University Singapore Management University (SMU)
Subject Strategic Management

Read the following case study and answer the questions below:

  1. After 2000, how did technologies disrupt the traditional value chain of the music industry?
  2. What are the internal and external factors which drive the music industry evolution?

Live Nation Faces the Music

In June 2008, Live Nation CEO Michael Rapino and Chairman Michael Cohl debated their company’s approach to the music industry. Over the previous decade, the industry had witnessed shifts in technology, listener preferences, and competitor behavior. Traditional and new players had taken diverse strategic paths across the unsettled landscape.

Live Nation had been especially aggressive. Since its 2005 debut as a public company, Live Nation had reached far beyond its roots as a concert producer, increasingly moving into territory traditionally occupied by the major record companies. It had struck mega-deals with Madonna, Jay-Z, U2, and other pop stars; acquired or leased major concert venues around the world; taken stakes in companies that sold merchandise and developed websites for rock musicians; taken control of the largest concert promoters in Spain and France; and invested in parking, food, and other services for concerts in the U.S. and Europe. (Exhibit 1 outlines the company’s activities.)

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Earlier Waves of Industry change

The turmoil that Live Nation and others faced was reminiscent of waves of change that had hit the music industry several times during its history. These waves both shaped the industry and revealed underlying features that endured for more than a century.

In the industry, early history, New York City’s “Tin Pan Alley,” a group of music publishers, bought and prin ed he sheet music of composers and lyricists, and sold them through retail concession stands and licensed agents. Artists often tried to go directly to consumers by having their music played in bars, dance halls, and their places. But as Tin Pan Alley companies developed retail relationships and mail- order lists of customers throughout the country, artists increasingly relied on publishers.

An Industry in Turmoil

By 2000, several trends had gathered momentum and began to transform the music industry. These trends were reflected most dramatically in revenue. (Exhibit 4 shows music spending over time.) By 2008, the U.S. record industry had shrunk to $10.3 billion in sales, and the worldwide market was down to $19.4 billion.

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