1. Vertical Integration in
the Music Industry
A Stakeholder Analysis
Hugo Amsellem

2. Introduction
• Purpose : Highlight the developments of
relationships between the stakeholders in
the music industry
• Problematic : “Will a new vertical
integration happen in the music industry?”
Hugo Amsellem for http://MidemNetBlog.com

3. Pre-Internet Era
Governments
Majors
Relationship Type :
Trusting Consumers
Opportunistic
Deteriorated
Antagonistic
Hugo Amsellem for http://MidemNetBlog.com

4. Pre-Internet Era
• The Music Industry is at its peak, the
Government collects VAT on CDs sales
• Consumers feel cheated by the poor
quality of many CDs, with only one or two
hits per LP
• No alternative to the CD/Singles duo
Hugo Amsellem for http://MidemNetBlog.com

5. The Emergence of Internet
ISPs Governments
Majors P2P
Relationship Type :
Trusting Consumers
Opportunistic
Deteriorated
Antagonistic
Hugo Amsellem for http://MidemNetBlog.com

6. The Emergence of Internet
• Consumers now have an alternative to CD
• ISPs benefit from attractiveness of illegal
downloading to sell internet access
• Majors labels are trying to break the ISPs/
P2P/Users circle by suing and lobbying
Hugo Amsellem for http://MidemNetBlog.com

7. The Emergence of Streaming
ISPs Governments
Majors P2P
Relationship Type :
Trusting Streaming Consumers
Opportunistic
Deteriorated
Antagonistic
Hugo Amsellem for http://MidemNetBlog.com

8. The Emergence of Streaming
• ISPs realize that P2P traffic consumes a lot
of bandwidth and represents a shortfall.
• Streaming plateforms earn the trust of
users and gain market share against P2P
networks.
• Majors accuse these platforms not to
generate enough revenue while
cannibalizing CD sales.
Hugo Amsellem for http://MidemNetBlog.com

9. A Vertical Integration?
ISPs Governments
Majors P2P
Relationship Type :
Trusting Streaming Consumers
Opportunistic
Deteriorated
Antagonistic
Hugo Amsellem for http://MidemNetBlog.com

10. A Vertical Integration?
• Majors labels, ISPs and streaming platforms
have antagonistic relationships with P2P.
• From that, comes a business opportunity
through a common enemy and common
interests.
• The “Majors” model’s survival is inevitably
linked to the transition from a concentric
b u s i n e s s m o d e l t o a mu l t i c e n t r i c
(multiheaded) one.
Hugo Amsellem for http://MidemNetBlog.com

11. A Vertical Integration?
Vertical integration of multiple value chains model
Hugo Amsellem for http://MidemNetBlog.com

12. Equilibrium
ISPs Governments
Majors P2P
Relationship Type :
Trusting Streaming Consumers
Opportunistic
Deteriorated
Antagonistic
Hugo Amsellem for http://MidemNetBlog.com

13. The Limits
• Artists will be chosen for their potential to
reach the largest audience possible,
consequently music diversity will be
impacted
• Higher investments on fewer artists will
impact the number of releases
•A vertically integrated company will be
forced to reinvest in its infrastructures in
order to keep up with competition by
innovating
Hugo Amsellem for http://MidemNetBlog.com