3. Defining the European Music Market

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Recorded music sales reached almost 5 billion Euros in 2006 in the 15 markets of the European Economic Agreement (EEA). The top 3 countries concentrated  71% of the sales. United Kingdom represented 31% of that, Germany 23% and France 17%.

Segmentation and definition of physical recorded music

  1. The relevant product market is the market for recorded music for all types of music. Subdivision along different categories (international pop, local pop, classical music and compilations) are not meaningful: competition does not take place exclusively in genres or in other possible segmentations. In addition, there are no accepted industry standards of genres.
  2. Some pop music is only marketed nationally and therefore possibly represents a distinct product market.
  3. Within pop music, a large number of different categories could be identified (for example jazz, soul, heavy metal and techno), possibly constituting distinct product markets as well.
  4. From a demand side perspective, end-consumers make purchasing decisions based on a number of criteria, among which type of music or genre, international vs. national, new release vs. back catalogue, individual artist vs. compilation, single vs. album or promotional campaigns.
  5. From the supply side, record companies may sign artists and sell records across a range of different genres. A number of independents labels, however, specialize in certain specific genres.
  6. Notwithstanding that every single repertoire, and even each artist, has its own specificities in term of audience, all styles and genres collectively make the new musical standard and influences. Further, artists may fit within more than one genre at a given moment in time, whilst an album or song may also fall into more than one genre. Most records stores sell a diverse range of music: their buyers talk to music companies and buy all kinds of music. Moreover, clear and consistent definitions of categories and genres are difficult to find as there are many similarities between all of them (producers, outlets, customers, contract mechanism).
  7. As regards compilations, there is a general appraisal that they form a separate market from a demand side perspective. But the suppliers (recording companies) are equally divided on this issue: some, in line with their customers, consider the compilations as an add-up to the other products, mainly for established and bestseller repertoire; conversely for others, compilations compete for the same retail space that is available and the same people buy both kinds of records.
  8. The recorded music market does not include manufacturing and distribution (logistics) of records because major recording companies, increasingly outsource these non-core activities (often to sister companies within their group) as do smaller labels.

This item is part of the series of posts based on the European Antitrust Agency 2007 Music Industry Analysis for the Sony BMG Case. It’s home page is here.

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