KollerEvansDiscussion post 3 slides

MUSIC & VIDEOS
WE’VE GOT YOU COVERED
CANDACE KOLLER ~ ZACHARY EVANS
Wednesday, December 10, 14
we are Zach Evans and Candace Koller. We are here to discuss a very important new trend in the music industry. We know that after our presentation you will be excited to
move forward with our ideas and be comfortable on how it will benefit Warner Music Group.

WARNER MUSIC STREAMING SERVICES
https://www.flickr.com/photos/sarahvannortwick/5095739172
Warner Music Group has been a very successful music label, distributor, publisher and label service provider to it’s strong roster of artists. We feel it’s time to think outside
of the box and develop our own streaming service that is exclusive for WMG music artists. This will be more than what other streaming services offer. We will offer
incentives to our subscribers that will help customers feel that they are getting more than just streaming.

PROBLEM
&
SOLUTION
Problem & Solution (3 points each) Explain what challenges this company faces that relate to how your proposal will help.
Address how your proposal will benefit the company qualitatively. Answer the question, “Why should they do this?”
https://www.flickr.com/photos/bucciantiphoto/15752438702 https://www.flickr.com/photos/revjett/9520118202
The problems are two fold. 1. Music sales are in a decline. During the 2013 sales year, no one artist was able to achieve platinum sales and more customers would rather
tap into a cloud based account for their music listening pleasure. Customers do not want to deal with storing and maintaining a music library be it digital or physical.

ENVIRONMENTAL SCANNING
Record Sales
Label Services
Record Sales Record SaleRsecord Streaming Services
https://www.flickr.com/photos/andymcgeechan/2990556812 https://www.flickr.com/photos/wotatopia/4994307619
This new streaming service will allow for continues revenue as the subscriber will pay a minimum monthly subscription fee. It will also allow us to continue to introduce
new music to customers who are interested in purchasing digital and physical media as well as bring revenue into the label services which will allow WMG to continue to
support their roster of artist.

WARNER MUSIC
STRENGTHS & WEAKNESSES
https://www.flickr.com/photos/livemusicphotography/888348997
Warner Music Group has a massive stable of artists whom which have a fan base who is loyal to them. Not only will we be able to help our artist collect royalties they deserve but we will also be able
to provide them and their fans direct contact and access to their music. This will allow our artists to recoup appropriate publishing and performance royalties, but also use their label services to
continue making music and support their careers.
Weaknesses, there are other subscription based providers who have a broader range of music available than we do. It may be a challenge to get them to buy in or switch to our service.
Financial
Standings
As
of
March
31,
2014,
the
company
reported
a
cash
balance
of
$142
million,
total
long-‐term
debt
of
$2.869
billion
and
net
debt
(total
long-‐term
debt,
including
the
current
porDon,
minus
cash)
of
$2.720
billion.
There
was
no
balance
outstanding
on
the
records
as
of
March
31,
2014.
Revenue
for
the
company
has
declined
3%
and
digital
revenue
increased
6%
both
on
a
constant
currency
basis.
The
net
loss
was
$59million
versus
net
income
of
$4
million
in
the
prior
year
quarter.
(WMG.com)
NASDAQ
WMG
status
is
a
share
price
of
$17.00,
shares
offered
32,600,000
in
common
stock.
Company
financials:
revenue
$1,008,000,000,
Net
Income
$36,000,000,
Total
liabiliDes,
$5,148,000,000,
stock
holders
equity
-‐$125,000,000
with
total
assets
equaling
$5,023,000,000.
The
current
CEO
Edgar
Bronfman,
CFO
Eric
Levin,
EVP
Brian
Roberts
and
WMG
currently
employ
4000
staff
members.
(NASDAQ.com)

