The attractiveness of the Music Industry for Warner Music

Topics: Music industry, Record label, Strategic management Pages: 7 (2225 words) Published: February 18, 2014

The attractiveness of the music industry from the perspective of Warner Group Music

Summary
Major transformation in the music industry over the last decade has resulted in the three major record labels; The Warner Music Group, Sony Music Entertainment and Universal Music Group finding themselves with rapidly decreasing revenues and company structures which no longer provide profitability. A brief analysis of the external strategic factors affecting the Warner Music Group has revealed the changes in technology and social habits of customers has had the biggest detrimental influence on the company. Further analysis of the competitive environment revealed a major change in industry dynamics and the need for this large companies to change their operations and adapt to the new environment in order to survive.

Contents

Summary
2
Contents
3
Introduction
4
Strategic Issues Facing the Warner Music Group
4
Macro Environmental Issues shaping the music industry
4
PESTLE Analysis
5
The Attractiveness of the music industry
5
Industry Dynamics
6
Globalisation
7
Risk
7
Ethics and CSR
7
Recommendations
8
Conclusion
8
References
8

Introduction
In the 1980’s the rather stable music industry started to transform. CD’s introduced digital music and this digitalization started a revolution in the industry and resulted in a rate of change which the three major music companies struggled to deal with. This report considers this transformation and how it affected on of these three companies – The Warner Music Group. The strategic issues faced by Warner Music are firstly identified from a report written by Professor Theodore Peridis and Professor Cyril Bouquet (Peridis and Bouquet 2012) and then grouped using the PESTLE model of external factors. The impact of the factors on the attractiveness of the industry is then discussed. Drawing in information from the Peridis report the structure of the industry is assessed using Michel Porters Five Forces framework. The conclusions drawn from this assessment are then used to suggest considerations for future strategies for the Warner Music Group. Finally the potential impacts of the following pressures; Industry Dynamics, Globalization, Risk, and Ethics and Corporate Social Responsibility on the attractiveness of the global music industry is discussed and the conclusion drawn that the music industry and the Warner Music Group must transform radically in order to maintain profitability in the future. Strategic Issues Facing the Warner Music Group

High order issues within the industry have resulted in the erosion of product sales, a constant state of change and poor strategic decisions. These issues, which have led to a loss of control, are of most concern to the Directors and CEO of Warner Music. It is these key issues which ‘keep the CEO awake at night’, which are significant in this case. The enormous power held by the major companies is being lost and product sales have been dropping year on year, to a point where the industry is no longer focusing on the sale of tangible goods. Revenues have fallen from a high in 2000 of $40 billion to $17 billion in 2011, IFPI (cited in Peridis and Bouquet, 2012). Artists have begun to manage their own careers. Taking control of marketing, promotion and distribution, this has dismantled the value chain created by the industry and the traditional industry structure is no longer creating a sustainable profit. It is the external influences which have affected Warner Music Group’s decisions and performance. Failing to understand these and choosing an inappropriate direction or strategy to follow has led to this decline in profits. The landscape is changing so fast that any deliberate strategy is likely to fail as it is will be obsolete very quickly. A more emergent strategy need to be employed. To begin to understand the external factors a PESTLE framework has been used to organise the...


References: Peridis, T. and Bouquet, C. (2012), 'Turmoil and revolution in the music industry ', IMD: Lausanne [online] available at https://learn2.open.ac.uk/pluginfile.php/1037221/mod_resource/content/2/Music%20Industry.pdf accessed December 2013
Viney, H. (2013) ‘Understanding the industry environment’, B835 Unit 2.3 [online] available at https://learn2.open.ac.uk/mod/oucontent/view.php?id=392400 accessed December 2013
Grant, Robert M. (2010) ‘Contemporary Strategy Analysis’ 7th Ed. Chichester, Wiley
Viney, H, and Segal-Horn, S (2013) ‘Industry Dynamics’ B835 Unit 1.3 Activity 3.1 [online] available at https://learn2.open.ac.uk/mod/oucontent/view.php?id=319656§ion=1.3.1 accessed December 2013
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