QUESTION $4(20$ MARKS$)$

With reference to information presented in the case study, explain the specific element$($s$)$ of the Business Model Canvas where MUSICA was most strategically affected.

QUESTION $5(20$ MARKS$)$

Explain the key drivers of change in the industry that MUSICA operated.

STREAMING KILLED THE MUSICA STAR

$$No one loves CDs$.$ They are not as cool as vinyl, not as personal as tapes. They are unlovely plastic, shiny discs that scratch easily, and their covers crack.$$ Such was the dim assessment of Guardian Australia columnist Brigid Delaney in $2018,$ in reaction to compact disk sales being eclipsed by streaming platforms. And although it is perhaps a stretch to say no one loves CDs$,$ it$$s plausible that most people do not love them enough to spend their money on them.

Clicks, which bought Musica in $1992$ for R$1\mathrm{.}2$ million, announced in January $2021$ that after $29$ years it will shut down the country$$s leading music and entertainment retail brand, Musica. This will constrain customers$$ shopping choices for CDs$,$ DVDs and games. The company said the closure $$ effective at the end of May $2021$ is due to the industry$$s steady decline over several years. Clicks can no longer compete with the digital consumption of music, movies and games.

$$Musica has been operating in a declining market for several years owing to the structural shift globally to the digital consumption of music, movies and games from the traditional physical format,$$ Clicks said in a statement.

$$The inevitable demise of the brand has been accelerated by the Covid$-19$ pandemic which resulted in the rapid decline in foot traffic in destination malls where Musica stores are typically located,$$ the company said.

Bret Dugmore, the owner of record store Mr Vinyl, said Musica occupied massive retail stores in prime locations, which means high rentals, while music has increasingly become a low mark$-$up product. It would take massive sales volumes to sustain a business in the music space in those locations, he added.

In its glory days, Musica was the place to get all the latest hits, with music fans spending hours at its listening stations deciding which CD to buy. By the early $2000$s$,$ Musica Megastores $-$ which was launched after Clicks' acquisition of music retailer CD Warehouse in $1997-$ sold over $30,000$ local and international CD and DVD titles. But the rise of digital streaming of music, movies, TV and gaming killed the demand for physical CDs and DVDs$.$

Dugmore said that as downloading and streaming became popular, CDs$,$ which restrict a listener to a particular playlist in a particular order, were no longer the most convenient medium. $$No music medium is more convenient than streaming platforms,$$ he said. Dugmore maintains that no music medium comes close to vinyl when it comes to the quality of the experience. $$This is why CDs have become mostly defunct $$ they$$re neither convenient in the face of streaming, nor do they offer a better mindful listening and collecting experience than vinyl,$$ he said.

According to Clicks$$ financial report of that year, by $2014$ Musica was still gaining market share in all product categories and grew sales by $1\mathrm{.}4\%.$ But the uptick was not thanks to CD sales, but rather due to the fact that competitors were exiting the market. Musica$$s main competitor at the time, Look & Listen, had filed for business rescue. Look and Listen closed its last shop in $2017$ after fifty years in business.

Even though it now had the lion$$s share of the market, Musica had to make itself more attractive to customers to survive. In recent years, the company tried to adapt its business and expand its offerings by selling electronic products, headphones for streaming music and gaming gear, but this strategy did not yield the hoped$-$for financial results.

News of the closure may have come as a shock for people who grew up frequenting Musica to purchase CDs or DVDs$.$ But music collector Vusi Hlatywayo says he knew Musica$$s closure was imminent. $$I am not surprised. I just forgot that it exists,$$ he says, laughing. He added that with the increase in Spotify users, iTtunes, and even YouTube, Musica was $$not going to go far$.$

Hlatywayo said he first listens to music on streaming platforms, and if he loves the album, he will purchase a physical copy on vinyl. Purchasing a CD is his last resort: $$I would personally buy CDs when I cannot get the music on vinyl,$$ he said, adding that some artists$$ music can only be found on CD$.$

In the fourth quarter $2020,$ Spotify, which only launched in $2008,$ claimed it had $354-$million active users and $155-$million premium subscribers. iTunes, launched in $2001,$ claimed $60-$million subscribers in June $2019.$ It has since not publicly released updated numbers of its subscribers. CD sales pale in comparison with these numbers.

According to the Recording Industry of South Africa, $($RiSA$)$ in $2020,$ only $506000$ units of CDs were sold in the country, bringing in R$21-$million