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MUSIC INDUSTRY

MUSIC INDUSTRY. Oligopoly – the Big 4. Universal Sony BMG Warner EMI Economies of scale Both vertical & horizontal integration. MARKET SHARE. Universal (Vivendi) 31.7% Sony BMG 25.6% Independents 18.3% Warner 15.0% EMI 9.5% . Music Sales Trends.

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MUSIC INDUSTRY

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  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. Who’s Buying? • 45+ 26% • 15–19 13% • 25–29 13%

  7. What Are We Buying? • Rock 34.0% • Country 13.0% • Rap/Hip-hop 11.4% • R&B/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

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