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Universal Music Group - SWOT, PEST, Porter Analysis
- 1. T E AM 3
- 2. v i si o n “We are UMG, the Universal Music Group. We are the world’s leading music company. In everything we do, we are committed to artistry, innovation and entrepreneurship…”
- 3. 1937 1999 2001 2004-08 2011 2014 Start of Universal records1934 as Decca records Ploygram (Major record Label Philips) acquired bySeagram. Segram merged in to UMG UMG acquired an online subscription music service, EMusic.com, which it used to help grow digital sales and internet related operations - UMG separated from Universal Studios - Made over six acquisitions making it the largest music catalog in the industry - Acquitted by Vivendi - Acquired BMG Music Publishing making it the largest music publisher - Acquisition of Univision Music Group Acquisition of EMI Universal Music announced the disbandment of Island Def Jam Music, one of four operational umbrella groups within Universal Music t i m e - l i n e
- 4. o rga ni z a t i o n a l S t ru c t u r e Lucian GraingeMichelle Anthony
- 5. b r an d s
- 6. s wo t- s t r e n g t h s Strengths Large global and local market Large parent company Strong management Brand recognition Artist portfolio Large market share Influential celebrity power Rich history Vevo partnerships Artist placement Opportunities Diverse consumer base Innovative distribution channels New technologies More fusion of genres Festivals, concerts, events collaborations (U-Live) Transformation from physical to digital Access to new talent Threats International competition Government regulations (copyright) Volatile costs Individual artists Music value to consumer (price)
- 7. s wo t- O P P O R T U N I T I E S Strengths Large global and local market Large parent company Strong management Brand recognition Artist portfolio Large market share Influential celebrity power Rich history Vevo partnerships Artist placement Opportunities Diverse consumer base Innovative distribution channels New technologies More fusion of genres Festivals, concerts, events collaborations (U-Live) Transformation from physical to digital Access to new talent Weaknesses Piracy File Sharing Technology changing music trends Lack of discovery High risk industry Uncertainty regarding artist deals
- 8. Weaknesses Piracy File Sharing Technology changingmusic trends Lack of discovery High risk industry Uncertainty regarding artist deals s wo t - W E A K N E S S E S Threats International competition Government regulations (copyright) Volatile costs Individual artists Music value to consumer (price) Opportunities Diverse consumer base Innovative distribution channels New technologies More fusion of genres Festivals, concerts, events collaborations (U-Live) Transformation from physical to digital Access to new talent
- 9. Threats International competition Government regulations(copyright) Volatile costs Individual artists Music value to consumer (price) s wo t - T H R E AT S Strengths Large global and local market Large parent company Strong management Brand recognition Artist portfolio Large market share Influential celebrity power Rich history Vevo partnerships Artist placement Weaknesses Piracy File Sharing Technology changing music trends Lack of discovery High risk industry Uncertainty regarding artist deals
- 10. m u si c i n d u s t ry r e v e n u e s DIGITAL DOWNLOADS 37% STREAMING 27% PHYSICAL 32% RING-TONE 1% SYNCHRONIZATION 3% 2009 2010 2011 2012 2013 2014 4.4 4.7 5.3 6.0 6.4 6.9 GLOBAL DIGITAL DOWNLOAD REVENUE (USD$ BILLIONS)
- 11. p e st - p o l i t i c a l Political Global industry - affected by many political environments Industry employment falling caused by piracy and transformation of music retail and consumers Legal development of protecting intellectual property worldwide Independent labels are predicted to grow, taking market share from the major labels Tax systems and trade barriers affecting the business Economical Piracy: 12.5 million losses in music industry Industry is in a decline Projected annual growth 1.7% Forced to change their business plan and channels of distribution High cost to run a record label today- making money means spending money Technological Development of blocking known piracy systems Becoming easier for independent artists to record, market and distribute on their own Technological development working against the set-up known today, but may be the way for a new industry structure
- 12. Economical Piracy: 12.5 millionlosses in music industry Industry is in a decline Projected annual growth 1.7% Forced to change their business plan and channels of distribution High cost to run a record label today - making money means spending money We are out of the crisis - but how has it affected people’s value of music Globalization as a benefit, but can also bring competitors p e s t - e c o n o m i c a l Political Industry employment falling caused by piracy and transformation of music retail and consumers Legal development of protecting intellectual property worldwide Independent labels are predicted to grow, taking market share from the major labels Tax systems and trade barriers affecting the business Social Change in consumer habits: How they listen to music, how they purchase (more individual track purchases than albums) Devaluation of music value in consumers eyes (Cheaper through streaming services or illegally) Controlling market: Having the funding and control to decide what music goes mainstream Social media and streaming services
