CD Prices in the Recorded Music Industry Case Analysis Strategic Marketing Management The EMI music group was formed in 1931 when the Gramophone Company merged with Columbia Graphophone to form Electric and Musical Industries (EMI 2007). EMI began with operations in nineteen countries and eventually grew to operate in over fifty countries. EMI has the rights to more than one musical composition. Of the five major music companies, EMI has the lowest market share in the United States. This market share may now be in danger as Universal Records has decided to decrease the price of its CDs in an attempt to generate sales. EMI must determine what it would gain or lose by lowering or not lowering the retail price of CDs and the price it charges retailers. Hard Facts The recording industry is highly competitive with its profits based on its ability to attract and retain artists who sell hit records. Artist advertising, promotion and publicity are central elements in a music company's marketing program and represent a considerable portion of the company's costs. Universal has a larger market share because it has more hit artists and a larger music catalog than any other record company. Because of these facts, Universal is susceptible to most losses. Universal decided to cut CD prices in the United States by up to 31.5%, not to increase market share but to convince consumers to start buying CDs again (Universal, 2003). Since the advent of new technologies that allow consumers to obtain music through nontraditional means, actual sales of CDs in the United States have declined since 2000 (Kerin, 2007). In fact, four of the five major record companies reported losses in the first half of 2003. Universal is considered one of the major US record labels with a market share of 29.4%, while EMI ranks last among the five major record labels with just 9.8%. of US market share. EMI was the only company to report no losses in early 2003 due to major reorganization efforts. Existing Marketing Problems EMI's main problem is the lack of market share in the United States. At first glance you might think that the main problem facing EMI in the US market is the possibility of a decline in CD sales caused by Universal Music Group lowering the price of CDs. It is recognized that Universal's price cuts will affect EMI, but Universal's price cuts are not the only or major problem facing EMI.