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Music Industry-Structure

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Case Analysis BMG ENTERTAINMENT Presented By: Group 2 Abhishek Pandey Alisha Sehgal Kapil Jaitley Yatin Malhotra Yashupriya
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Page 1: Music Industry-Structure

Case AnalysisBMG ENTERTAINMENT

Presented By: Group 2

Abhishek Pandey

Alisha Sehgal

Kapil Jaitley

Yatin Malhotra

Yashupriya

Page 2: Music Industry-Structure

Case Overview

¨ History of Music Industry¨ Evolution of Music Industry¨ Major players in Music Business¨ Introduction of Internet¨ Impact of internet on economics, Structure

and Dominance on Music Industry¨ Actions taken by major companies in wake

of e-music

Page 3: Music Industry-Structure

Internet Usage

Page 4: Music Industry-Structure

Music Industry-Structure

Before the advent of Internet

Page 5: Music Industry-Structure
Page 6: Music Industry-Structure

Music Industry-Structure

After the advent of Internet

Page 7: Music Industry-Structure
Page 8: Music Industry-Structure
Page 9: Music Industry-Structure

Structure of music industry

1. Lower barrier to entry

2. Reorganization of the supply chain

3. Subjecting the public to a different point of service.

Page 10: Music Industry-Structure

ECONOMICS of Music Industry

Page 11: Music Industry-Structure

Pre Internet

A typical Recoding Company spent $ 300,000 in Production and Marketing

Of this $ 200,000 was classified as Recoupable cost

Artists were paid $2 per unit sold after selling 100,000 units

Hence a failed album put the burden on primarily on artist

Page 12: Music Industry-Structure

Post Internet

¨ MP3.com gave artists the flexibility to choose setting their prices within a range of $5.99 to $ 14.99

¨ The company lost $ 40 million on sales of $20 million

¨ Emusic.com set the price of downloading a song for $ 0.99 and an album for $ 8.99

¨ It lost $ 18 million on revenues of $ 92,300

Page 13: Music Industry-Structure

For Major Players

REVENUES in:¨ Singles downloads have reached $363

million ¨ Album downloads $135.7 million¨ Annual growth rate of above 160%

Page 14: Music Industry-Structure

DOMINANT PLAYERS

Page 15: Music Industry-Structure

Dominant Players of Music Industry

Before Internet

EMI; 13.4

SONY; 16.5

Universal; 25BMG; 9.2

Warner; 26.5

After Internet

Page 16: Music Industry-Structure

BMG

1. BMG took the opportunity to use the internet as a marketing tool promoting its newest artists such as Britney Spears.

2. By placing the website on its CD covers, it created a large base for the success of its numerous websites promoting its artists.

3. By providing a service that updated customers on their favourite artists, the customers also knew when to expect new products.

4. Used the internet as a means to maintain market share without actually taking the operations online

5. The company has also established relationships with all the major companies involved in digital music downloading technology such as AT&T, IBM, etc.

6. Set up many websites for specific genre of music

Page 17: Music Industry-Structure

SONY MUSIC ¨ Launched Total E ¨ Pursued digital downloads¨ Installed “Digital Kiosks”

Universal Music Group¨ Launched Getmusic with BMG¨ Went for digital downloads

Page 18: Music Industry-Structure

REVENUES OF MUSIC COMPANIES

Beginning of INTERNET ( FY 1999)

COMPANY REVENUE( $ mm)

BMG 4306

EMI 3596

SONY MUSIC 6336

UNIVERSAL MUSIC GROUP

3751

WARNER MUSIC GROUP

3834

POST INTERNET ( FY 2000-2007)

Page 19: Music Industry-Structure

INFERENCE

From the table we can infer that post internet era has led to:

1. Decrease in revenues of BMG

2. Substantial increase in revenues of Warner group, EMI

3. Increase in revenues of Universal group

Page 20: Music Industry-Structure

IMAPCT OF INTERNET ON MUSIC INDUSTRY¨ Internet file sharing is an inevitable fact and a rapidly increasing trend. ¨ • People enjoy to trade music and to download favourite songs at zero

cost. ¨ • People prefer to download individual songs, not entire albums. ¨ • People are searching for popular music but also for music that is

difficult to obtain in ¨ offline music stores (for example old songs and regional music). ¨ • Digital music industry is not immune to theft within recording

companies (for instance ¨ some songs were released trough Napster months prior to their

commercial release, ¨ such as Mettallica’s “I Disappear” and Madonna’s “Music”)

Page 21: Music Industry-Structure

Positive Impact

¨ Ease of music distribution by artists`¨ Music downloading is the only way for most

people to access the “dead” songs¨ Music Piracy allows down loaders to experiment

with unknown artists, thereby increasing the sales in long run when they buy songs of these artists`

¨ As shown by by the 2005 RIAA Consumer Profile, cd sales at concerts have risen, implying that there are more people attending concerts

Page 22: Music Industry-Structure

Negative Impact

¨ The record labels have experienced falling sales and attribute this to the increase in 'piracy‘

¨ Retailers of all sizes are feeling the effects of falling CD sales on their business. Smaller retailers complain that the disadvantages they face in competition with the larger stores is being exacerbated by the availability of downloaded music

¨ HMV, Virgin and Tower Records, the three major retailers, have had to face renewed competition from on-line retailers such as Amazon.

¨ Intellectual property theft (IPT)

Page 23: Music Industry-Structure

Conclusion¨ Long term album sale increase¨ Access and exposure of out of print music¨ Greater influence of independent and other lesser known

artists¨ Sony, EMI, Universal and Warner Group have had

increase in their revenues while there has been a huge drop for BMG. This shows that these players still dominate the industry scene wherein BMG has lost its hold substantially

¨ Many small level players have also come up¨ Value chain now focuses on involvement of internet


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