Market Share of the Major Record Labels and a Takeover Analysis

AudioMicro located a fabulous breakdown of the market shares of the major music industry record labels.  We’ve input the information below this post.  The breakdown is helpful when analyzing the present state of the music industry and where it may be headed.  It seems the Universal Music Group (UMG) has the dominant presence in this space with nearly 1/3 of all major label music revenues.

The only individually publically traded music company, Warner Music Group, traded on the NYSE under the ticker WMG, has a present market capitalization of around $1.32 billion at the time of this post, with FY 2007 revenues of $3.4 billion and a 12.31.07 cash balance of a mere $160 million.  Extrapolating WMG as 18% of the market in 2006 from the source cited above, and assuming that 18% has remained steady into 2008, the overall music market, in terms of the dollars it would cost to embark on a total corporate takeover of the entire market and all of the assets contained therein, would be in the neighborhood of $7.3 billion.

Now let’s give it a 20% takeover premium that we know the shareholders would eventually agree to in a Microsoft / Yahoo / Microhoo style proxy battle, and that’s still only $8.8 billion to own every major record label in the world.  This analysis assumes (and of course exist in a vacuum / perfect world) that the labels were all public companies, which is certainly not the case (nor will it ever be the case).  If anything, WMG will go private in the near future.  Nevertheless, let’s just imagine the possibilty of taking over the entire music industry (or at least the majority of the industry) for a mere $8.8 billion.  Now $8.8 billion is a heck of a lot of money to most people, but to a corporate giant like Google, Microsoft, or a large media comglomerate like Rupert Murdoch’s News Corporation (with over $3 billion in cash) it really would not be difficult to put this deal together either through either an all cash purchase or a cash / stock combo.

It’s interesting to see how the music industry pales in comparison to the larger media / tech world, though it’s certainly much sexier than all the rest.  Here is the market share break down cited at the beginning of this post:

Mkt Share 2006 2005
UMG 32% 32%
SONY/BMG 27% 27%
WMG 18% 17%
EMI 10% 10%
OTHERS 13% 13%

Five New Frequently Asked Questions on AudioMicro.com

These 5 questions seem to be the most commonly asked by those new to AudioMicro’s platform:

1.  Question: How can you call yourselves “Royalty Free” if the artist receives a 50% royalty?

Answer: Royalty-free is a confusing term. It actually doesn’t apply to the content provider/artist – it applies to the content purchaser. The basic definition – “Royalty-free media is acquired for a ‘one time only’ fee and gives the purchaser right to use the content according to the terms agreed upon, with no license fees being paid for further use.” So the purchaser buys the music, pays a one time fee, and the artist who created the purchased music receives 50% of the sale.

2.  Question: Is the music I upload to AudioMicro exclusive? What if I need to remove my music from AudioMicro? Does AudioMicro own the music on the site?

Answer – No, the content provided to AudioMicro is always non-exclusive, meaning you can do whatever else you want with the music at any time. You can sell it on 100 other websites and license it to TV shows while it exists on AudioMicro. You can actually chose to make your music exclusive to AudioMicro, and if you specify that for any given song, you will receive 60% of a sale rather than the standard 50%.

You can remove your music from AudioMicro for any reason, at any time. Simply let us know and we’ll remove it from the site.

And lastly, YOU always retain full ownership of the publishing and copyright of the music you upload to AudioMicro.

3.  Question: Why should I sell my music for such low prices when I’ve made hundreds/thousands of dollars licensing my music to TV shows?

Answer: Simply put, by putting your music on AudioMicro you’re opening it up to an entirely new customer base, the YouTube Crowd. TV shows will continue to pay top dollar for music, never even thinking of going to a site like AudioMicro. But amateur filmmakers and website designers will always come to AudioMicro for content. By making your music available to everyone, you really get the best of both worlds.

Please check out the June 6th blog below for a more detailed answer to this question.

4.  Question: How do I upload a bunch of songs at once?

Answer: Using an FTP Client.  You can request access to our new FTP ingestion system. On your profile page, under “quick links” there is a link to “request FTP.” Click that and we will send you an email with instructions to set it all up. If you prefer not to use the FTP system, don’t forget there’s a multi-file upload link on the upload page as well.

5.  Question: If my music is used on TV, will I receive performance royalties?

Answer: Yes! As long as you are affiliated with a Performing Right Organization (PRO). We have licenses with BMI and ASCAP, which are the PRO’s in the United States. PRS is the PRO for the U.K. Every country has it’s own PRO. Even if you’re affiliated with a foreign PRO, ASCAP and BMI have deals with them allowing them to collect your royalties, pay them to your PRO, and your PRO will pay you. So regardless of who you’re affiliated with, you’ll still get your performance royalties if your music is used in a public medium.