The purpose of this paper is to examine various determinants that influence elasticity of CD demand in the capital of the Republic of Macedonia, Skopje. This research was conducted together with my colleague Darko Trajkovski, during the period November 2000 ? March 2001. As the elasticity of the demand is in direct relation with the price, our central issue was to collect data on the consumer's reaction to the different prices of music CDs in Skopje. It was carried out by means of an anonymous questionnaire consisting of 11 questions.   We determined 9 parameters which could be converted into dependent or independent variables and statistically processed later on:
 

- year of birth;

- sex;

- education

- quantity of CDs owned in home collections

- genre preference

- preference for Macedonian or world music

- music stores where CDs can be purchased;

- preference for original or pirated CDs.

- quantity of CDs purchased in the last month;

- demand for different price of CDs.

We targeted the age group 15-35, assuming that this age group is the most active consumer of music CDs. Our sample consisted of 80 randomly chosen participants from different areas in Skopje. We also excluded from our survey participants who do not purchase CDs, because our research only concerns the CD consumer population.

    The database with the answers to our questionnaire was statistically process and we could notice that there were significant results even in the first layer of statistical analysis ? frequency distribution. Therefore, in this paper we will present the frequency distribution for some of the variables which could be significant for further statistical elaboration. We will present the results for the following parameters:
 

- music stores where music CDs are purchased;
- quantity of CDs purchased in the last month;

- demand for different priced CDs
- quantity of  CDs owned in home collections
- genre preference
- preference for Macedonian music CDs
- preference for pirated CDs.

1. Music stores

    This research included the larger music stores, even though it is widely known that nearly every store in Skopje sells pirated CDs. Even at some larger music stores, besides the original CDs, it is not unusual to notice a supply of pirated ones.
 

 The table shows that the most favorite store is Yugoton, with 39 % market share.
 
 

2. Quantity of CDs purchased in the last month (January 2001)
 

    In regard to the frequency distribution for the quantity of CDs purchased per month, the answers were concentrated in 2 categories:
 

- 46% of the surveyed replied that they had purchased 1 or 2 CDs.

- 34% replied that they had purchased 3-5.

The results in the frequency distribution was one of the indicators which could be used for the further determination of the price elasticity.
 
 

3. Demand for different priced CDs
 

    This was undoubtedly the central question related to the main interest of our research ? the elasticity of the demand for
different priced CDs.  The results were in the expected range.
 

    The total demand for CDs over 250 denars (4 Euros), which is 40 CDs, is quite different than the demand with a price of 80 denars (1,3 Euros)  - 80 CDs. This table reveals that Skopje CD consumers react strongly to the shift of CD prices, too. In fact, the actual price of a CD in Skopje is anywhere between 100 and 150 denars, which proves that the market reacts to the elasticity of the demand. One of the determinants that decide the level of elasticity is the existence of audiocassettes as substitutes for CDs, which only increases the possibility of a reaction to a change in prices. Nevertheless, the suppliers cannot afford inelastic demand when it comes to the supply of music CDs. The CDs in Yugoton cost 150 denars, which proves that it is not the cheapest, but nevertheless most popular music store in Skopje. This is probably because of its good location and reputation, as well as having the best supply of music in town. Yugoton is the oldest music store in the city. It existed in the days of the Socialist Federal Republic of Yugoslavia. Today it is privatized and is mostly controlled by the Lithium Records Label. Most of the surveyed people purchase their CDs from this store.
 
 

4.Quantity of CDs owned in home collections
 

    The results of the survey show that 36% of the surveyed (the largest group) own about 21-50 CDs.
 
 

    Purchasing CDs became popular in the middle of the 1990's.  Because  new  technology  is  always   expensive,  it took longer for these developments to be widely accepted. Therefore, if we take into consideration the economic and social aspects of Macedonia, it will be easier to understand the small amount of individually owned CDs. Had pirated CDs not existed, this amount would have been substantially smaller. Thus it is easy to conclude that the income of the consumer is one of the most important factors for the purchasing of CDs in Macedonia. This explains the existing preference for audiocassettes, which are more popular than CDs.
 

5. Genre preference

    Music genres is a broad notion, and it was very difficult to form clear genre categories. For instance this research proved that many surveyed people accepted our categorization, while there were some that demanded a more specific genre classification. The results show that half of the surveyed (or 42%) prefer commercial or pop and dance music; 21% listen to techno music, while a declining percentage of 10% listens to popular folk music.
 

