Global market expansion strategy for Canada’s major performing rights organization

1. International Expansion
Project

2. AGENDA
1. Brief description of SOCAN
2. Is SOCAN ready for international expansion?
3. To which Market should they expand?
4. What mode of entry?
5. Conclusion

3. How does SOCAN generate revenue?
• A Music rights management
organization controlled by
rights holders;
• To date ONLY collect
performing rights and
starting to acquire
reproducing rights;
• Not handling: Mechanical
reproduction license,
Synchronization license or
Digital performance right;
• SOCAN is a non-profit
organization, 15% of the
collection fees are used for
operational expenses.
Program producers provide cue sheets (list
of the songs and length, instrumental/ vocal,
feature/ background, program schedules and
logs
Operators report a few times a year their cue
list for that day
Public spaces provide their own music use
data
Restaurants and bars, are not surveyed and
simply pay a flat rate
Fee Collections

4. How does SOCAN operate?
• Support operations optimization:
Marketing, sales, service
• Enterprise cost reduction
• Operating model and governance
• Content monetization
• Digital/media asset management
• Technology enablement: non-core IT,
next-gen sales, operations and
engineering
Back Office Operations
• Customer experience management
• Digital IP: products and services
• Pricing and bundling
• Sales, service and marketing transformation
• Social media strategy
• Technology enablement: lead to service,
web, contact centers, customer resource
management (CRM)
Front office operations

5. What is SOCAN’s value proposition?
Product Leadership
Customer Intimacy
Operational
Excellence
• Awareness:
• Raising awareness of need to pay
license; good quality music to add
value to business
• Royalty Collection:
• Ensuring most efficient
collection across countries; joint
collection ventures and
outsourcing deals
• Reach:
• Increase number of businesses paying
license
• Countries without licensing
implemented: Support PROs to expand
revenue collection

6. AGENDA
1. Brief description of SOCAN
2. Is SOCAN ready for international expansion?
3. To which Market should they expand?
4. What mode of entry?
5. Conclusion

7. Revenue Growth outlook
Analysis of Revenue Growth for 2016:
Findings
• Higher revenue growth (9.4% vs 3%)
potential in ALL countries other than
Canada/USA;
• High growth in Music industry in EGYPT
and ARGENTINA can indicate new content
leading to growth in repertoire; higher
royalty collection;
• High growth (12.8% v/s 7%) in Internet
usage in countries other than Canada/USA,
suggest expansion can create new
consumer base.
Source: PWC Global entertainment and media outlook 2016–20
0
2
4
6
8
10
12
14
16
CAGR for E&M Spending, Internet
growth and Music Industry growth
E&M Spending Internet Music
Lower CAGR in Canada and US implies market saturation

8. International expansion is the BEST option:
Takes advantage of key opportunity, while at the same time mitigating/ managing key threat.
Internal
capabilities for
strategy of
expansion
Does the market present the right conditions?
External
environment
offers
opportunities
• Key opportunity:
• Globalization
• 5 Forces model shows advantages in Non saturated markets with cooperative
governments.
• Key threat:
• Publishers negotiating directly with digital platforms
• Through 5 forces model significant disadvantages in buyer power were identified;
• Competitive Advantage:
• Integrated platform with tailor made services
• Superior data-matching capabilities (purchase of MediaNet)
• Transparency and accuracy in collection and payment of royalties, compared to minor
players
• Key strength:
• Strong brand in Canada (90 years experience)
• Collection of big data for members (Business Analytics)
• Key weakness:
• Not holding ALL music rights, may hinder members preference

9. Does SOCAN have access to required resources?
Amount depends on
mode of entry and
market size, but
there is cash
available;
MONEY
From improvement
of foreign-claims
tracking process
INTERNATIONAL RELATIONS
301 full-time and
part-time employees
in 6 offices across
Canada and US in
2016
EMPLOYEES
47,305 51,205 55,479
62,733 67,013
2012 2013 2014 2015 2016
International Royalties
growth (thousands $)
15,121 15,413
45,025
22,725 22,565
2012 2013 2014 2015 2016
Cash
(thousands $)

10. What would be the best strategy for expansion?
 Market Penetration not effective for revenue growth
1) North American market saturated;
2) International Partnerships already in 213 countries;
 Product development can be an alternative
1) Acquire other 4 music rights categories;
2) Members can sell all rights through one single source;
 Diversification is another alternative
1) Requires high investments (to understand market);
2) Less competition;
3) Could provide back-office services (different revenue source);
 Market development is the BEST option
1) Fast-growing new markets;
2) Access market with mature technology and business model.
from Ansoff Matrix options

11. In conclusion
SOCAN is ready for expansion

12. AGENDA
1. Brief description of SOCAN
2. Is SOCAN ready for international expansion?
3. To which Market should they expand?
4. What mode of entry?
5. Conclusion

