For centuries man had dreamed of capturing the sounds and music of his environment by means of music recordings. The road to successful music recording had not been smooth until the derivation of the music recording industry. Since the inception of the music recording industry, the way in which music is produced, distributed, sold and consumed have greatly changed so also has popular music changed over time. These changes resulted from new technology which was invented between 1890 and 1900 and paved way for entry, which in turn has caused significant structural shocks within the industry. The Sound Recording Technology invention has not only changed the way we listen, but has also substantially reduced the cost of production, reproduction and distribution of the industry’s product to the very minimum especially within the past 5 years. Although technology seems to pose an obstacle to entry into the industry, recently, the main barrier to entry over the past years has been radio airplay because of the cost associated with informing consumers about the existence and the nature of products in the industry. Between 1900 and 1910, there was an integration of three large firms (Victor, Columbia and Edison) who controlled most audio-related products including playback devices and the audio products themselves and this served as a substantial barrier to entry. But it is possible for another technology of supply, high speed internet, might eventually offset this important barrier to new entrants into the industry. After 1910, the music recording industry became the center of controversy involving (1) alleged price fixing by the major firms in the industry and (2) massive alleged copyright infringement by consumers, in what amount to a free-for-all over economic rents. The clash between the firm and their consumers has erupted in legal open warfare, with the Federal Trade Commission and courts finding the major firms guilty of overcharging consumers by nearly half a billion dollars in a scheme that maintain artificially high prices, and the industry suing hundreds of consumers for copy right infringement according to Prof Peter J. Alexander in “Market Structure of the Domestic Music Recording Industry”. In 2003, The Business Week Online posted that, The Recording Association of America (RIAA), the trade association for the music recording industry, issued hundreds of subpoenas aimed at individual consumers whom they alleged to be copyright violators.
Number of Firms
The market structure of the music recording industry is made of five large international and integrated firms. These firms are Vivendi Universal, Sony Corporation, Time warner, Emi Group and Bertelsmann AG. These firms exhibit number of characteristics including dating back as far as the twentieth century. Also, with the exception of Time Warner, all the firms have been sold and bought many times. Additionally, each firm except EMI is part of a larger media with particular interest in motion pictures, television, cable and book publishing, music publishing, production, manufacturing and distribution. The largest among these firms is the Vivendi Universal Music which was created in 1998 from two major French firms, Polygram and MCA. According to the Various Company Reports, represented by the table below, the Vivendi Universal Music is currently the largest music company in terms of market share and recorded music revenues. It owns the largest recorded music in the world, with over one million catalog of recorded music. Its operational activities include production, distribution and publishing of music as well as licensing of music copyrights. According to Prof Peter J. Alexander, in 2002, one out of every four compact disks sold worldwide was a Universal Music Group Product. Some of the Vivendi’s other media holdings include Universal studios (motion picture), USA Networks (television) and Houghton Mifflin (book...