    This decline in purchasing and listening to this music is a direct result of the emergence of new Macedonian pop music. This type of music is a blend of several styles including rock, rap, techno, soul, and even ethno.  The marketing of this type of music is well organized and conducted, which is why this music is becoming increasingly popular and accessible. Label marketing is usually managed through television, which is a most popular means of advertising. The most effective marketing methods in Macedonia are producing music videos and commercials, organizing popular promotions of records, staging music shows such as "Skopje burning", "Taksirat, " Lithium Records Festival," etc. Newspaper and tabloid marketing has also contributed to the music industry and the appearance of music stars. Before the break-up of Yugoslavia, the popular music setting was mainly composed of music groups from all the federal republics, among which the groups from Serbia, Croatia and Bosnia and Herzegovina dominated the scene. It took a while for Macedonia to create its own music scene and music performers after the break-up, however nowadays many of these performers are growing in popularity all over the Balkans.

    It is interesting to note that the Macedonian performers' CDs often have the sponsors of the artist included on the cover of the CD. Kiril Dzajkovski's CD with the Coca-Cola company logo on the cover is a good example of this practice. These sponsors and their advertisements can often be spotted in the music videos as well.

    Another peculiar fact about Macedonia is the enormous amount of radio stations that only air a certain type of music. In the beginning of the transition to capitalism in the early 90s, there were no regulations and laws on radiobroadcasting, which resulted in 60 radio stations for about 700,000 inhabitants.

    Before Macedonian independence, music publishing was only realized through Macedonian Radio Television, which was a national institution with separate broadcasting. Other foreign labels existed, however they had the status of domestic companies and had set up stores in Macedonia. For instance, Skopje had a Zagreb Yugoton store, and an RTB one from Belgrade; one could easily find editions of Radio Television Ljubjlana, Slovenia and Suzi ? Sarajevo, Bosnia and Herzegovina. All of these labels legally distributed and sold music from the world's most popular labels of the time.
 

6.  Preference for Macedonian music CDs

 The first Macedonian music CD is Vlatko Stefanovski's ballet music "Zodiac". It was published in 1990 by the Third Ear Label and produced by Ivo Jankovski.
 
 

    The number of CDs produced was very small because not many people owned CD players, and the prices of CDs were much higher than audiocassettes. During the last 5-6 years, the CD market has rapidly developed, especially after the arrival of the first pirated editions. Music CD production has only become popular in the past 3-4 years. That is why music production in Macedonia is somewhat limited, which directly affects the number of individually owned Macedonian music CDs. World music is always sold on pirated CDs, while Macedonian music is always sold in original copies, which makes them more expensive. That is why 35% of the surveyed have 25% Macedonian CDs. There is hope that this will change in the near future. In the year 2000, the music group "AREA" sold 3000 CDs, the biggest number of CDs sold that year (information obtained through the label of the CD).

( Area “Vrati na imaginacija”  -Site moi sliki -  Avalon production   MP3/Sitemoisliki.mp3 )
 
 

 7. Preference for pirated CDs
 

    Pirated CDs are a characteristic of Macedonian music production, which made it necessary to discuss this alarming situation.

( “Sinot bozji” -Nemir, performed by Tose Proeski  and Karolina  Gocheva - Avalon production   MP3/Nemir.mp3 )
 

    The study shows that 71% of the people surveyed have 50% pirated CDs, while six of the surveyed even have a 100% pirated CD music collection. According to the research of IFPI, this situation usually occurs in countries in transition, especially in the region of Southeast Europe. By accepting the Agreement for Association and Stabilization with the EU, among others, Macedonia also pledged to find a solution to this seemingly minor problem. As long as there are CDs that are 2-3 times cheaper than originals, people will not hesitate in buying the cheaper ones. On the other hand it is a serious problem, as there are substantial loses to both artists and producers.

    Macedonia is not the only country that has problems involving CD piracy; this development is common in many countries around the globe. Keeping in mind that Macedonian music CDs are well protected, we realize that most of the pirated copies come from countries such as Bulgaria, Ukraine, or countries of the Middle East.

    As we already stated, this paper only covered a part of our research. Bearing in mind that this is our first research on the subject, it is obvious that it has many flaws and limits. As pilot research it has fulfilled its purpose of gaining methodological and theoretical experience. However it is obvious that we came to practical results which will be used for further future studying of the CD marketing development in Macedonia.
 
 

Questionnaire