The Music Industry

Introduction

In the recent years there has been a change in the structure of the Music industry and the paths that have been used for creating, promoting and distributing music. Most of these changes have been a result from the advancements in technology, which affected both economical and technological structures of the industry. To understand better how these changes have affected the industry and their possible future impact, we need to clearly understand the current structure.

The value chain of the present music market is pretty simple. We have four main players - Artists, Music Agents (intermediates), Distributors and Consumers. The way that the product, in our case a musical CD or just music, reaches its final destination is most of the times well defined. There are a few exceptions that I will discuss later.

Musicians come to the record company or music producer with a sample of their music. Than if these so called "gate keepers" decide that it is worthy to publish and the music is promising they sign a contract with the musician. Copies of albums are recorded and than the product is promoted and distributed on the market, as the specifics of the different kind of music are taken in mind. The interesting thing with the music industry is that we do not have one ultimate consumer but diverse audience because each product is specific and has a specific niche in the market. Companies are optimizing their profits by selling the particular product to the group which demand is the greatest. Financial means and industry contacts are used by music publishers and record companies to attract attention to new releases and create demand.

At present there are 5 major companies dominating the music market - EMI - (Thorn), Warner - (Time Warner), BMG - (Bertelsmann), Polygram - (Philips), and Sony. Most of them are also dominating the global market. It is a trend and many of the companies are incorporating both music recording and music publishing. They are doing this because music publishers are earning a lot of money from the contracts with the musicians and percent (33% - 50%) of the produced CD's and companies can gain these profits for themselves.

Key Players of the Industry

Major Music Publishers by Gross Revenues and Rank

EMI (#1)Warner-Chappell (#2)BMG (#3)Sony (#4)Polygram (#5)

Market Share of the Five Major Record Companies (% of sales)

EMI - (Thorn)10142222131516

Warner - (Time Warner)227131113814

BMG - (Bertelsmann)128159111314

Polygram - (Philips)13132322322313

Sony14181213251413

Tota l30.519.08.26.56.01.870a

Total ($M)12.1027.5523.2702.5722.392.717

Country's global rank (#)123458

Online Music Industry

The other major point is the Internet Market. The Internet has played a major role in the past few years and as it seems it will grow more. Here is a simplified mode that will help you understand my point easier.

It is easier now for the Artists to contact the Distributors directly or even record CDs by themselves and distribute them to the customers. E-commerce allows this skipping of the intermediaries in the market but at the moment it is not so wide spread. Also it allows not only the artists but also the music agents ...