Bmg Case Analysis

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Case Summary #3: BMG Entertainment
2008310606
Ji Min Lee

1. Why have a handful of major record companies dominated the music industry through most of the last century?

The world market of record music in 1990s was dominated by only five big corporations: BMG Entertainment, EMI, Sony Music Entertainment, Warner Music Group and Universal Music Group. The majors could maintain their status thanks to patents and agreements, technological improvements and M&As. The majors had the complete control of patents and music rights from the artists. Even though the artists tried to directly contact to the customers, they could not afford the attempt. Thus, they relied on the professional signers and on the publishing company. The publishing companies hired composers and lyricists, and the products were sent to record companies with advanced phonographs. The companies that could follow the technological improvements were the successful ones. It was important to own the instruments that shaped consumer trend. When the industry faced difficult time, several merges took place as a means to sustain the company’s market share and dominance in the industry. Three of the five major companies were formed out of the 1931 mergers. Also, through vertical integration, the recording companies could reduce costs and raised the entry barrier to the industry. As the big companies got more and more market share, they diversified their investments and produced all kinds of genres. They secured all the valuable shelf-space in the retail stores, making it extremely difficult for other newly competitors to compete with them.

2. How does the advent of the Internet change the structure and economics of the music industry? Will major record companies continue to dominate the business?

The advent of the Internet is a disruptive technology for music industries like BMG and other major recording companies. The statistic shows the impact of the Internet. Online sales accounted for...
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