• Olivia Boachie

Business Economics and Industrial Organisation

The following analysis attempts to assess the structure and sources of competitive pressure in the British Phonographic Industry using Porters five forces framework model, and how the advent of the internet has affected the structure and performance of the industry.

Michael Porter’s Five-Forces model of the music industry

Michael Porter’s Five-Forces framework model recognises the economic forces that affect industry profits. The five forces are: Internal rivalry, Entry, Substitutes and complements, Supplier power and Buyer power. These forces may affect and abolish the revenues of current businesses. The five forces framework is a business study and industry strategy improvement instrument which lets marketers eventually generate stakeholder value through industry events. The key factors of appeal are the demand and supply of products in the market, quantity of entrants presently in the market and their strengths and weaknesses. In response to the essay question, the British Phonographic Industry will be examined critically through each of the five forces. A graphical representation of Porter’s Framework is shown below:

British Phonographic Industry

“BPI (British Phonographic Industry) represents the UK’s recorded music industry, which is one of the most exciting and thriving music sectors in the world. British artists account for one in eight albums purchased by fans around the globe” (http://www.bpi.co.uk/about-bpi.aspx). BPI co-owns the Official Charts Company in “a joint venture with the Entertainment Retails Association (ERA). The Official Charts Company is responsible for the commissioning, distribution, marketing and promotion of the UK’s industry standard music and video charts and sales data. BPI also maintains the industry standard for certifying Gold, Silver and Platinum sales awards” (http://www.bpi.co.uk/about-bpi.aspx). There are three major record companies within the British Phonographic Industry which are: Warner Music UK, Sony Music Entertainment UK and Universal Music UK.

Internal Rivalry

Internal Rivalry refers to the jockeying for shares by firms within a market. It is fierce if competition drives prices towards costs. This is more likely when there are many firms, products are perceived to be homogeneous, consumers are motivated and able to shop around, prices may be set secretly, sales orders are large and received infrequently and the industry has excess capacity. The UK music business has been contested for by three big recording studios for years. There is severe rivalry amongst these recording studios; their market shares continued to be steady for years as new opposition hardly went into the market due to great entry barriers. The music industry is booming when associating online and offline sales collectively.

The product distinction attainable in the music business is v