Record Industry and Bmg Music Case Study

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BMG Entertainment

Since the earliest of times, music has become a way for everyone to be entertained, have a sense of closeness and the capacity to connect with each other. Prior to the 18th century, it was focused on the formal printing, arrangements and marketing. However, in 1877, technology changed the industry and the way it was delivered when Thomas Edison first discovered sound recording devices. This led the way for continuous transformations from LP records to digital music players / smart phones. BMG has been experiencing tremendous amounts of volatility in the last 25 years in order to keep up with these shifts. (Rivkin) To fully understand what is taking place requires looking at: these transformations within the industry, BMG's strategic relationships and organizational choices. Together, these elements will illustrate how the sector has influenced changes within the company itself.

Does technological change as a rule unseat the current leaders in an industry? What kind of changes causes difficulties for incumbents while other kinds do not? Be specific. Do digital innovations present challenges that are different from any other preceding competitive disruptions?

Advancements in technology forced the industry's leaders to be continually unseated. This occurred as far back as the 1920s, when radio created a divergence. It led to decreases in record sales and indicated a tsunami of coming shifts. As time has evolved, these numbers continued to change with technology as the primary driver. In the 1990s and early 2000s, digital music forced a major shakeup in how people listened to and recorded songs. Both the I Pod and MP3 player quickly became the items of choice. (Rivkin)

While the Internet, was replacing traditional radio stations with free and fee-based music sites. Firms such as Apple went from being on the brink of bankruptcy to domination (from the release of the I Pod). Whereas traditional record companies; lost their supremacy due to the lack of tight controls.

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Recently, smart phones are offering consumers with the ability to integrate their I Pod / MP3 player with the Internet and traditional cell phones. For many years, Apple was the biggest player thanks in part to their success with the I Phone. However, Google has quickly emerged by dominating the sector from a partnership utilizing Samsung (via the Galaxy 4). (Standard and Poor's) These transformations are illustrating the constant changes in the current leadership. Over the long-term, this will occur during some kind of technological shifts. As a result, the biggest challenges incumbents will face are recognizing and quickly reacting to them. This is what has occurred since the 1870s. (Hull) (Rivkin)

In the last several years, digital innovations are presenting issues that are much more complex. This is because of the availability of online music sites and free bootleg recordings. The result is the recording industry cannot police or prevent what is happening. To make matters worse, combining cell phones with portable listening devices are splintering the marketplace. This is leading to a rupturing of the profit margins inside the sector. In this case, the recording companies are having major problems from failing to adjust to these changes with their revenues become smaller. (Hull) (Rivkin) (Standard and Poor's)

BMGs leaders face an array of strategic choices, not one isolated decision. What are the choices involving timing, organization, customers and technology partners? Is there one choice that is the most internally consistent? Why is this choice consistent?

BMG is facing timing related choices, based upon how fast they are adapting to the digital music-based structure. This means that their royalties are declining. These are the fees they charge for the use of specific copyrighted works. The basic idea is to utilize this as a way to protect their profit margins. The problem is….....

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