Sonybmg Case Study

Topics: Music industry, Sony Music Entertainment, Universal Music Group Pages: 21 (9308 words) Published: October 18, 2008
Synopsis
In 2004 a joint venture was created by Sony Music Entertainment and Bertelsmann Music group to create Sony BMG. With 46 offices all over the world, Sony BMG finds there headquarters in New York. The company aims to provide a wide variety of music through limitless distribution channels. Sony BMG caters to almost 1,000 artists in six different genres. Despite the problems Sony BMG has dealt with in the past four years, they have stayed strong in their position as the second largest recording company. They have problems with their top executives and powered through new ideas which turned out to be some of the worst decisions. Sony BMG is dedicated to customer satisfaction and introducing artists into as many markets and divisions as possible.

Problems
Sony and BMG executive clashing over management styles
Follow the Leader mentality
Inability to cope with Illegal downloading
Advertising their artists instead of themselves as a company SWOT Analysis (See Appendix Part A)
The Music Industry
The music industry is the largest art related industry in the world. The SIC code of the music industry is 3652, which is the Phonograph Records and Prerecorded Audio Tapes and Disks. Basically, it concerns the creation and selling of CDs, cassette tapes, and now the new realm of the internet mp3s (US Department of Labor, 2008). It has been around, to a lesser extent, since the 1700s, when musicians first began to make a living selling their music to the public (Glover, 2005) and has progressed from selling sheet music to now using the internet to pass along music. It is constantly expanding with thousands of albums being produced every year with new ways to distribute the constantly changing music. Getting into the physical industry (selling CDs) is fairly easy, but succeeding on a global scale requires an immense amount of luck, ability, and financial backing. The market structure, like most established and large industries, is an oligopoly. There are four major music producing companies that are producing at least eighty percent of the market’s music. The industry is hard to get into because of the high capital needed to produce national and even global awareness of their products. While it is possible for a small company to produce several records for their niche markets and compete with the Big Four locally, it is quite unlikely that other companies are able to compete on a global, national, or even state-wide scale against the Big Four. Another resource that is taken up quickly by the main four companies is the human resource. The best singers and musicians are likely to be given much better contracts and promised much better exposure to their customer base by going with the Big Four. This is also a problem for gaining entrance into the industry. The four main companies in the industry are as follows: Universal Music Group owning 31.61% of the overall music industry market and 34.37% of the albums market, Sony BMG owning 27.44% of the overall music industry market and 28.13% of the albums market, Warner Music Group owning 18.14% of the overall market and 16.85% of the albums market, and finally Thorn/EMI owning 10.2% of the overall market and 9.23% of the albums market (Cashmere, 2007). The largest trend in all industries around the world is the use of technology and the music industry is no different. New technologies are causing an uproar by recording companies and applause by consumers. Programs such as the infamous Napster, Kazaa, and the now prominent iTunes are allowing easier distribution of single songs and whole albums at prices much less than originally believed possible when compared to albums on CDs. These new programs (iTunes excluded) originally started out as free-ware: a program that is downloaded for free and doesn’t require a fee for downloading songs. In 2006, through the use of programs like those and other freeware it is estimated that around five billion songs were illegally...

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