New Entry of Record Labels in the Music Industry
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Start Me Up: New Entry of Record Labels in the Music Industry Master Thesis MSc Business Administration Management and Entrepreneurship in the Creative Industries Faculty of Economics and Business, Amsterdam Business School Myra Alice Wilhelmina Ruers - 11903929 Supervisor: Dr. M. Piazzai 21st of June 2018 Statement of Originality This document is written by Student Myra Ruers, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. 2 Abstract The music industry is extremely vibrant, diverse, and inherently uncertain. Record labels are the main intermediaries in this industry, facilitating the connection between the creative input from musicians and the demand from the consumers. Due to many technological advancements, the barriers to entry have decreased significantly, hence making it easier to enter this industry as a new record label. Additionally, strategic integration options allow existing firms to start new ventures by acquiring or initiating subsidiaries. This research focuses on the multiple modes through which new entry can be commenced. These entry modes all have their own characteristics and consequences for the configurations of the industry. The likelihood of entry, the subsequent performance of new record labels, and the effects on the diversity of the output are the main topics that are explored. In this study, databases storing longitudinal information on musical releases are used to compile a dataset with the necessary information on new record labels. The main outcomes reveal that there are still many organizations entering the industry despite a general trend towards disintermediation, and that the widely accepted categorization that divides record labels into two groups (major and independent) is not completely accurate, because large independent labels tend to act similarly to major labels. 3 Table of Contents Statement of Originality .......................................................................................................... 2 Abstract ..................................................................................................................................... 3 Table of Contents ..................................................................................................................... 4 1. Introduction .......................................................................................................................... 6 2. Literature Review ................................................................................................................ 9 2.1 Strategy and New Entry ............................................................................................................. 9 2.2 Strategic Integration ................................................................................................................ 11 2.3 The Music Industry .................................................................................................................. 12 2.4 Majors vs. Indies ....................................................................................................................... 15 2.5 New Entry in the Music Industry ............................................................................................ 17 2.6 Diversity in the Music Industry ............................................................................................... 22 2.7 Vertical Integration in the Music Industry ............................................................................ 24 3. Data and Methods .............................................................................................................. 27 3.1 MusicBrainz Database ............................................................................................................. 27 3.2 Sample ....................................................................................................................................... 27 3.3 Variables .................................................................................................................................... 29 3.3.1 Hypothesis 1......................................................................................................................... 29 3.3.2 Hypothesis 2......................................................................................................................... 30 3.3.3 Hypothesis 3......................................................................................................................... 31 4. Results ................................................................................................................................. 32 4.1 Hypothesis 1 .............................................................................................................................. 32 4.1.1 Additional Analysis: Long-term and Short-term ................................................................. 34 4.1.2 Additional Analysis: Electronic Music ................................................................................ 36 4.1.3 Additional Analysis: Billboard Chart .................................................................................. 36 4.2 Hypothesis 2 .............................................................................................................................. 37 4.2.1 Additional Analysis: Original Grouping .............................................................................. 38 4.3 Hypothesis 3 .............................................................................................................................. 39 5. Discussion ........................................................................................................................... 40 5.1 De Novo Entrants ..................................................................................................................... 40 5.2 De Ipso Entrants ....................................................................................................................... 41 5.3 Internal Competition ................................................................................................................ 43 5.4 Access to Valuable Connections .............................................................................................. 45 6. Conclusion .......................................................................................................................... 48 6.1 Insights ....................................................................................................................................... 48 6.2 Practical Implications .............................................................................................................. 49 6.3 Limitations ................................................................................................................................ 50 6.4 Future Research Options ......................................................................................................... 52 7. References ........................................................................................................................... 53 8. Appendices .......................................................................................................................... 58 8.1 Appendix 1 – Multidivisional Majors ..................................................................................... 58 8.2 Appendix 2 – Lifecycle of Small Labels .................................................................................. 59 8.3 Appendix 3 – MusicBrainz Keys ............................................................................................. 60 8.4 Appendix 4 – Statistical Analysis Results ............................................................................... 61 8.4.1 Normality tests ..................................................................................................................... 61 8.4.2 Hypothesis 1a ....................................................................................................................... 61 4 8.4.3 Hypothesis 1b....................................................................................................................... 61 8.4.4 Hypothesis 1c ....................................................................................................................... 62 8.4.5 Hypothesis 1d....................................................................................................................... 63 8.4.6 Additional analysis H1: Short-term and Long-term ............................................................ 63 8.4.7 Additional analysis H1: No Electronic ................................................................................ 64 8.4.8 Additional analysis H1: Billboard Songs and Weeks .......................................................... 65 8.4.9 Hypothesis 2......................................................................................................................... 66 8.4.10 Additional analysis H2: Original Grouping ....................................................................... 67 8.4.11 Hypothesis 3a ....................................................................................................................