The Making of a Music Multinational: PolyGram's International Businesses, 1945–1998

Abstract

In half a century PolyGram expanded from two small Dutch and German companies to become the world's largest music multinational. It did so in the midst of a fast-changing business environment, in which relatively homogenous products and tastes gave way to differentiated outputs for segmented markets. Making use of strengths inherited from its owners Philips and Siemens, PolyGram integrated a continuous series of foreign acquisitions into one international organization while maintaining the creative identities and independence of the firms it acquired. To control and manage the resulting idiosyncratic configuration, it developed the federated form, a decentralized organizational structure that fit the shifting environment. PolyGram became what can be defined as a rightsbased multinational, and its structure showed similarities to multinationals in other rights-based industries.

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“…The findings indicate that specific bundles of related products and services re-engaged Out of Touch consumers at the regional level of analysis. Empirical analysis shows that contrary to the optimal strategies based on national subsidiaries during the second half of the 20 th century [Bakker, 2006], regional strategies are preferable in creating value and regional teams within firms. Further, these are important when developing knowledge as they facilitate understanding of the heterogeneity of regions, as described by Ritzer [Ritzer, 2003].…”

“…However, strategies to approach or interact with consumers could be substantially different at the national level. For example, Bakker [Bakker, 2006] -in an exhaustive review of the evolution of the multinational business in the music industry during the second half of the 20 th century -argues that MNEs extracted the maximum profits by transferring their property rights catalogue to national subsidiaries or intermediaries, who understand better the nature of national markets. The existence of local subsidiaries with property rights provides evidence that the MNEs were employing local consumer strategies during the later 20th century, before revenues started to decrease due to the digitization of music.…”

“…Music industry MNEs have extensive global experience and yet retain national subsidiaries in their key markets [Bakker, 2006;Johanson, Vahlne, 1977]. They have also conducted extensive international research to gain an understanding of the consumers in these markets [Chandra, Coviello, 2010].…”

The Three Tenors Antitrust Case: What Did We Learn?

“…However, a large international music organization has its own internal market, its own internal trading between repertoire owners (labels) and operating companies or international affiliates who market and distribute product worldwide. PolyGram in 1998 had a federated, rights-based, decentralized structure (Bakker 2006). The organization believed that decentralization was the key to managing creativity (Arnold 1997).…”

“…In 1998 PolyGram possessed a highly decentralized, federated structure (Bakker 2006). Given the significant joint investment in 3T3 (US$18 million), PolyGram wanted its operating companies (which were responsible for marketing the new recording in all territories except the U.S.A.) to get fully behind the new release, and channel the maximum promotional effort and resources into the launch of the new album.…”