SACD

Giel Bessels is one of the three founders of a Dutch classical music record label called PentaTone Music BV, which releases all of its recordings on a high-resolution audio format called Super Audio Compact Disc (SACD). Now a decade old, PentaTone has survived the commercial failure of SACD’s launch in 1999 and the adverse market characterized by a continually shrinking demand for classical music recordings. However, the founders wish to build their company further and know that they must stimulate demand for their products so that they can finance further recordings. Bessels and his team recognize the unique difficulties of educating consumers about the superior quality of high-resolution, surround-sound classical music on SACD, which needs to be heard to be fully appreciated. The case invites students to think creatively about alternative ways of growing and protecting PentaTone’s business, including novel uses of social media and possible expansion into China. The case also illustrates a relatively unusual motive for new venture creation — here, the business is seen as an asset to be built up to provide a future capital gain through a trade sale rather than as a vehicle to generate a stream of current and ongoing dividends (incomes).