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5 Forces by Porter

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Porter 5 forces of Universal Music Group

Rivalry within Music Industry
According to Universal’s last full-year results of recorded music market, for FY 2014, we can conclude that the music industry is concentrated, the market share of which is held by three largest firms. They are Universal Music, Sony Music and Warner Music separately. Hence, there are not many other firms except these three giants that can have a significant market share. Although the competition is remain intensive among these three firms, Universal Music has achieved the highest revenue of the total recorded music market in the world.
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Reference: http://www.musicbusinessworldwide.com/whos-more-powerful-universal-music-or-sonyatv/

Bargaining power of Suppliers
In Music Industry, the suppliers are artists, who have signed a contract with a music company.
In the beginning, these artists are not famous, they just need to cooperate with music companies and rely on the packaging and sensationalization. Hence, they do not have much leverage with UMG.
However, once these artists have became celebrities or even giant stars, they will gain more reputation and power to bargain with UMG. After all, in this moment, they can use their own fame to achieve revenues without UMG.

Bargaining power of Buyers Power
Buyers can be classify into two groups: one is mass consumers, another is retailers.

Mass consumers command a high bargaining power. Although there are a minority of famous firms in music industry, customers still have some choices to select a company, the switching costs is quite low for them.

As for retailers, the switching costs is high because music products are not standardized. However, retailers are fragmented, none of them has any significant influence on products or price. Moreover, producer(UMG) can take over own distribution if they need.

Threat of New…...

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