being of this organization. The discussion of this complex question can be broken into many components: the pros and cons of each distribution system, balance of power issues, and issues of control and timing.