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CD Pricing in the Recorded Music Industry
Case Analysis
Strategic Marketing Management
EMI music group was formed in 1931 when Gramophone Company merges with Columbia Graphophone to form Electric and Musical Industries (EMI 2007). EMI started with operations in nineteen countries and has eventually grown to operations in over fifty countries. EMI has the rights to over one musical composition. Of the five major music companies, EMI has the least market share in the Unites States. This market share may now be in jeopardy as Universal Records has decided to decrease the price of its CD's in an effort to generate sales. EMI must determine what they would gain or lose by dropping or not dropping their retail price for CD's and the price charged to retailers.
Case Facts
The recording industry is highly competitive with its profits based in its ability to attract and retain artist who sell hit records. Advertising, promotion and publicity for its artist are central elements in a music company's marketing program and they represent a sizeable amount of the company's costs. Universal has more market share because it has more hit artist and a larger music catalog than any other music recording company. Because of these facts, Universal is susceptible to the most losses. Universal made the decision to slash its CD prices in the US by up to 31.5 percent in the US, not to increase market share but to persuade consumers to start buying CD's again (Universal, 2003). Since the advent of new technology allowing consumers to obtain music in non-traditional means, actual CD sales in the US had been on a decline since 2000 (Kerin, 2007). In fact, four of the major five record companies reported losses in the first half of 2003. Universal is considered a heavy hitter US with a market share of 29.4% while EMI ranks in the bottom of the five major record labels with a mere 9.8% of US market share. EMI was the only company that did not report losses the beginning of 2003 due to major reorganization efforts.
Existing Marketing Problems
EMI's major problem is lack of market share in the US. Upon first glance one would think that the major problem that EMI is faced with in its US market is the possibility of a decrease in its CD sales caused by the decrease in CD price by Universal Music Group. It is acknowledged that the decrease in price by Universal will affect EMI but Universal's price cuts are not the only or main problem EMI is faced with.
I consider myself to be a fan of all types of music and I like to stay involved with the music world. Music is such an integral part of society in so many different aspects. Music defines time periods, brings back childhood memories, educates, relaxes as well as inspires. Stop and think for a moment if the music stopped, what would the world be like? A sudden silence overcoming the world. More realistically, stop for a moment and think what it would be like if you could not see your favorite band in concert.
copy the discs(148). Marketing and promotion decide the best way to sell the record, while Distribution gets the record in stores. Lastly, and probably most importantly, is the Administration. This handles the bills and keeps track of how well the record is doing in the market(148). Without the help of each of these particular levels, the recording industry would have problems. The only other problem would be to make sure people hear the music and buy the record.
The two biggest components are major and independent record labels. Major record labels are the driving force of the industry, “Big Four labels/major record labels represented the majority of the music sold, making up as much as 75% of the music market or more depending on the year.” (About.com) Additionally, “The five major record labels; Sony, Universal, BMG, EMI and Time Warner dominate 85% of the market when it comes to sales of Compact Discs. Leaving only 15% for the hundreds of independent record labels and thousands of artists out there." (Raprehab and Bomhiphop.com) In his essay A Brief Outline of How the International Popular Music Industry Manipulates and Exploits the Audience, Shams Quader discusses this issue."Big Four is responsible for 70% of the worldwide music and 85% of US music sales. ... Seeing that these companies have such a monopolistic hold on the world market..." (Quader) it would be safe to presume that the music monopoly was/ is created as a result of how the three major record labels today are holding more than three forths of the net profit of the industry moreover the question of the monopoly was brought to the table especially when Universal Music Group proposed a merger with EMI and many of its top billboard chart artists, Universal Music Group was also the
In this case, there are three main effects of Napster on the recording industry. The first one is that it caused a large decline in record sales in a short time. According to this case, the spending on recorded music in U.S dropped 4.1% in 2001 and the industry’s top 10 albums also sold much less compared to the year before. The second effect is that it cased the sales of CD burners, blank CDs and digital audio players increase and nowadays, most new computers come with CD-RW drives installed, which means people can easily store downloaded music, share music with friends and take it with them anytime as well. The third effect is that it increased the cost of recorded music. Once people can download free music through peer-to-peer software services, they have less incentive to buy original editions, which will make recording industry spend more to fight against copyrights and invest more in new artists and new music. Overall, these three effects make the recording industry go through a hard time.
