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. Issues in the Music Industry This is a clip from the documentary Artifact following the band 30 Seconds to Mars and their issues with the record company as they record a new album Excerpt from Artifact Take next 2 mins to check in about issues identified in clip What are your questions right now? What are the implications for artists? Consumers?