- 13. p e st - s o c i a l Social Change in consumer habits: How they listen to music, how they purchase (more individual track purchases than albums) Devaluation of music value in consumers eyes (Cheaper through streaming services or illegally) Controlling market: Having the funding and control to decide what music goes mainstream Social media and streaming services affecting market Economical Piracy: 12.5 million losses in music industry Industry is in a decline Projected annual growth 1.7% Forced to change their business plan and channels of distribution High cost to run a record label today- making money means spending money Technological Development of blocking known piracy systems Becoming easier for independent artists to record, market and distribute on their own Technological development working against the set-up known today, but may be the way for a new industry structure
- 14. p e st - t e ch n o l o g i c a l Social Change in consumer habits: How they listen to music, how they purchase (more individual track purchases than albums) Devaluation of music value in consumers eyes (Cheaper through streaming services or illegally) Controlling market: Having the funding and control to decide what music goes mainstream Social media and streaming services Technological Basic technology needed to listen music - getting more accessible globally Development of blocking known piracy systems Becoming easier for independent artists to record, market and distribute on their own Technological development working against the set-up known today, but may be the way for a new industry structure Streaming business increasing sales by 19% Political Industry employment falling caused by piracy and transformation of music retail and consumers Legal development of protecting intellectual property worldwide Independent labels are predicted to grow, taking market share from the major labels Tax systems and trade barriers affecting the business
- 15. p o rt e r Rivalry Among Existing Competitors HIGH Growing competition and rapidly shifting consumer preferences Bargaining Power of Customers HIGH Large variety in the market free music genres artists experiences distribution channels Bargaining Power of Suppliers MODERATE Suppliers = artists Artists have choice to choose between different companies Established artists have the power to negotiate pricing and deals Threat of substitutes HIGH battling against radio television social media internet piracy Threat of New Entrants LOW-MODERATE High Barriers of Entry Low startup costs for independent artist, ie. Soundcloud High time costs to bring artists/products to market High financial cost and risk: - acquiring talent and music - distribution - marketing
- 16. m a rk e t s h a r e SONY 36.6% WARNER 22.2% UMG 41.2% UMG lost market share in 2014, mainly as a result of the sale of the Parlophone Label Group (PLG) to WMG in 2013, which formed part of EMI Recorded Music acquisition requirements. UMG’s loss was WMG’s gain and the smallest of the three majors narrowed the gap on second-placed SME. Sony/ATV held its lead in music pub- lishing, but the collective share of the independent publishing sector was the highest overall.
- 17. a n alys i s . p e rs p e c t i v e Contracts: Before: Record labels limited to producing, distrib- uting, market and selling recorded music. Now: Labels receive income from other sources, art- ists earnings (live performances), merchandise sales, publishing, commercial endorsements (360) Needs to be beneficial for both parts - unique talent to make the deal profitable Streaming - competitor or partner? (Pandora, Spoti- fy, Deezer, Youtube, etc)
- 18. o u rr e c o m m e n d a t i o n s - Stay up-to-date with consumer trends shifts in social media and music - Look into Streaming and other distribution channels! - More research and development with technology to result in faster growth - Get a more diverse group of artists.. Don't be afraid of new and unique talents - An effort is events and festivals - Expand into emerging markets
- 19. c o nc l u s i o n Technology is an important factor that has completely changed the industry UMG is a big powerful entertainment company with an established history of popular artists and genres UMG can continue their success by staying up to date in market trends with continuous innovation Make music valuable for consumers again Finding a solution to the “streaming issue” - clear strategy needed to overcome this obstacle
- 20. v i ve n d i ’ s f i v e y e a r s t r a t e g y VIVENDI’S FIVE-YEAR DEVELOPMENT PLAN FOR UNIVERSAL MUSIC GROUP “UMG will accelerate the monetization of music on digital channels, broaden the reach of its audio and visual content through multiple partnerships with platforms and strengthen its strategic relationships with brands and sponsors. It will pursue its industry-leading track record of talent management and development. UMG will also continue investing in high-potential markets for music, such as Africa, India and China.” - Vivendi press release on July 31, 2015