Ministry Of Sound

The Ministry of Sound went from start-up to maturity in little over a decade. The case raises issues concerning
both business strategy, particularly regarding sustainable competitive advantage and resources, and
corporate strategy, particularly regarding diversification and internationalisation. There are also issues of
ownership and organisation. In the end, the fundamental question is: whatfuture for the Ministry?
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Ministry of Sound
In 1991, 28-year-old James Palumbo invested
£225,000 (≈a340,000) of his own capital into a new
dance club located in an old South London bus
depot. As an old Etonian (the UK’s most elitist
private school), a graduate of Oxford University
and a former merchant banker, Palumbo was an
unlikely entrant into a dance culture that was still
rawand far from respectable. He actually preferred
classical music. The club’s name, the Ministry of
Sound, ironically recalled Palumbo’s father, a former
Minister in the Conservative government of
the day. Yet within just 10 years, Palumbo built the
Ministry of Sound into a music and media empire
worth nearly £150m. Two years later, Palumbo had
quit as chief executive and the Ministry of Soundwas looking for a new strategic direction.
The Ministry of Sound’s start had been difficult.
Dance music had its origins in ‘acid house’, itself
with its roots in the futuristic, electronic music of
the gay clubs of Chicago and New York. The new
style had been picked up by British DJs in Ibiza,
who combined it with the drug Ecstasy to create a
new ‘blissed-out’ sound. Dance music arrivedin
the UK during 1988, the so-called ‘Second Summer
of Love’, strongly associated with recreational
drugs. By the early 1990s, drug-dealing in its most
ugly sense had become part of the dance culture.
Palumbo recalled:
When I came into this business, with my bonuses and
my nice City suits, I was completely naïve. Just a joke.
I found that every Friday and Saturday night my door
was taking£30,000 and the security team was making
£40,000 on Ecstasy. It happens everywhere in the
UK leisure business. There are all these fat bastards
running chains of discos and bowling alleys, and none
of them admits it. We went through a really traumatic
time at the club.1
Palumbo changed his security team, bringing in
security professionals from the North of England
with no links to thelocal drugs gangs. He even
hired a psychoanalyst to cope with the gangland
threats that followed his drugs crack-down:
If they say ‘we’re going to kill you’, you know what
you’re up against. But the threats [from London’s East
End drugs gangs] are much more sinister. The word is
fed back that if the business is cut off, they will follow
you home, go for your family, stab you or murder you.2But Palumbo persisted in making his club a
safer, cleaner environment. During the 1990s, he
campaigned nationally against the use of drugs in
youth venues.
Thus the Ministry of Sound led in the transformation
of club culture from an underground
movement associated with ‘acid house’ into a
mainstream youth market activity. An illuminated
sign on Palumbo’s office wall read:
We are building aglobal entertainment business
based on a strong aspirational brand respected for its
creativity and its quality. The Ministry of Sound team
will be more professional, hard-working and innovative
than any other on the planet.3
The Ministry established a distinctive logo and
brand and invested heavily in club facilities and
sound equipment. It was a leader in developing the
new‘super-clubs’, fronted by ‘super-DJs’ earning
six-figure sums for playing other people’s music.
By 2001, over two and a half million clubbers had
visited Ministry of Sound nightspots and that same
year its first festival weekend attracted 55,000
people at Knebworth.
The business developed in many directions
during this period. A magazine aimed at clubbers,
Ministry, was launched in the mid-1990s and...