Gramophone Company of India owned the largest catalog of Indian music, dating back to the early 1900s. During the 1990s, in a remarkable turnaround, the company went from government-supervised bankruptcy protection to a return to profitability. However, in 2000, Gramophone was faced with the challenge of the Internet and digital distribution of its music content. First, Gramophone had to decide whether it should launch a website and e-commerce operations for each of its four divisions, or if it should attempt to integrate the various sites. Second, Gramophone also considered selling its music content via the Internet. If the company decided to pursue direct music sales to its customers, there were several other decisions to be made. Should it sell pre-recorded CDs or sell made-to-order customized CDs? Should these Internet efforts target Indians living in India or Indians living abroad? How should any direct Internet sales be priced? And, what impact would direct sales have on its traditional distribution channels? Further complicating Gramophone’s decision was the fact that e-commerce in India was still in its infancy. India had just 10 million telephone lines, and only 2.7 million of the country’s 1 billion inhabitants had Internet access. Moreover, only 2 million people owned credit cards.