Corporate greed is nothing new to the music industry, as its long history of artist exploitation continues today. While greed in business may not be seen as a bad thing, when it comes to the creative industries it is the fundamental evil between creativity and commerce. If the artist doesn’t make you money, you send them on their way, and if they do, you try to give as little as contractually possible to the artist themselves. Some labels will claim they are there for the music, and that they are a label that is loyal to its artists and are focused on the quality and integrity of the music and artist alike, but this couldn’t be further from the truth. Corporate greed cuts into the innocent ideal that labels are genuine music lovers who want
not prepared to pay as much for a 'disposable' product as they are for a
The three major record labels are Sony Music Entertainment, Universal Music Group, and Warner Music Group; these majors have sub-labels such Atlantic Records (Warner) and Columbia Records (Sony). There are thousands of indie labels (300 Entertainment, Mad Decent, etc.) yet they only represented about a third of the total US album market share in 2015. Majors have substantial amounts of capital at their disposal and key divisions in-house (distribution, publishing), often putting them at an advantage over their smaller competitors. The below graph shows just how large a share of the US recorded music market the major labels controlled in 2015 compared to their many independent
The most significant down side to technology is the loss in revenue from album sales. Illegal downloading of music has become prevalent in today’s society, and many artists—major or independent—receive little to no profit from album sales. Many companies, such as Apple, have tried combating the issue with protected file formats, but a loophole has always been found to bypass the protection. Unsigned and independently signed artists hurt the most, as they pay almost everything out-of-pocket to produce their music. The only feasible response to the loss in revenue, artists have found, is to increase tour dates. In today’s age, it is not rare to find artists who tour more than eight months out of each year. Touring has become one of, if not the only, reliable source of income for many
Sheffet, Mary Jane. "The Supreme Court And Predatory Pricing." Journal Of Public Policy & Marketing 13.1 (1994): 163-167. Business Source Complete. Web. 15 Apr. 2014.
Although a lot of times the artists the labels push are not successful, there are also times where they succeed. Artists such as Pink Floyd, the Rolling Stones, ACDC, Foo Fighters, Journey, The Beastie Boys, Eddie Van Halen, Rick Springfield, The Beatles, and Nirvana are all examples of successful artists who were picked up by record companies because they were the next new, big, thing andor because they were considered to have potential for making money. The record industry has been around for about a century, and recently the record industry has taken on a transformation. There were many changes in the business of music records from the 1980s onward.... ... middle of paper ... ...
Music Business Music Business Exam Number One Question 1 - What is The music publishing industry at a glance would seem to be those who print sheet music, method books, lead sheets, and all of the texts or notated music that musicians (and those aspiring to be musicians) use. Years ago, this was what most music publishers did, but as the industry has evolved, the process has become much more complex. Music is not just ink and paper, intellectual material and property to the individual who writes it. Therefore, the song does not become "a song" when it is written down. This is not an easy concept to grasp because the song itself has no physical makeup.
There are six key new market disruptions concerning the digital distribution of music: the creation of a new and broad customer base, the possibility of an annuity versus a per-unit revenue model, the gatekeeper advantage for a record company having proprietary access to a new digital distribution infrastructure, understanding of a technology that could be applied to other digital content, need for balance between physical and digital distribution strategies, the strategy the incumbent should adopt with respect to the evolving war over digital distribution standards. Was there a disruption or an evolution?
Modern vinyl records are nearing a century old, and the product as a whole seemed to have peaked in the 1980s. Vinyl records themselves most nearly ghosted the market place by the mid 1990s with the advent of digital media and the compact disc. I had thought for nearly all of my youth that the ease of convenience of digital music, and especially streaming services had put the final nail in the coffin for this product as retirement was in its last waining hours. According to Jordan Passman, contributor to Forbes, “Vinyl records are projected to sell 40 million units in 2017, with sales nearing the $1 billion benchmark for the first time this millennium. This impressive milestone has been untouched since the peak of the industry in the 1980s…explosive by today’s standards”.
This concern was proved to be true when sales of recordings in the US went from 104 million in 1929 to 6 million units in 1932 and sales of phonographs decreased to just 40,000 units a year (Frith, 1988). The most obvious consequence of this drop in sales was the collapse of the small phonographic companies that had developed during the phonograph boom in the 1920s. The offer is now concentrated in an oligopoly,
Music piracy is a developing problem that it affects the music industry in many different ways including being responsible for the unemployment of 750,000 workers, as well as a loss of $2,5 billion; therefore, I want to explore ‘To what extent has music piracy affected the music industry market in the United States over the last 10 years?’