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BMG Case Study

 

            
             (a) Why have a handful of major record companies dominate the music industry throughout most of last century?.
             Major record companies were able to dominate the music industry throughout most of the last century for the following reasons:.
            
             • High Entry Barriers.
             With the key development of patented music recording technology, Edison, Columbia, and Victor created and maintained an oligopoly in the recording market for years. Through early alliances and partnerships with smaller companies, the three record companies soon became global. The advance of radio technology caused industry-wide reorganization and allowed for the rise of RCA, EMI, and CBS as core record companies that dominated the industry in 1999. One reason why the three major labels were able to maintain high entry barriers was by developing new formats for distributing music and setting the standard for recording playback (discontinued EP and agreed to sell players for 33-rpm and 45-rpm discs). Another barrier to entry existed in the fact that large record labels like RCA were able to sign on popular music artists such as Elvis Presley to dominate the music industry. Moreover, they were able to buy out contracts of smaller record companies with music artists, as well as scarce shelf-space. Lastly, through vertical integration, major record companies were able to reduce internal costs such that competitors entering the market couldn't compete on the bottom line.
            
             • More Marketing Power.
             Due to developments in distribution network and promotional channels that allowed major record companies to mass market more effectively, smaller record companies sold out to major companies or had major companies distribute records on their behalf. However, in order to maintain the loyalty of fans to smaller "indie" bands, labels of small record companies were kept, despite having been bought out by major companies.


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