BMG Entertainment Essay

1374 Words 6 Pages
BMG Entertainment

The Internet, by making free and non-free online distribution of music, has profoundly affected how business is conducted in the record industry in terms of distribution channels, copyright and the economic structure of the major players in the global market. Initially, the Internet was viewed as an opportunity by some of the major players as a new channel of promotion. However, after the existence of Napster and few others, the majority considered it as threat because of the increase in the free file sharing. Consequently, for the Internet to be an opportunity for the major players, they had to adopt new business model in terms of distribution for online customers while keeping their conventional distribution
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According to the WSJ, while spending on U.S. online music was $836 million in the year 2000, about 5.5% of the total revenue in the music market, it is projected to increase to $5.36 billion by the year 2005, about 25% of the market.

BMG Entertainment is one of the earliest to enter the online opportunities. Created websites to attract consumers, and it was the first to use downloading technology to use it as promotional tool. Some of the tangible assets are worldwide production facilities, partnership with technology companies, financial power, second in terms of market share for the last few years. In addition, BMG has a technology group within the division, very successful distribution center, diversified foundation of catalogs, and the size of the company. Some of BMG's intangible assets are established brand name, strategic alliances as promotional tools, its parent Bertelsmann, the German giant media corporation gave BMG additional strength.

The current strategy for BMG is to experiment an encryption method to reduce piracy while participating in a joint venture with three of the other major players to utilize the Internet as a sales channel. The problem with the current strategy is that consumers are not satisfied with the services that MusicNet is providing in terms of prices and the limitation of the services in terms of downloading, burning

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