1 | Page UTRECHT SCHOOL OF ECONOMICS (U.S.E.) Faculty of Law, Economics and Governance Master Thesis in International Management DISRUPTIVE INNOVATION IN THE MUSIC INDUSTRY How can incumbent firms survive streaming? A case study Author: Supervisor: Betti Csiba Luigi Pinna 5978920 July 2017 Academic year 2016/2017 0. ABSTRACT This paper investigates the reaction of incumbent firms to streaming as a disruptive innovation in the music industry through the case study of Universal Music Group, a major record label company. The article is directed at finding the answer to the research question “How can incumbent firms survive streaming?” and hypothesises that companies which adapt to streaming can be revived. After a thorough review of the literature on the sharing and access economy as well as on disruptive innovation in general and in the music industry, the author analyses the effects of streaming on the music industry, the reaction of the industry as a whole and conducts an in-depth analysis via the example of Universal Music Records, a major record label company. Based on previous research, the author classifies the reactions of incumbents according to four potential responses: fight, flight, adapt or disrupt the disruptor. UMG’s combined adaptive measures helped UMG to not only survive streaming but bounce back after a downturn, confirming the hypothesis of the paper. The article also examines the possible future outcomes of the current situation and predicts that streaming is here to stay for the longer run with Spotify as the most influential player of the new field. Finally, the author discusses the paper’s limitations and highlights areas for potential further research. Keywords: disruptive innovation, streaming, record labels, incumbents, adaption