MUSIC INDUSTRY

1
MUSIC INDUSTRY
2
Oligopoly the Big 4

• Universal
• Sony BMG
• Warner
• EMI
• Economies of scale
• Both vertical horizontal integration

3
MARKET SHARE

• Universal (Vivendi) 31.7
• Sony BMG 25.6
• Independents 18.3
• Warner 15.0
• EMI 9.5

4
Music Sales Trends

• U.S Music Sales (1/3 of worldwide sales)
• 2007 10.4bn (down 9)
• 2006 11.5bn
• Down from 12.3bn in 2005
• Down from 14.5bn in 1999

5
MUSIC REVENUE TRENDS

• Sales of CDs are falling steadily
• Sales of digital tracks are rising
• Piracy / CD burning represents annual lost
  revenue of 4bn

6
Whos Buying?

1. 45 26
2. 1519 13
3. 2529 13

7
What Are We Buying?

1. Rock 34.0
2. Country 13.0
3. Rap/Hip-hop 11.4
4. RB/Urban 11.0

8
SOURCES OF COMPETITION

• Piracy of CDs and Cassettes.
• In No.2 market, Japan, 236m CD-Rs were burned in
  2002, while legitimate CD sales were 229m.
• In Spain, two out of five records were pirated.
• MP3 file swapping
• Competition from new forms of entertainment
  including video games and DVD films

9
Promotion

• Promotion as important as production
• Single largest expense
• Includes attempts to influence positions on music
  charts, radio play time (payola), tours

10
Conglomeration

• Synergies through ties to film studios, TV
  networks, publishing, etc.
• film scores developed from corporate-owned
  library
• music video channels promote own artists
• artists appear on talk shows
• magazine articles

11
Industry Strategies

• commonly 5 renewable 1-album contracts,
• royalty system pays the artist 7-15 payable
  after costs are met (plus songwriter publishing
  royalties),
• Decisions according to track records and
  reputations celebrity power
• Pre-selection systems selecting that which is
  most likely to succeed in light of recent
  successes