Bmg_Case_Brief

The music industry is under transformation. For BMG this is an opportunity to be the leaders in the industry. The internet has emerged as what will undoubtedly be the new distribution format for music. There is a new definition of value for music consumers. The goal for BMG must be to deliver that new kind of value while sticking to the business we are in. Consumers want simplified user interfaces, high variety/selection, and a simple to use player for digital content. BMG is not a software company or manufacturer of music players. Therefore the strategic position of BMG should be to capture a significant share of all downloaded music in the next five to ten years. Creating a specific percentage goal for the company to strive for unite the company into the future of record labels. This can be done by continuing to sign and promote artists (ongoing utilization of the internet as a platform) and making deals with as many distributors as would like to attempt to break into the business of digital downloading. Piracy is the new rival in the game and being hesitant to make deals with other competition is futile. Consumers are looking for options when they purchase their music. The online distribution channel that has all the artists they are looking for and is compatible with their player will win high market share. With the emergence of content available to users for free as a substitute, we must view rivals as complements in providing customers with all the choices they seek in artist content. Taking game theory into account creating a price war within the major record companies is not beneficial to the industry. With the emergence of more online content, variable costs will decline. Due to declining CD production and digital content duplication being essentially free, creating a non-price mix of value is ideal for BMG. This will be the case for all major record companies. Leave the price war to be fought at the retail level due to low switching costs of buyers and cost advantages of online distributors. At BMG we should have the strategy to be partners with as many distributors as possible across all channels to hedge the risk posed by the un-doubtable boom in online retailers due to reduced barriers of entry. Making big bets to guess the next format of distribution or the next emerging trend in players is of no advantage to BMG. Sell CD’s to brick and mortar, catalog, and online sales and bytes to download distributors. Continue to promote on all channels. This strong overall strategy should allow BMG to stay congruent in all departments. Fads will come and go in, what has potential to be a long, shakeout period. Staying focused on the current strengths of BMG will be crucial in the coming years, mimicking is not sustainable. It is important to remember the leverage we hold against independent labels and emerging internet distribution sites. The current list of artists boasts an advantage for promotion and distribution for emerging artists as well as mitigating risk of promoting a new artist. Given our current market position we have the ability to experiment in a time of flux. There is no advantage to limiting the company. As relationships develop one structure will emerge and new entrants will be less common. Remaining flexible in experimentation will allow BMG to quickly cut off failures and aggressively institute successes. At BMG we have the opportunity to hold multiple positions within the industry. Making our content available for download before competition will present an advantage and investing into R&D heavily could reveal alternate ways of entering the market. This will further prevent any new entrant advantages from emerging. Findings new features to offer customers and easier accessibility to content should be a focus. Finding important focuses and digging deeply will be vital in avoiding pitfalls. Considering the current structure of the industry and where it is headed, a timely reduction in the production of CD’s could provide a significant cost savings as restructuring occurs. The current internet presence of BMG will constantly be refined due to the heavily reliance on technology for delivery. Creating a new segment of distribution that deals exclusively with internet distribution will be a wise investment. Hiring on a manager to work with Jones who has experience in digital formats, supported by IT savvy subordinates will allow for value creation in this department rather than simply growing. Jones will remain an important cog in the distribution with current retailers, but someone with experience in digital technology will be vital.