13. Which markets have the easiest entry?
We looked into all the countries in the world and filtered our
options according to competitiveness and size:
• In a medium-low competitive environment SOCAN can
add more value (ranks from 92 to 124, out of 138)
• Too- low competitiveness (125 to 138) is too risky
• Countries with higher populations than 11mi> bigger
opportunities
• Reduced populations are not worth the initial effort an
expansion requires
• The most developed country in the list: ARGENTINA
(stage 2 to 3)
• 3 countries in stage 2: EGYPT, ECUADOR and TUNISIA
• 4 countries in stage 1 (GDP<2,000USD per capita) with the
highest populations: PAKISTAN, BANGLADESH,
ETHIOPIA and TANZANIA
SOURCE: The Global Competitiveness Report 2016–2017. World Economic Forum.
Overall
Competitiveness
Population Size
Stage of
Development
34
18
8
Findings

14. Which markets offers the greatest opportunities?
Competitive
Rivalry
Threat of
New Entry
Buyer
Power
Threat of
Substitution
Supplier
Power
• Publishers are negotiating directly
with digital platforms;
• SOCAN does not possess the
reproduction right from digital
platforms.
• Digital platforms desire to license rights
only in one society for the whole world.
• SOCAN Distributed royalties from Apple
Music for the first time in 2016
Selected countries ranked according to the Five Forces
Model:

15. Which market is the overall best choice?
Threat of New
Entry
Spending
Power
Competitive
Rival PROs
Supplier
Power
Total
Tunisia 1 8 1 7 17
Tanzania 5 7 4 8 24
Ecuador 2 5 8 6 21
Egypt 3 2 7 3 15
Pakistan 4 3 5 1 13
Bangladesh 7 4 2 2 15
Argentina 6 1 6 4 17
Ethiopia 8 6 3 5 22
* 1 is the best, 8 is the worst.

16. Rank by ability to enforce Intellectual Property
Rights
SOURCE: 1. The Global Competitiveness Report 2016–2017. World Economic Forum.
2. Wall Street Journal & Heritage ranking of Economic Freedom (http://www.heritage.org/index/ranking)
3. Fragile States Index, Fund For Peace (http://fundforpeace.org/fsi/data/)
It will be easier to open, maintain and close businesses in Tunisia (80.6%).
Ethiopia has the least possibilities (50%) for future business growth of the country,
Tunisia is the market with more competitive institutions and the highest ability to enforce property rights.
Argentina and Ethiopia have the least ability.
Argentina highest in Fragile state index due to its economic stability: is the most developed country in
shortlist.
Fragile state index combines all data ranging from political and social stability of the country.
Business Freedom
Property rights &
institutions
competitiveness
Fragile States Index
Threat of New
Entry
Spending
Power
Competitive
Rival PROs
Supplier
Power
Total
Tunisia 1 8 1 7 17
Tanzania 5 7 4 8 24
Ecuador 2 5 8 6 21
Egypt 3 2 7 3 15
Pakistan 4 3 5 1 13
Bangladesh 7 4 2 2 15
Argentina 6 1 6 4 17
Ethiopia 8 6 3 5 22

17. Threat of New
Entry
Spending
Power
Competitive
Rival PROs
Supplier
Power
Total
Tunisia 1 8 1 7 17
Tanzania 5 7 4 8 24
Ecuador 2 5 8 6 21
Egypt 3 2 7 3 15
Pakistan 4 3 5 1 13
Bangladesh 7 4 2 2 15
Argentina 6 1 6 4 17
Ethiopia 8 6 3 5 22
Rank by GDP shows access to disposable
income
SOURCES: 1. World Bank, GDP per Capita (https://data.worldbank.org/indicator/NY.GDP.PCAP.CD)
Bangladesh presents a great opportunity because of its high growth rate (7.1%)
For focus age group Pakistan and Egypt present best GDPs ($90 to $100 million).
Based on GDP only (total current spending power), Argentina (12,449 GDP per
capita) is the best out of the candidates.
GDP growth
GDP for population
from 15 to 34
Total GDP per capita

18. Threat of New
Entry
Spending
Power
Competitive
Rival PROs
Supplier
Power
Total
Tunisia 1 8 1 7 17
Tanzania 5 7 4 8 24
Ecuador 2 5 8 6 21
Egypt 3 2 7 3 15
Pakistan 4 3 5 1 13
Bangladesh 7 4 2 2 15
Argentina 6 1 6 4 17
Ethiopia 8 6 3 5 22
Rank by number of players present in the market
Tunisia, Ethiopia, Tanzania and Bangladesh have no PRO at this time.
Pakistan has only one underdeveloped PRO (with around 300 members)
PROs
Other Institutions
Ethiopia has a Musicians Association (EMA) and Tanzania has a Copyright
Society
SOURCE: 1. MusicBrainz website
2. BMI website

