Question

What is the oligopoly market structure of the music industry?

Answer 1

The music industry is known as an oligopoly market, largely because it is dominated by a few large but limited numbers of companies competing with each other.
The general public would spend on trusted labels such as Warner Music Group, EMI Group, Universal Music Group, and Sony BMG. These companies are known collectively as the "Big Four" majors who have worked fairly well with each other. These companies apparently have control over around 75 percent of the global market.

There are two types of market for oligopolies which are homogeneous oligopolies or differentiated oligopolies. Companies that supply steels, copper, latex and so on may be homogenous oligopoly firms. Differentiated oligopoly firms may consist of companies manufacturing stationery, vehicles, and furniture. The music industry will be known as a distinct oligopoly market because the music companies' content, pricing, and branding would be exclusive.

Small labels would find it very difficult to compete in the industry in such an oligopoly environment, as these big record labels dominate pricing decisions. In addition, obstacles to joining the industry are considered high because they include issues relating to copyright , patents, advertising and even economies of scale. The behavior of firms with oligopolies can be called the theory of games. In order to stand out in the market , it is important that oligopoly companies consider the actions and potential comeback of their rivals.

There is reciprocal interdependence between companies in the oligopoly market, when one company's actions affects the entire industry significantly. Tacit collusion often occurs in an oligopoly market which refers to an informal agreement on a certain strategy between firms. Businesses will however avoid competing based on the price factor because of the possibility of bribery from other businesses. Instead, businesses are focused on after-sales programs, advertisement and marketing activities.