Download - BMG Entertainment - HBS Case Study
in April 1999 BMG and Universal announced a new venture,
Getmusic.com
In July 1999, Sony and Warner announced plans to acquire CDNow and merge it into
Columbia House
Through Getmusic, a venture with BMG, Universal sold
conventional CDs and cassettes and promoted its artists online.
By 1999, Time Warner was scrambling to catch up in the
online arena.
Way Forward – Ø By 1999, the top 5 started some kind of joint activities Ø Some of the companies were struggling to shift to Internet ** Will use this qualitative analysis for recommendations
Qualitative Analysis
Paremeters 1991 1992 1993 1994 1995 1996 1997 1998 1999Retail4Value4of4Sales4(US4$4in4Billion) 27.8 29.5 31.2 36.1 39.7 39.8 38.6 38.7 38.5
Units4Sold 2.8 2.9 3 3.3 3.4 3.6 3.6 3.6 3.6
Size4of4Global4Music4Industry Plot4of4Yearly4Trend
Take Away – Ø After 1996, the growth in terms of Revenue & Units sold is stagnant
Quantitative Analysis
Companies Revenues-(US-$-Billion) %age-Market-ShareBMG-Entertainment 4.3 11.2EMI 3.6 9.4Sony-Music-Entertainment 6.3 16.4Universal-Music-Group 3.7 9.6Warner-Music-Group 3.8 9.9
Total 56.4
Financial-results-of-major-record-companiesCompanies %age,Market,ShareBMG,Entertainment 17.3EMI 9.3Sony,Music,Entertainment 16.9Universal,Music,Group 25.5Warner,Music,Group 15.8
84.8
Music,Industry,Market,Share,in,US
Type Market*Share*of*the*top*4*Entreprise Total*No.*of*Entreprise*in*an*IndustryVery*High*Concentration*Oligopoly*(A)*type >*75% <*20Very*High*Concentration*Oligopoly*(B)*type >*75% 20K40
High*Concentration*Oligopoly*type 65%*to*75% 20K100Medium*(Upper)*concentration*oligopoly*type 50%*to*65% The*Number*of*Entreprises*is*very*largeMedium*(Lower)*concentration*oligopoly*type 35%*to*50% The*Number*of*Entreprises*is*very*large
Low*Concentration*Oligopoly*Type 30%*to*35% The*Number*of*Entreprises*is*very*large
Concentration*Ratio*Matrix*by*Bain*Consulting
Take Away – Ø As per the concentration ratio matrix, the global music industry is approaching Medium (upper)
concentration Oligopoly, and in US the Music Industry has already achieved very high concentration Oligopoly.
Recommendations
Snapshot of Music Industry Practices over time: • In 1929, due to depression in the recording industry, Thomas Edison went out of business • In 1931, Columbia, Parlophone, and Gramophone merged to form Electric and Music Industries (EMI) • CD Now, merged into Columbia House • ** From the discussion between CEO & VP - Two of the six companies that dominated the industry had merged a year
earlier, and at least one other was rumored to be looking for a buyer. • Seagram acquired Universal Studios in 1995 • Seagram purchased PolyGram in 1998. • From page 4 - By 1999, nearly 85% of the global market for recorded music rested in the hands of five corporations
Concluding from Qualitative, Quantitative, and Industry practices ü From the CR4 analysis of respective market shares, it seems that the market has reached a
consolidation phase wherein some of the leading players will be acquired by others. ü BMG Entertainment should look for acquisition or get merged with some company. ü From the financial results of 1999, the return on sales for BMG (4.1%), is lower than EMI
(10.2%), and Sony (5.1 %), so BMG could look for merger with any one of the two. ü BMG should focus more selling more online products.
Thank you …