Bmg Case Study Analysis

...

However, other websites had gone much ahead. They were exploiting the Internet to sell their products as well, and that too at a cheap price. BMG entered this segment as well, forming a venture with Universal Music to compete with the likes of Amazon and CDNow. There was one major drawback; they were selling their products at a 20% higher cost. A consumer would prefer to purchase the same product at a cheaper rate from Amazon than from BMG. The consumers didn’t care where they bought the product from; they just cared about the artist they wanted to listen to. A rational consumer would choose the cheaper option. Because of the higher prices, the prospects of BMG and Universal’s Getmusic.com seem bleak, and this effort into the online world seems like a fail.

BMG struck up a partnership with American Online (AOL) as well to provide consumers the benefit of 50 free hours of AOL’s online services if they purchased particular BMG CD’s. The reason why BMG undertook this was to get the CD users to connect with the company online as well, as a lot of times, the users of AOL were directed to the various websites operated for BMG for the marketing of their artists. Perhaps, BMG was trying to shift the entire marketing operations of the company online to reduce costs associated in marketing physically. Though this was a good promotion initially, when AOL’s online services may be expensive, as more online service providers would open up, the prices would drop. Then, to purchase a CD would probably be more expensive then to purchase online services. This was a good way to get initial traffic to the websites of the company, but the sustainable success of this activity is doubtful.

BMG also tried its hand in the downloaded music industry in 1997. There was one issue though; BMG did not sell downloaded music routinely. With various websites coming into play by 1998, the consumers had various arenas to either buy CD’s online from, or download the music of their choice. BMG was late in exploiting the power of downloads, unlike Universal, which was one of the first majors to delve into the industry of downloaded music.

The Internet was quickly revolutionizing the music industry. Start-Ups were quick in exploiting the potential of the Internet. However, BMG lagged behind in this context, due to the time taken to execute its decisions. The new crop of digital customers that the Internet had created had found their needs on other websites like MP3.com, before BMG could satisfy them. Maybe BMG was not successful in correctly establishing the power of the Internet. By confining the use of the Internet for marketing in the beginning phases, they probably lost out on a massive new consumer base, and potentially even their customers, to the upcoming websites providing cheap or free download of music. If only they had entered the online retailing segment earlier, and made a cut in their prices, they could have been the pioneers for online retailing of music.

Another problem maybe the different technologies used by BMG to put up their music online. This was done in order to prevent piracy. But it caused great inconvenience to the customers, as they were required to download different softwares to listen to different types of music. Even though BMG didn’t have choice but do this, in order to prevent piracy, it could have spent more time in trying to develop one kind of software for all the genres of music. This action of theirs did not make too much sense and was subject to criticism from the industry as well.

The Internet was a place of surprises and no one was certain about what the future held. In such a case, BMG could have undertaken more research and development to formulate plans to enter and stay in the era of the Internet and maintain its place as a leader in the music industry.

...