How Global Record Companies Adapt to Digitisation in the Music Industry

Abstract

The music industry underwent a revolution with the advance of digitisation, which was a disaster for the record companies who relied on physical sales of music from CDs and cassettes. Digitisation meant that music in physical formats switched to digital formats, which came unexpectedly for record companies who lost revenue and market shares. Illegal downloads dominated the market until the Pirate-Bay trial in 2008, when the music industry slowly began to flourish again. Despite this, global record companies did not begin to grow significantly again until 2012. That gap, between the progress of digitisation in 1999 and 2012, was a hectic time for labels that had to undergo several strategic conversions to get started with their business again. After this “revolution”, they were not as important anymore and their role in the value chain had become blurred. Through the value chain model and with non-predictive strategy, one can explain which adaptations record companies have had to implement and why. To gain a better insight of history and experiences in the industry, Per Sundin, CEO of Universal Music Group, was interviewed. Mikkey Dee, drummer for Scorpions, was also interviewed to gain further insight of industry history. For the past 7 years, music has been profitable for some global record companies because of strategic changes that have been made. Initially, record companies were forced to implement an adaptive strategy, but this has later morphed into a transformative strategy with elements of effectuation. This proved to be effective as global record companies now have a more important role in the value chain. They have outsourced operations and specialized in areas such as marketing that have become increasingly important in today's music industry.