BMG Entertianment.

Essay by GIBBSA+, October 2005

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BMG Entertainment, owned by AG Bertelsmann, is one of the big five major recording labels in the industry. Worth $4.6 billion and representing over 200 labels, they are the world's 4th largest media company. They have consistently been one of the leaders in the sales of CDs, yet as the Internet industry grew, their sales continually dropped significantly due to new Internet competitors, their main competition stemming from illegal file sharing sites. After several lawsuits, peer to peer sharing was eventually deemed illegal, yet that didn't stop many Internet consumers from obtaining other ways to download illegally.

BMG's answer to file sharing was to create legal file sharing websites of their own which would not only allow the downloading of music files, for a fee, but would also aid in promoting their CDs and artists to a larger consumer base. While this aided in their quest for recovering from a sales slump, the websites served more of a promotional purpose than actually making sales for the recording company.

BMG faced several key issues following the creation of file sharing, which included regaining lost profits as well as creating an innovative way to enter the Internet file sharing market. Through the efforts made by the SDMI, a conglomerate of recording companies compiled to set the technological standards of file sharing as well as creating a type of copy management technology, BMG should be able to enter the Internet file sharing market safely and profit considerably.

Economic Environment.

A subsidiary of the German media conglomerate, Bertelsmann AG, BMG Entertainment represented the world's fourth-largest media company as of 1999. Its revenue was mainly derived from North America, representing 51% of sales, followed by Europe (32%), Latin America (9%), and the Asia-Pacific region (8%). Worth $4.6 billion and representing over 200 record labels,