A Study on the Dynamics of OPM

Record Industry
Bacierto, Valeroso
Introduction
Acceptance of Pinoy Pop Music

Emergence of Original Pinoy Music (OPM)

Different genres: classic disco hits, pinoy jazz, hip-hop

Very popular

Philippine Association of the Record Industry, Inc. (PARI)

Industry responsible for compiling all music records published in the Philippines

Records historical data of the Philippine music industry

Published an article stating the challenges of the performance of OPM in the

past decade (1999 - 2010)
Reference Mode and Behavior Patterns
OPM album sales have been
continuously decreasing since
1999 to 2010

From a revenue of Php 2.7 billion

down to Php 699 million sales

Physical album sales (CD sales)

have been decreasing

Digital album sales is steadily

increasing but a slower rate
Reference Mode and Behavior Patterns
The local physical albums sales
from 1999 - 2010 have gone
down to Php 699 million = 75%
drop in sales

The digital music sales from 2005

to 2010 have increased by more
than 400% from 2005 to 2010

The Php 183 million sales for

digital music does not offset the
losses from physical album sales
Reference Mode and Behavior Patterns
Comparing data with foreign countries
like Canada

The trend for physical distribution is

decreasing while the digital distribution
is increasing

With the rate of increase in the digital

distribution, it is inferred that it will
surpass the sales of physical
distribution

Different motivations in purchasing or

accessing music
Reference Mode and Behavior Patterns
PARI released an estimated research
that shows 83% of audio CDs sold in
the Philippine market are pirated

The total sales of physical and digital

music sales is just Php 699 million
which is still below the Php 2.7 billion
record in 1999

Php 1 billion lost income due to music

piracy

Alternatives in accessing music

increased through piracy
Reference Mode and Behavior Patterns
Sales of portable players (CD
players) declined, may be
related to the decline of CD
sales

The increased demand for devices

that allowed convenience to
consumers to access music
through smartphones or wireless
speakers
Reference Mode and Behavior Patterns
Report
Piracy – Will it Kill the Music?
Spanish Piracy Levels
Downloads Save The Music Business
TEMPO: Keeping Pace with Online Music
Distribution
Yankee Group
Student Thesis
Interactive Music Marketing: Driving Offline
Sales by Targeting Fan Types
Analysis and Findings
Report forecasts a slowing of digital piracy by
2006
Piracy down to 22.9% from 30% in second half
Prevalence of music
piracy despite its
of 2002
This figure will include legitimate online sites
decrease
such as Apple's iTunes. Broadband users are
123% more likely to download digital music New legitimate online
sites such as iTunes
Music consumers expect to pay lower prices for
downloaded albums than physical products
Music consumers access
Only slow Internet connections are stopping and download music
young web users from downloading online music online
65% of respondents use free service such as
KaZaA. Only 3% currently pay for downloads.
Music fans are more
responsive to online
Music fans are more responsive to online advertising
advertising. Results segmented by online music
fans and other users
Reference Mode and Behavior Patterns
Time Event Description Time Event Description

1970s OPM (Original Pinoy Music) has emerged
In the early '80s the cassette sales had grown
tremendously, propped by influx of cassette
playback from the Middle East workers. Pirated
1980s
CDs have proliferated in view of the availability of
its high speed duplicators coming mostly from
Chinese sources.
The phenomenal increase from 1989 to present
was presaged by the increase of sales of OPM
1989 - 1998
due to Executive Order (EO) 255 and the CD
format.
Pirate CDs which started in 1997 in the
1997 Philippines, was then sold from P800 to P1,000
for compilations.
In 2001 alone, sales plummeted by 42.5%
because of piracy. This was when at least thirty
big record bars in Metro Manila, Cebu, Davao,
2001 Iloilo and Cagayan de Oro were known to have
closed shop because pirate vendors were
selling pirate CDs right beside or in front of
them, which costs 3 for P100.
2002 - Decrease in total OPM sales from Php 2.7
2010 billion down to only Php 699 million sales
Pinoy Music Summit was launched to address
2014 and discuss the alarming 75% drop of
Philippine music industry in the past decade

Napster, a pioneer in peer-to-peer file

1999 music sharing was released. It facilitated a
widespread music piracy on a global scale.
 Major Variables Why is SD necessary
Repeating occurrences since 1999
OPM Sales
Underlying processes to uncover in order to
Music Liking understand the behavior pattern of the
OPM sales
Income
Perhaps the rate at which non-listeners are
Illegal and Legal Demand converted to OPM fans is slower than the
rate at which the satisfaction with OPM
OPM decays over time

