Assignment 1 - Transaction Cost Economics
By Tejaskumar
11030241083
Div B

1. Topic Music Industry 2. Introduction
For music industry , the major source of income comes from selling the music that the bands produce . Revenues are generated by means of selling CDs and DVD and online retail sale . The major players in the music industries are there for the music sellers , the recording studios and various band that create the music . 3.1 Uncertainty factors 2.1.1 Technological
Technological factors for example ipod and walkman have revolutionized the music industry .This lead to increase demand for music on a very large scale. Music became easily available. Sales grew in these scenarios .
Internet is another such factor which lead to the digitalization of music .Due to internet a new revenue stream of digital music was created.
Cloud computing is another such factor which could make cheap sharing of music online as hosting such huge website became easy which lead to competition and cheaper music availability and piracy .
YouTube or social media, digital music retailers are also changing the landscape of the music industry.
Online social media could be the next technological factor that affects the music industry by making the demand increase virally . These factors also affect the specificity as the dependency on the music producers is now decreasing rapidly . 2.1.2 Demand
Demand for music is always growing and the more population growth more the consumption of music would be there . This there is not demand variations in the music industry. However demand variations for a particular music band may be prevalent.

2.1.3 Volatility

Volatility is increase for music bands day by day and there is either an increase in demand of music or decrease in demand on music on a very rapid scale . Thus Volatility is such cases seems high .

2.1.4 Ambiguity
Ambiguity factors are very less in the music industry as the demands are well defined.
2.2 Specificity factors 2.2.1 Site Specificity Languages play a very important role in music .Different regions in the world listen to different music .Thus there is high site specificity. 2.2.2 Physical Asset Specificity

The physical asset sepecificity is low in this case .

2.2.3 Human Asset Specificity
The human specificity is high as dependency on the band performing the specific music is very high . Music industry is heavily depended on such artists .
3. Identify governance scenarios when organizations would skew a) towards Hierarchy b) towards Market 3.1 Scenario 1 – Transaction for the Music Company and band.
‘The more general the asset, the better the firm is served by looking to the market. Conversely, the greater the specificity of the asset, the more likely internal production under the firm’s hierarchy is the optimal solution’
For a music company ,dependency on a particular band, would make it buy rights from them according to the above statement as the assets would become specific to a particular music company.
3.2 Scenario 2 – Technological Transactions.
Uncertainty of technology may or may not force organizations to move towards an opposite governance/sourcing. However if for music company like Sony or Samsung the assets become specific hence it is would go for hierarchy approach towards acquire that technology. But if the assets are general like website or IT based it would tend to go towards the market.