Music Business Music Industry Record Label www.mana.com.mx www.facebook.com/mana

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?
1. 45+ 26%
2. 15–19 13%
3. 25–29 13%

7. What Are We Buying?
1. Rock 34.0%
2. Country 13.0%
3. Rap/Hip-hop 11.4%
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