Threats to a company involve the outside or external factors that cannot be controlled. These factors may involve legal restrictions, new technology, competition, and the economy itself. The first obvious threat to any record label or any business in general would be their competition. Universal Music Group, is the biggest company with the largest music market share, therefore, it is always the possibility that the leading competition could advance in their technology or develop a strategy that eliminates smaller competition. For example, when Sony invented the Walkman, it was a world phenomenon that sold by millions. Then, came the CD world and Apple with its invention of the iPod took over handset music period. Even though these are different music related companies, the same concept applies for a record label.
The most worrisome threat record labels would be the use of illegal downloads and file sharing. CD sells are dramatically declining and retailers such as Best Buy, Target, Radio Shack, and Circuit City are limiting the amount space that was once reserve for the music section. Brick-n-mortar stores such as Cat’s Music, Camelot, and Cd Warehouse are going out of business completely and becoming non-existent. Big Champagne is an online music download monitoring company whose data show songs per year that are illegally downloaded through peer-to-peer websites. The value of recorded music is slowly depleting. Companies such as iTunes, which is a legal downloading website, also causes a decrease in record sales because instead of buying an entire CD, consumers are able to buy a new song without purchasing the entire album.
What does this mean for record labels? For labels this mean that the record label finances will dramatically decrease in due time. Economist predict that recording music will eventually have a zero value due to the effect of illegal downloads. Recorded music sales constitute the majority of income that a record label obtains. Therefore, no matter how many to selling artist a label may have on their roster, their financial status will decrease unless there is some type of innovative way to stop piracy all together or find another source of primary income for the label such as live performance.
Although this a smaller relevant matter that does not have complete control over a decline of a record label, but definitely causes a threat is the increasing prices of gasoline. With the inflation of fuel, more and lower to middle class consumers no longer have the discretionary income that they may have once had to purchase music.