WARNER MUSIC
COLLABORATORS
https://www.flickr.com/photos/66114359@N04/6020642709
https://https://www.flickr.com/photos/vadfromkiev/9860953686 www.flickr.com/photos/65196280@N04/8572352115
Warner music group has a long list of partnerships and collaborations. One in particular that we feel is a strong and will help our marketing and sales push is the
partnership with soundcloud. They have a strong list of people using their service and we hope to use it in conjunction with our streaming service to help unsigned/
unknown artists get discovered.

https://www.flickr.com/photos/squeegy/2178926436
https://www.flickr.com/photos/ahr19/6262537089
https://www.flickr.com/photos/malthe/4673635685
https://www.flickr.com/photos/taylalyell1979/14556226382
WARNER MUSIC
COMPETITORS
As previously stated there is a growing list of streaming services available to consumers. We think our incentive based subscriptions will bring more customers to our
service as well as theirs if not exclusively.

WARNER MUSIC
BUSINESS CLIMATE
https://www.flickr.com/photos/panoramamercantil/7923949124
https://www.flickr.com/photos/bob_karol/2543778086
Swift Yorke
https://www.flickr.com/photos/carlos_muller/3388897561
The business climate sees more artists who are declining to have their music sold for free or for minimal residuals and publishing. We would offer are artists to be
exclusive with us or they could share their music on our platform and others they choose. We’ve seen companies such as CBS pulling their content from video streaming
providers like hulo and netflix and only allowing their content to be viewed from their CBS application only. Allowing them more control of the content and being aware of
their share in the market place.

STRATEGY FORMULATION
WARNER MUSIC GROUP
MARKETING DISTRIBUTION A & R LEGAL
STREAMING
DEPT.
As for our strategy for this new streaming service we see the necessity of adding a new streaming department. This department would be relatively small and will need
minimal support at the onset of this venture. During the launch we will need to enlist the help of the legal department to discuss licensing and royalty agreements with the
artist. The marketing department to help get the service out there and start cultivating interest in the service. A team of 15 employees and 2 webmasters that make up the
division based

WARNER MUSIC PROJECT BUDGET
Sales
Year 1
Expenses
Year 2 Year 3
Operations
Marketing
Legal
Distribution
Net Profit
57,230,238 60,091,750 63,096,337
TOTAL
6,428,321 6,697,237 6,979,599
5,000,000
5,000,000
150,000
160,000
0
0
5,000,000
170,000
0
$11,578,321 $11,857,237 $12,149,599
$45,651,917 $48,234,513 $50,946,738
The
first
and
largest
cost
for
the
implementaDon
of
Warner
Music
Group
streaming
services
is
the
cost
of
operaDons.
Included
in
operaDons
are
streaming
costs,
licensing
fees
and
hosDng
as
well
as
the
employee
budgets
associated
with
it.
Due
to
the
streaming
service
being
an
added
division
within
Warner
Music
Group
the
arDsts
and
music
streamed
will
mostly
be
limited
to
the
ones
inside
of
the
WMG
catalogue,
which
allows
for
a
lower
need
to
have
too
many
employees.
In
order
for
the
service
to
be
a
success
there
has
to
be
an
awareness
surrounding
the
product
which
could
fit
inside
of
a
$5
million
dollar
budget
that
would
include
but
not
be
limited
to
social
media
markeDng,
terrestrial
radio
markeDng,
print
adverDsing
and
event
markeDng.
Making
people
aware
that
the
product
exists
is
important
for
the
launch
of
the
product
and
once
there
is
an
established
foundaDon
users
tesDmonies
and
word
of
mouth
will
be
very
beneficial
to
the
growth
of
the
services
offered.

