The Big Five

In the last ten years, the rate of concentration in the $40 billion music industry has been staggering. Five companies have taken control over almost every aspect of the industry. These five companies own virtually every record label you can name. Many of these labels with histories back to the Victrola days (like RCA Victor and Parlophone) are now under the control of a handful of international entertainment conglomerates that have learned to how prolong shelf life and dominate shelf space ruthlessly. Although changes in the way music is delivered are a threat to the giants, they have the financial, legal, and technological muscle to minimize their losses and maximize their gains.

There are five major record label conglomerates, who control over 80% of all the titles produced in the United States and comparable percentages in the rest of the world. They are Warner Music, EMI Group, Universal Music Group (UMG), Bertelsmann Music Group (BMG) and Sony. They own the distribution companies that control over 80% of the wholesale market. They are also a huge presence in the retail sale of recordings. Furthermore, they hold the rights to much of the copyrighted music, not the artists who originally wrote the music, an old story that is only getting worse. The oligopolies are growing and concentrating and it seems every time an independent begins to build new markets, it gets bought out by one of the big guys.

The pace of consolidation is increasing. A few years ago, there were six biggies in the industry. UMG (Universal Music Group) is a merger of Polygram and MCA brought about in 2000 by Seagram/Universal which in turn has been taken over by French media/water conglomerate Vivendi. Time Warner and EMI announced merger plans in 2000 but that was held up by European antitrust laws. It’s not hard to imagine that one or more of the remaining companies will get swallowed up by another. There are steady rumors, for example, that BMG is looking to be sold or merged.

Of course, Universal Music Group is on the block, the biggest of them all. While it is unlikely, for antitrust reasons and cash flow problems, that any of the others will take over UMG, neither do they want an energized new competitor. After all, UMG is the largest of them all and has been growing steadily in sales volume, even in the downturn.

But UMG has few suitors, and the reason is the general decline of the business. From 1988 to 1996 the industry grew at a rate of 8% a year. Since 1996 it has shrunk by a total of 17%. The two reasons are music piracy and just plain unexciting music from the recording companies, though they will never admit the latter.

The Internet has and will continue to be a great disruptor in this industry and the independents need your support! All the threats by Senator Hatch and the recording industry trade group and all the lawsuits against individual college students will not work. The industry shut down Napster but file sharing has found other routes. The only sane moves by the industry have been to finally enable reasonable file download services but this may be too little, too late. The industry is in the midst of being redefined and the big five are at their most vulnerable thanks to the disruption.

Don't let the corporations decide what music you listen to! Good independent music is out there and by supporting it, you support the artist instead of the conglomerates. Thank you for your continued support!