CD albums Overall, there are many variables that could

affect the behavior
Digital albums
There are also key stakeholders that are
affected in the increase and decrease of
OPM sales
 Objectives
1. To document and understand the OPM sales
and its underlying processes in the
Philippines.
2. To identify significant variables that
contributes to the behavior of the problem
variable in the system.
3. To determine the relationships between the
major variables identified throughout the
process.
4. To develop a working causal loop diagram
and stock flow diagram simulating the
process of determining the OPM sales.
5. To recommend policy designs to the
underlying problem identified in the system.
Assumptions
1.  The price of both the physical and digital
albums are assumed to be constant and
are not affected by exogenous factors.
2.  It is assumed that the popularity and
satisfaction with OPMs, CDs and Digital
music are affected by a specified boredom
rate.
3.  It is assumed that digital music has been
introduced at time 0, together with CDs.
Literature Review
Artist and Repertoire
Development

Recording

Manufacturing

Distribution

Marketing and Sales

Literature Review
Issues:

1.  Eksin and Konuray (2008) - file sharing of music poses threat to the declining trend in music industry

a.  Some researches say otherwise, positive effects can also be identified in terms of making the
music more known to a larger group of people

2.  Eksin and Konuray (2008) - less promotions given towards physical albums

a.  Audio stores have been decreasing sizes to closing down while new businesses emerge

3.  Gopal et al (2002) and Sison et al (2011) - changing purchasing patterns of music consumers

a.  Identified factors that affect changing purchasing patterns but did not explain why
Literature Review
A.  Music Piracy B.  Popularity of Music

Has its own dynamics Gave rise to having loyal listeners

Greatly impacts the music sales
Gave rise to new way of acquiring music
Affected how consumers decide
Affected how consumers will relate to the
music (stimulus)
Effort in marketing music to potential
customers

Music piracy is affected by factors such as:

Budget

Number of social networking mediums

Limitations of the Literature
Only focused on how music piracy affects the music sales

Lacks certain discussions on the consumer’s perspective

Only considered the industry’s perspective

Lacks in understanding the motivations of purchases of CDs and digital albums through
music liking and satisfaction

Did not consider the underlying processes that influences the decrease in OPM sales

To address this gap, the study will focus on consumer’s perspective integrated with the
industry’s viewpoint as well as the processes that drive the behavior

Dynamic thinking will be used to address this gap

Model Formulation
Model Formulation
Model Formulation
Non-evident Loops
1.  Loop with song quality 2. Loop with voice quality
Model Formulation
Non-evident Loops Non-evident Loops
3. Loops with perceived satisfaction with OPM 4. Loop with rate of composition
Major Variables and Feedback Loops
Base Run and Reference Mode
Causes of Problem Variable
1.  Direct Causes
Causes of Causes
Causes of Causes
Removal of Major feedback loops
Conclusions
1.  The OPM sales is greatly affected by 2 loops: the loop for OPM satisfaction
and the loop for the effect of gigs and concerts, which influences both the
quality of the song and the voice of the artists.

2.  The desire of to buy music, the effect of airtime and the variety of music only
have a small effect in the OPM sales.
Sensitivity Analysis
Sensitivity Analysis
Sensitivity Analysis
Sensitivity Analysis
Policy Design
Current Policies:

1. Policy of playing 4 OPM

songs per hour
Policy Design
Current Policies:

1. Government Budget
Policy Design
Designed solutions:

1. Educational system
Policy Design
Designed solutions:

1. Educational system
Policy Design
Designed solutions:

1. Educational system
Policy Design
Designed solutions:

1. Educational system
Policy Design
Designed solutions:

2. Purely OPM
Policy Design
Combined solutions:
Recommendations:
1.  Based from the tests done, it can be noted that the way to actually
improve the OPM sales is by increasing the number of its listeners and
fans. This can be done by actually increasing the satisfaction of the
audience through increasing both the quality of the song and the quality
of the voice of the artists. In order to address this problem, it is proposed
to enhance the music program of the educational system in order to
improve the talents and skills of Filipinos in writing.

2.  It can be recommended that future researchers to look into ways by

which the amount of OPM fans and OPM listeners would be increased.
A Study on the Dynamics of OPM
Record Industry
Bacierto, Valeroso