19. Rank by available channels for music distribution
Threat of New
Entry
Spending
Power
Competitive
Rival PROs
Supplier
Power
Total
Tunisia 1 8 1 7 17
Tanzania 5 7 4 8 24
Ecuador 2 5 8 6 21
Egypt 3 2 7 3 15
Pakistan 4 3 5 1 13
Bangladesh 7 4 2 2 15
Argentina 6 1 6 4 17
Ethiopia 8 6 3 5 22
Since SOCAN’s biggest revenue comes from TV. Pakistan presents the best
opportunity with 97 TV channels.
TV channels
Radio stations
Argentina is the country with the largest amount of radio stations (1,030)
Pakistan, Bangladesh and Ecuador also present large amounts of radio stations
(over 130)
Online music
streaming services
This channel can be a double edged sword because those services are starting to
negotiate the rights by themselves. For such reason, eve though Argentina has the
largest amount of streaming services (17) Pakistan and Bangladesh become more
attractive options (2 and 1).
SOURCE: 1. Wikipedia: List of television networks by country
2. Live online radio website
3. Global music report 2016

20. Pakistan: Analysis
OPPORTUNITIES
• Repertoire overlap/ proximity with Indian
music industry, where SOCAN is already
developing partnerships:
• Common languages with India: Punjabi and
Urdu
• Immigration of Pakistani to Canada
• 10% growth in entertainment and music
(E&M) industry in 2016
• When compared to the other 7 markets,
internet usage in Pakistan is:
• Largest number of mobile phone
subscribers, and has 2nd largest
potential as only 68% of the
population hold mobile phones.
• 2nd largest number of broadband
subscribers, and has 3rd largest
potential as only 15.5% of the
population has broadband connection.
RISKS
• There is a PRO in the market already,
hopefully SOCAN can turn it into opportunity
• Ranked high in fragile states index (high risks
of terrorism)
• No evidence of Fee Collection at the
moment, might be hard to kick-start the
process
SOURCE: http://culture360.asef.org/wp-content/blogs.dir/1/files/2017/05/Contemporary-Music_Bangladesh_FINAL-290517.pdf

21. In conclusion
SOCAN should expand to Pakistan

22. AGENDA
1. Brief description of SOCAN
2. Is SOCAN ready for international expansion?
3. To which Market should they expand?
4. What mode of entry?
5. Conclusion

23. Mode of Entry for Expansion
SOURCE: http://www.drawpack.com
Descript
ion
Use agents on
commission
Invest Resources
in Selling
Allow use of
brand name
Shared
investments
with JV Partner
Manufacture
and Sell
In
SOCAN
Local agents
collecting rights
and using
SOCAN in
Canada for
back-offices
Local agents with
a small SOCAN
office
Local PRO can
become SOCAN's
sister society and
pay SOCAN for
consultancies
SOCAN puts
platform and
back-office
knowledge,
while local PRO
has agents and
local knowledge
Develop a
completely new
local SOCAN
Indirect Export Direct Export Licensing Joint Venture
Direct
Investment
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24. Comparitive Summary
Expected
return (in $)
$30,466.55 $20,466.55
1000$ fee
/platform use
$20,828.28 ($1,823.45)
Qualitative
summary
4 POSITIVES
3 MEDIUM
2 NEGATIVES
(non-costly)
3 POSITIVES
5 MEDIUM
1 NEGATIVES
1 POSITIVES
4 MEDIUM
5 NEGATIVES
4 POSITIVES
2 MEDIUM
3 NEGATIVES
5 POSITIVES
1 MEDIUM
2 NEGATIVES
(both w/ high non-
estimated costs)
Indirect Export Direct Export Licensing Joint Venture
Direct
Investment
24

25. Which mode of entry provides the least risk?
Customer access medium medium - +
Future revenue
growth
- - + +
Cost of Technology
requirements ($)
+ medium medium medium -
Local legal
knowledge
medium medium Not required +
Requires
learning
Potential loss of
proprietary
knowledge
+ medium
Control over
operations
medium medium - +
Potential loss of
Brand recognition
No use for brand +
Local Corporate
development ($)
-
Customer service
Good reach, if
synergy
+
Indirect Export Direct Export Licensing Joint Venture
Direct
Investment
Though, direct investment has more positives than Indirect Export, the 2 negatives have high non-estimated costs

26. AGENDA
1. Brief description of SOCAN
2. Is SOCAN ready for international expansion?
3. To which Market should they expand?
4. What mode of entry?
5. Conclusion

27. In conclusion
Indirect export into Pakistan provides the greatest
return with the least risk
• Special attention is needed in recruitment of agents: consider
Hofstede’s Model;
• Local Property rights laws are based on Common Wealth, so
Canadian SOCANs legal department can be directly responsible
and hire local lawyers only when needed;
• Back-office Platform can be used by agents through cloud.
27