Bmg Music Group

BMG

How do these threats and opportunities impose on the current business model of BMG?

. 1. If you were Strauss Zelnick, would you proceed to implement digital music distribution? Why? Comment about it If you were Strauss Zelnick, would you proceed to implement digital music distribution? Why? Comment about the threats and opportunities that this technology imposes on the current business model of BMG.

The business model of the music industry and specifically BMG was set up to put BMG in the most powerful position. Content producers such as composers, lyricists, performing artists and music publishing companies worked through the record companies to reach methods of distribution and then finally the consumers. BMG was the gate keeper of all the content that needed to reach the consumer. The advent of the internet and providing musical content on the internet had the ability to cut out the distribution centers and connect the artists directly with the consumers. Yet if BMG did not address the digital music distribution strategy then it would be in danger of not being in control of this medium and providing the consumer with the services that they needed. As the CEO of BMG, I would implement digital music distribution in order to test it out and see if it would be an effective distribution method.

The Opportunities with digital music distribution: One of the most important opportunities with the digital music distribution service is that it would cut costs, time, manufacturing, and distribution for musical content. This would could result in more reduced costs to the consumer and increased profits for the music company. Allowing content online would also potentially introduce old music to a new audience of listeners. At the record stores and on the radio, vast collections of music were not able to be played or stored due to space and time issues. Online, all the music could be sold to whomever was looking for it.

The threat of digital music distribution: Digital music distribution disrupted the decades old operations of the music industry. A handful of firms had always controlled the market and they were able to maintain this control because of their mastery of the status quo. Through new innovations such as the tape recorder, cd, and dvd forced these firms to adapt, the advent of the internet and its impact on the music industry was novel and set up a unique set of challenges. The first notable challenge was that BMG owned and worked with two hundred labels in fifty three countries. They also owned manufacturing facilities in Argentina, Brazil, Germany, Hong Kong, Ireland, Mexico, South Africa, Spain and the United States, creating 2.5 million CD's per day. By creating a digital music distribution-operating arm, they had to face the reality that one day, digital content might compete with or replace the CD and render the physical distribution centers obsolete. The ramifications for this worst case scenario had to be thought out and carefully implemented.

The other threat was that BMG would not be able to control the 700,000 songs that their music-publishing department controlled and managed. The Internet was volatile and the though they might be able to invest in anti-piracy methodology, there was no guarantee that it would be as effective as necessary.

. 2 If so, would you do it through the existing distribution organization or build a new and independent one, from the scratch? What are the pros and cons of each option?

. As the CEO of BMG, I would definitely build a new distribution organization dedicated specifically to online distribution. Though the principle is the same, physical distribution organizations have a completely different structure and set of expertise. If the goal is to make the online distribution organization as successful it needs to have its own special attention

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