Compass Records Essay Example for Free

Compass Records EssayBackgroundsAlison Brown and her husband Gary West, who were both musicians, founded compass Records in 1995. Compass Records is a fine independent preserve company that centered on folk and roots music. Compass Records occupies only a tiny part of the 32-billion dollar music recording industry, competing with some multi-national corporations dominating 86% of the business, such as Sony/BMG, Universal Music Group, Warner Music Group, and EMI.However, the industry has witnessed a stagnant growth since 1995, with a decline on annual sales at a compound annual growth rate of 5%. By 2005, Compass Records had grown to include nearly 50 artists under contract and were averaging around 20 releases a year. With 40% of its albums selling over 5,000 units, Compass Records turned a profit on 80% of its titles in 2005. Brown and West also acquired a $100,000 recording studio in May 2004 in order to give the label and its artists more flexibility in the creative process and save $500 a day on studio rental.Problems* (General) Licensing vs. Producing and Own * Compass Records has to decide between licensing the finished recordings, which is less speculative and less expensive with a finite life to the future cash flows associated with the recordings, and producing and owning a operate copy, which will be more risky and more expensive with an infinite life to the future cash flows associated with the recordings. * (Specific) How to maximize firm value through the Roscommon decision * Whether to license Adair Roscommons music or own the master recording outright.