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Market Structure

Market Structure. How has the structure of the music industry changed over time?. Structure. Concentration Product or Geographic Differentiation Substitutability Consumption Production Entry Conditions Costs Economies o f scale Growth vs. Decline. Concentration.

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Market Structure

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  1. Market Structure How has the structure of the music industry changed over time?

  2. Structure • Concentration • Product or Geographic Differentiation • Substitutability • Consumption • Production • Entry Conditions • Costs • Economies of scale • Growth vs. Decline

  3. Concentration

  4. Measure of Concentration: HHI • The Department of Justice and Federal Trade Commission Merger Guidelines use the Herfindahl-Hirschman Index • HHI = = the sum of the squared market shares • 1 firm, with 100% market share (a monopoly): HHI = 1002 = 10,000 • 2 firms, each with a 50% market share: HHI = 502 + 502 = 5,000 • 4 firms, with market shares of 30%, 30%, 20%, and 20%: HHI = 302 + 302 + 202 + 202 = 2,600 • 10 firms, each with market shares of 10%: HHI = 10 (102) = 1,000

  5. Concentration Today In 2012, EMI was eliminated as it’s recording operation was acquired by Universal and it’s music publishing business was acquired by Sony. Universal agreed to sell-off nearly two-thirds of EMI’s labels to gain regulatory approval.

  6. Remaining Elements of Structure • Substitutability • Consumption • Production • Entry Conditions • Costs • Economies of scale • Entry deterring strategies • Growth vs. Decline

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