BMG

6 Pages 1481 Words

Dominance of handful of key players in the last century.
This was because of following entry barriers in different decades.
Till 1920’s:
· Patents to the oligopoly. Therefore no access to technological know-how.
· Industry in its embryonic stage. This implied slow growth because of
o Buyer’s unfamiliarity with the industry product. Unless records were available machines were useless.
o High prices due to lack of scale economies
Early 30’s
· Depression hit industry. Therefore it was consolidation time though otherwise it would have been growth stage for the industry.
30’s and 40’s
· By now established firms had stronghold on production (scale economies), marketing and distribution.
50’s and 60’s
· industry reached shake-out stage. There was more supply than demand. “payola” was widespread to beat the supply.
70’s, 80’s and early 90’s
· This was maturity stage. established players had set up mature distribution network and promotional channels.
· Reconsolidation started happening.


Thus the patents in embryonic stage and a depression in the otherwise growth stage of the industry gave the initial players enough time to reach scale economies and edge in marketing & distribution which they did not lose out on. Therefore only a handful of major record companies dominated the music industry.

Change in structure and economics of music industry because of Internet:
1. Online sale of physical products: physical retailer falls out of picture and rest of the structure remains same.
a. If website is owned by another company:
i. Structure: distribution division supplies stock to website’s distributor who further supplies to the customers.
ii. Economics: distribution and sales cost of record company will come down as supply is to be made to less no of physical locations. Though there is no retail expenses, there will be website settingup+operating expenses (very high and not fixed as intern...