Update: The Music Industry in 2006

John R. Wells; Elizabeth  Raabe

Case | HBS Case Collection | February 2007

Update: The Music Industry in 2006

by John R. Wells and Elizabeth Raabe

Abstract

The global recorded music industry was undergoing a major transition in 2006. Sales had been declining for a decade, and consumers were buying music in new formats and through different distribution channels. CD sales still accounted for the majority of revenues, but sales of music in digital formats (downloads, videos, ringtones) were growing significantly and accounting for approximately 10% of the industry's revenues in 2006. Many considered digital the future of the music business but the format posed both opportunities and challenges. While it had revitalized the singles market, for instance, digital had also facilitated rampant piracy. The music industry was retaliating, launching lawsuits against illegitimate peer-to-peer operators such as groups caught downloading illegally. Whether this would be enough to stop the trend was a matter of much debate. Meanwhile, the industry continued to consolidate. In 2004, Sony Music and BMG, the third- and fifth-largest record firms at the time, merged to form Sony BMG. Surprisingly, in 2006 the European Union's Court of First Instance annulled the merger--which the European Commission had approved two years earlier--after a group of independent music labels complained about the merger's effect on competition. While Sony and BMG were defending the merger in court, EMI Group plc wondered if its desired takeover of Warner Music Group--which it had been pursuing since 2000--would ever happen. If it did, how much business would the new entity have in the rapidly changing environment? All wondered how the industry would evolve.

Keywords: History; Arts; Music Entertainment; Intellectual Property; Market Timing; Performance Evaluation; Trends; Music Industry;

Format: Print

13 pages

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Citation:

Wells, John R., and Elizabeth Raabe. "Update: The Music Industry in 2006." Harvard Business School Case 707-531, February 2007.

In October 2019, Dan Macklin, the newly-appointed chief executive of Salary Finance Inc., was weighing his options for the future of the business. The company’s value proposition was quite simple: partner with employers to offer employees affordable loans that were repaid through automatic payroll deductions. Taking repayments directly from salary, and collecting those repayments in one transaction from the employer, dramatically reduced costs, saving employees large amounts of interest when compared to market alternatives like credit cards or payday lenders.
Salary Finance Inc. was a subsidiary of Salary Finance Limited which was launched in the UK in 2015. By September 2018, Salary Finance Limited had partnered with over 100 UK employers and offered loans to around one million employees. It was at this point that the company decided to try and replicate this success in the United States, and opened an office in Boston, Massachusetts. By October 2019, the US business had partnered with 15 employers, offering loans to around 50,000 employees.
In October 2019, Macklin was contemplating the best way to accelerate the growth of Salary Finance Inc. to hit his 10 million employee target. He was also wrestling with whether he should stick with the core product or add new products to drive sales. This had worked well in the UK where pay advances and savings accounts had proven popular in addition to their core loan product. Salary Finance Inc. was off to a good start, but it remained uncertain how quickly Macklin could grow the business and help more Americans get out of debt.

Case | HBS Case Collection | January 2020

Celata Bioinnovations

John R. Wells and Benjamin Weinstock

In December 2019, Jon Hu (Harvard Business School MBA, 2019) and Dr. Samantha Dale Strasser, co-founders of Celata Bioinnovations, were raising $1 million to launch their company. They had founded Celata less than six months earlier with the aim of redefining the drug discovery process. Celata’s platform used novel data types and a unique data integration process to generate hypotheses about proteins that were involved in the formation and progression of disease. They believed the platform was better and faster at identifying actionable biological targets, increasing the speed of discovery and reducing the chances of failure, promising to lower costs and bring drugs to market more quickly. Their platform had achieved proof of concept during Strasser’s PhD research at Massachusetts Institute of Technology (MIT), when it helped identify and validate a target related to Inflammatory Bowel Disease (IBD) in mouse models. However, full validation wouldn’t come until their platform was used to develop a drug that successfully treated a disease in humans, a process that could take several years.
In the first instance, Celata’s platform was best suited to identify targets for cancers, inflammatory diseases, and neurodegenerative diseases, which collectively presented a global market opportunity of over $200 billion. However, Hu and Strasser were debating which opportunities to pursue. Should they try to improve the efficacy of current drugs, or go for brand new opportunities, indications for which there were no solutions on the market? And if they focused on the latter, should they just look for large market opportunities, or include “orphan” diseases, for which there was a relatively small market? Should they look for small molecule drug candidates, or include large molecule biologics in their search? And where should they operate in the drug development pipeline? At one extreme, they could sell potential drug candidates to established pharmaceutical companies; at the other, they could “go full pharma” and build a new pharmaceutical company themselves.

Keywords: drug development; drug discovery; Drug Trials; Pharmaceutical Companies; Pharmaceutical Company; Pharmaceuticals; therapeutics; Biologics; biotech; biotechnology; biopharmacy company; biochemistry; technology commercialization; technology companies; Drug Testing; Startup; start-up; Startups; start-ups; Startup financing; strategic decision making; strategic decisions; strategic evolution; FDA; Food and Drug Administration; clinical trials; disease management; market attractiveness; Market entry; market opportunities; Health Disorders; Technological Innovation; Technology; Commercialization; Business Startups; Finance; Decision Making; Strategy; Market Entry and Exit; Opportunities; Pharmaceutical Industry; Biotechnology Industry;

Citation:

Wells, John R., and Benjamin Weinstock. "Celata Bioinnovations." Harvard Business School Case 720-427, January 2020. View Details

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In 2019, Wuxi Lead Intelligent Equipment Co., Ltd. (Lead) was the largest supplier of lithium-ion rechargeable battery manufacturing equipment in the world. Based in Wuxi, China, the company generated RMB 3.9 billion ($557 million) in revenues in 2018, up from RMB 175 million five years earlier, for a compound annual growth of 86%. Almost 90% of sales came from the lithium-ion battery market, and Lead supplied most of the major manufacturers in China, Korea, and Japan, and Tesla in the United States. The company was floated on the Shenzhen Stock Exchange in 2015, and, in early December 2019, was valued at over RMB 33 billion. Lead’s meteoric rise had made its charismatic founder Wang Yanqing the 205th richest man in China.
However, all was not well in the rechargeable battery market in 2019. The Chinese battery and electric vehicle markets had received significant subsidies over the years, but these were slowly being withdrawn. In early 2019, the Chinese Government announced that subsidies on electric cars would drop by 50% at the end of June 2019. On the announcement, stock prices across the sector fell sharply. Electric car sales in July and August 2019 were down, but most observers believed that the set-back was short-term and that growth would continue to be strong in the long term. However, many expected rapid consolidation in the battery manufacturing and electric vehicle markets, as marginal players were forced out by mounting competitive pressure.
Lead’s revenues for the twelve months ending September 30, 2019 were up 13% on 2018 revenues, well behind the 79% growth enjoyed in 2018 compared to 2017. However, the company’s stock price in early December 2019 remained strong at RMB 38 per share, 40% ahead of a year earlier.
Yanqing, who remained majority shareholder in the company in 2019, was optimistic: “We are facing a short-term setback as subsidies are reduced, but the battery and EV markets will soon recover. And we have many other options at Lead. The challenge is which to focus on.”

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Update: The Music Industry in 2006

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