Major Labels
Over this past weekend, I had a conversation with a friend of mine about the music industry. I was talking about the way that some of the big name artists were moving away from the major labels to companies like Live Nation that offered ’360 deals’ and touring venues throughout the world. I described how this showed how we should follow the money – from record labels no longer selling albums to the live concerts where people were still paying for the experience.
My friend said that I was missing a big point though. He agreed that there was more money to be made now in live shows, but he also mentioned the fact that some of the 4 major labels (Sony, Universal, Warner, & EMI) have very rich parents (Universal – Vivendi, Sony – Sony Corp). Not only do they have rich parents, these rich parents also own a large percentage of the media companies out there.
Take Sony Coporation for one, Sony has Sony Electronics, Sony Pictures Entertainment, Sony Ericsson, and Sony Music Entertainment. Vivendi has ownership in NBC Universal, Activision, and of course Universal Music Group. So even though Sony & Universal are losing share in album sales, they have a number of other media avenues in which to sell their songs. That is why we are seeing songs on video games, tv shows, and movies like never before. Take the popular video game ‘Guitar Hero’ for one. It is produced by Activision, which is owned by Vivendi, which also owns Universal.
I think it is telling that the top 2 record lables are Universal (32% of market) and Sony (24% of market). The others, Warner & EMI, are not owned by large media conglomerates. Warner used to be associated with Time Warner, but that is no longer the case. It seems that the strategy of Warner & EMI is to maintain their strong presence in publishing and continue to collect on royalties. Each company has a strong publishing arm. They also have less of the market – Warner 21% and EMI – 9.5%.
So Sony and Universal are part of huge media conglomerates. Warner is its own public company listed on the NYSE. And EMI was purchased by a private equity firm, Terra Firma (not a media conglomerate). It seems as though Sony & Universal have more readily available options to diversify being under the media conglomerate umbrella. We shall see how these strategies play out in the near future.
Stay tuned,
Erik
erikrostad.com 
