The growing popularity of downloading music from the internet definitely gives rise to a new music industry value chain that differs from the traditional value chain. With the invention of the iPod and other portable mp3 players, there has been a considerable increase in music downloads. Instead of buying the whole CD, consumers prefer to buy the song they want online. Having the ability to purchase just the songs you want compared to paying the full price of the CD is what causes the consumers to lean more toward downloading. Another reason is that with the more gadgets being invented, it is easier to place all your music on one device to listen to, instead of carrying around a bunch of bulky CDs which basically would cause a lot of inconvenience. The process of downloading music versus selling from brick-and-mortar businesses alters all the parts of the value chain including supplier-related value chains, the company’s own value chain and forward channel value chains. However, the most affected link, I think, is the company’s own value chain. With the music being available and downloadable online, production cost is expected to decrease for costs associated with pressing and packaging of CDs would be eliminated. If the recording studios begin to sell the downloadable files themselves, the production cost is substantially reduced since the cost for pressing and packaging of CDs would be eliminated from it. Also, manufacturing cost would be completely eliminated since they don’t need to produce any actual product. Moreover, they could eliminate all the retail distribution costs and incur only the cost of setting up a distribution medium online. There would be no wholesale distribution or retail distribution beyond the record company. Lastly, not only marketing expenses but also company overhead expense would be reduced.

The traditional value chain would become