Ownership P1 (a)

Meaning & Purpose

Ownership is essentially what type of company Columbia Records is: there are many different types and all of them differ in who owns what, whether the public or the private sector gets the shares, etc. I think that it is very important that we go into detail and learn about ownership too, because from it we are then able to have a greater understanding for the works of companies, such as Columbia Records.

Below I go into more detail on what Columbia Records actually is as a company and who it belongs too...

Columbia Records

Columbia Records is an American flagship recording label, under the ownership of Sony Music Entertainment and operates under the Columbia Music Group. Sony Music Entertainment is the parent company, and Columbia Records is a subsidiary (the child of the parent company). A parent company is a company that owns enough voting stock in another firm to control management and operation by doing and influencing or electing its board of directors; a subsidiary is a company whose voting stock is more than 50% controlled by another company (the parent company). The advantages of a subsidiary company is that the parent-subsidiary structure essentially isolates risks because the two companies are separate legal entities. The losses at a subsidiary do not automatically transfer to the parent company. The parent can exercise control over a subsidiary if it owns a large block of its stock, but not necessarily a majority of the shares. (Even a fractional ownership of the shares of a widely held company could result in effective control).

There are disadvantages to subsidiary companies too though; for example the parent company does not have complete access to the cash flow of the subsidiary, unless the parent controls 100% of the shares. In order to maintain its image and reputation too, the parent company may have to pay for the subsidiary's debts, even if it has no legal obligation. The parent company can also be liable for damages if an operating subsidiary violates the law, or is subject to enforcement actions. So in this case, if Columbia Records did go badly one day and its reputation depleted for whatever reason, Sony Music Entertainment would be obliged to pay for their costs, despite the situation having nothing to do with them.

It was founded in 1988, in Washington D.C. (The UK label is led by joint MDs Alison Donald and Mark Terry).

I believe Columbia Records is multinational; the advantages to the company being this is that the cost of production throughout the world will cost less; however a monopoly effect could also be created, which means that the public could turn on the company, if they make unpopular decisions (for example, dropping a very popular artist).

Columbia Records homepage