RCA Records

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RCA Records

• The Digital Revolution

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RCA Records

• The music industry as it is today is a banking
  system its not about art. Theyd sell a hubcap
  with cheese on it if they could. Who needs
  themIf you can sell music without compact disc
  factories, delivery trucks, radio stations, and
  stores?
• Chuck D., Rap Artist/Online Entrepreneur

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RCA Records

• RCAs less is more strategy
• We are not an assembly line. We do not put out a
  lot of recordsSome say, the more times I get up
  to bat, the higher my batting average will be.
  The more product I release, the more hits Ill
  have. That is not true. Given that this is a high
  fixed-cost business with tremendous operating
  leverage, the more releases it takes to generate
  a given sales figure, the far less profitable
  youll be.

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RCA Records

• RCA records is part of Betelsmann Music Group
  (BMG)
• In 1999, BMG has 200 active music labels
• RCA is second to Arista in revenue contribution
  for BMG with 350M in sales

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BMG Entertainment Organization Structure
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Problems at RCA Records in the Mid 1990s

• Sales dropped 10 between 1994 and 1995
• US signings were not successful outside the US
• RCAs roster was unfocused
• Employee morale was low
• BMGs other labels won US rights over RCA

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RCA Turnaround

• RCAs competitive advantages are creativity and
  financial commitment to artist development less
  is more strategy global orientation to artist
  and repertoire and marketing broad exploitation
  of rights through all channels
• From 1995 to 1999, RCA exited jazz, reggae and
  heavy metal and focused on rock, pop dance and
  urban
• Headcount was reduced by 30 people and an entire
  layer of management was eliminated

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RCA Cells

• Cells were responsible for the creative and
  fiscal development aspects of artist development
• Each cell consisted of one representative from
  AR, marketing, media, promotion and sales

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Music Industry in 1999

• Slow growth in the US- 2 annually
• End of the LP replacement era
• Competition from video games
• Greater variety of radio formats
• Radio stations became more risk averse to new
  music
• Consolidation of music retailers

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Sales Breakdown of Various Channels
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1999 Global Market Share
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Music Industry in 1999

• 5 Labels-Universal, Sony, Warner, EMI and BMG-
  accounted for 80 of the global music market
• From 1990 to 1999, Independent labels market
  share grew from 10 to 20 percent
• Consumer 30 and older bought approximately 50 of
  music sold, up from 34 in 1989
• Consumers 15 to 29 bought 39, down from 42 in
  1997

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Technology

• MP3 ability to download digital files
• Liquid Audio-Music on Demand
• ATTs a2b- download CD-quality music quickly
• Speculated that digital distribution would lessen
  musicians dependency on the major labels
• Labels viewed digital downloading as a
  promotional channel

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Traditional CD Value Chain
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RCA Structure

• Trying to decide how Internet Marketing
  Capabilities fit in with the other marketing
  departments
• 8 marketing departments- Promotion, Publicity,
  Tours, Video Services, Creative Services, Product
  Development, Product Management, Sales

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RCA Organizational Structure
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RCA Challenges

• Holding onto talent
• Where to spend?
• Capturing the audience
• Leveraging BMG
• Chasing the Rabbit