Analysis of the Bmg Entertainment

1666 WordsAug 9, 20087 Pages
BMG entertainment, the world’s fourth-largest media company, was a subsidiary of Bertelsmann AG, a German media conglomerate. In 1999, it was a $4.6 billion music and entertainment company with more than 200 record labels and operations in 53 countries. Its revenue was derived from North America (51%), Europe (32%), Latin America (9%), and Asia-Pacific (8%). Despite of this BMG Entertainment’s ability of generating huge revenue, and its operating strategies to make the company sound, the BMG Entertainment, however, is now facing severe obstacles tough to overcome. 1) Executive Summary: As new technology came out in this world, music industry was destroyed. The advent of broadcast radio as well as Internet made many record companies…show more content…
The CD also required large costs to be replaced with old LPs and cassettes, so in this period, mergers and acquisitions were dominant by big companies, since not all of them could afford the large costs. Due to the advent of broadcast radio and music television, consumers did not have to buy records. Therefore, availability of substitution was increased and complement to record such as CD players as well. As substitution for music records increased, existing companies’ competition was much intensified. However, treat of new entrants was still very low, since opening a new entity in music industry required a lot of capitals. Record companies produced music records within a variety of genre, and sold them to not only domestic customers, but also international customers. Therefore, there was low bargaining power of customers and suppliers. 4) Current Industry Analysis with Internal Analysis: As it is discussed briefly above, that Internet hurt music industry. Especially the development of downloading MP3 files over Internet reduced people’s need to buy physical products such as CDs. They could enjoy listening music through their personal computer or MP3 players instead of audios or CD players which required inputting CD or cassettes. Because posted songs on the Internet web sites were primarily illegal and pirated songs, they used the songs for free. As a result, sales of record companies declined

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