Case Study

Case #1 Overview: Founded in 1987, Naxos had become the world’s largest classical music label. It had reached this lofty position by being an innovative cost leader. The company’s chairman, Klaus Heymann, had been quick to take advantage of a drop in the manufacturing price of CDs and the fall of the iron curtain. Recording with artists and orchestras in eastern Europe and paying musicians one-time fees instead of royalties, Naxos had developed a unique and effective business model. The company had also been a first mover in the web-based distribution of music. Having exhibited a knack for making the right move at the right time, what should Naxos do to sustain its success in the decade to come? This case was used in the Second McKinsey/HSBC Business Case Competition.

Case #2 Overview: The three founding members of The Mammals–Tao Rodriguez-Seeger, Ruth Ungar, and Mike Merenda–were facing a major decision. In the year just ending, the string band specializing in folk rock music had played over 160 concerts, earning approximately $100,000 in gross revenues but leaving little time to write or prepare new music. Signature Sounds Records had offered the group a recording contract. They needed to decide whether to accept the record deal and leverage Signature Sounds’ financial and marketing resources or to remain independent. Would the record label want them to tone down their sometimes-controversial songs and compromise their artistic values? They also had questions as to the role of their two backup musicians, Mike’s brother and a childhood friend. Should they join The Mammals on a permanent basis? The case presents information on the music industry in general and the folk segment in particular.

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