2. MUSIC INDUSTRY

3. Oligopoly – the Big 4 Universal Sony BMG Warner EMI Economies of scale Both vertical & horizontal integration

4. MARKET SHARE Universal (Vivendi)31.7% Sony BMG25.6% Independents18.3% Warner 15.0% EMI 9.5%

5. 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

6. MUSIC REVENUE TRENDS Sales of CDs are falling steadily Sales of digital tracks are rising Piracy / CD burning represents annual lost revenue of $4bn+

7. Who’s Buying? 1. 45+26% 2. 15–1913% 3. 25–2913%

8. What Are We Buying? 1. Rock34.0% 2. Country13.0% 3. Rap/Hip-hop11.4% 4. R&B/Urban11.0%

9. 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

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

11. 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

12. 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