WARNER MUSIC SALES PROJECTIONS
Year 1 Year 2 Year 3
Sales Projections
Projected Units Sold
Unit Price
Unit Cost
TOTAL
13,944,000
$3.99-$4.99
5,378,321
$57,230,238
14,641,200
$3.99-$4.99
5,647,237
$60,091,750
15,373,260
$3.99-$4.99
5,929,599
$63,096,337
When it comes to how many paid subscribers exist in America the numbers in research varied from 22-28 million. The most recent number with an accurate
breakdown states that there are approximately 24.9 million paid subscribers to music streaming services as of November 2014. With the strong presence of
countless Warner Music Group artists stretched across every genre past and present and the features that are not matched by current streaming services it is
anticipated in good reason that in the first year Warner Music Group streaming services could reach at least 7% of the market share or 1,743,000 million subscribers
in the first year.

First, the WMG team of lawyers would already be relatively familiar with the artists contracts and be an essential tool in giving the department the go ahead to add the artists
music to the platform. In the event that there are a few artists who own the majority of the rights to their music the lawyers may need to get the artists permission before
adding the music to the catalogue. Adding two lawyers to be dedicated to contracts involved should be around $150,000 the first year.All in all, the benefit of having such a
large in house catalogue for WMG gives plenty of content without having to go outside to make the service successful. The second great advantage is that there are virtually
no distribution costs that are not already included inside of the operations because everything is digital and there will be no physical distribution of the product.

Strategy Evaluation (3 points) Explain how you will evaluate the success of executing your strategy. This addresses your SMART goals and how you will stay on track.
WARNER MUSIC
MILESTONES
All
in
all,
the
benefit
of
having
such
a
large
in
house
catalogue
for
WMG
gives
plenty
of
content
without
having
to
go
outside
to
make
the
service
successful.
The
second
great
advantage
is
that
there
are
virtually
no
distribuDon
costs
that
are
not
already
included
inside
of
the
operaDons
because
everything
is
digital
and
there
will
be
no
physical
distribuDon
of
the
product.
Aber
relentless
markeDng
efforts
to
build
a
solid
foundaDon
the
goal
is
to
hit
the
one
million
subscribers
milestone
by
September
of
2015
through
compeDDve
pricing
and
the
ability
to
offer
more
than
the
compeDDon.
In
December
of
2015
the
goal
is
to
have
a
least
1.7
million
paid
subscripDons.
The
second
year
will
focus
on
improving
on
the
progress
that
has
been
made.
Through
evaluaDng
the
department
needs
as
well
as
updaDng
the
placorm
it
will
make
users
experience
even
greater
than
before.
In
March
of
2016
the
goal
is
to
hit
the
2
million
paid
subscripDon
mark
and
shortly
aber
begin
creaDvely
coming
up
with
ways
to
offer
things
that
the
compeDDon
simply
cant.
Another
large
milestone
for
2017
is
to
have
at
least
3
million
paid
subscribers
and
to
introduce
partnerships
with
large
corporaDons
such
as
car
manufacturers
to
use
WMG
streaming
in
their
cars
and
make
the
audio
and
visual
components
readily
available
inside
of
their
vehicle.

https://www.flickr.com/photos/zebandrews/9480368360
https://www.flickr.com/photos/throwboy/5373976454
ONE MILLION
SUBSCRIPTIONS

EXCLUSIVE MEMBERSHIP INCENTIVES
https://www.flickr.com/photos/jhdennis/4243485596
https://www.flickr.com/photos/juliakrause/583482052
The
numbers
and
research
point
us
to
a
very
logical
direcDon,
which
will
help
increase
revenue
in
record
sales,
label
services,
and
the
new
streaming
music
subscriber
business
model.
Warner
Music
Group
needs
to
develop
and
support
our
own
paid
subscripDon
music
streaming
service
for
the
arDsts
on
our
roster.
By
doing
this
we
will
drive
traffic
to
our
website,
support
the
payment
of
licenses
to
our
arDsts
owned
copyrights,
find
a
revenue
stream
that
consumers
are
willing
to
support
and
will
help
our
label
to
find
new
customers
and
create
a
stronger
bond
with
our
exisDng
ones.

MARKETING
Thank you for your time and attention. I hope you’ve enjoyed the presentation and the ideas that were discussed.

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