Warner Music Group

Topics: Warner Music Group, Music industry, EMI Pages: 7 (1998 words) Published: December 15, 2010
M004LON : Finance, Funding and Legislative frameworks for Success Industry : Music
Company :Warner Music Group


1. Introduction
2. The Pestle Analysis
3.1 Countries and Revenues
3.2 Piracy
3.3 Advent of Digital Music
3. Porter’s Five Forces-WMG
4.4 Intra-industry Rivalry
4.5 Buyer’s Power
4.6 Threat of new entrants
4.7 Supplier Power
4.8 Threat of substitutes
4. Recommendations
5. Conclusions
6. Appendix
7.9 Financial Ratios
7.10 Interest Rates in main markets of WMG
7.11 Inflation rates in main markets of WMG
7.13 Balance Sheets of WMG
7.14 Piracy Rates
7. References

WMG Corporation is one of the well established and popular music company.WMG records as well as publishes music. It was founded in 1958 known as Warner Bros. Records. Since 2004 it is known as Warner Music Group. It operates in more than 50 countries. Many renowned artists are associated with Warner Music Group. It is a third largest recording company after SONYBMG and Universal. It is the first company to come up with digital transformational music. It earns its revenue by offering various services like touring, merchandising, sponsorships, endorsements, providing ringtones to mobile operators. [Source: www.wmg.com ] 2.The Pestel Analysis:

The Pestle analysis on Warner Music group leads us to identify three main problems that WARNER MUSIC GROUP faces in face of 1) Piracy ,2)Recession,3)The Transition Phase of the Music industry.

The Profitability ratios of Warner Music Group show a downward trend that can be attributed to the recession, Piracy. 2.1 Countries & Revenues:
The variance of the indicators of recession like inflation, interest rates, consumer confidence, level of business investment in these countries have been in synchronisation with the variation of Profitability ratios of WMG. This trend can be clearly observed in the graphs shown in the appendices. ROCE ratio is a measure of the effective use of the resources and the Capital. It has been on the decline since 2006 owing to the global recession which continued till the present time.

The Gross profit margin of a company speaks about its profitability; it is influenced by various factors like inflation, consumer confidence levels, and Effective usage of the capital.

As it can be observed from the above inflation graphs of the main markets of WMG there has been an influence of these rates on the profitability ratios. The table below shows the various effects of inflation.

So the inflation rates which correspond to recession have a major impact on the profitability of WMG. Mainly after 2007 the when the recession started the Profitability of WMG has been on the decline. Though the recession seems to have ended but economies are making up for their lost budgets. 2.2 PIRACY:

Piracy has had its share of toll on the music industry as a whole; though in the main markets of WMG the piracy has not been rampant it can hinder the market expansion which might have an effect on the profitability of WMG.

SOURCE: www.ipi.org
So it can be clearly seen that piracy is on the lower side in many of its main markets with the exception of Italy. Piracy in other markets can be a by product of recession and can also boost up recession which again negates the profitability. 2.3 ADVENT OF DIGITAL MUSIC:

The music industry is in a phase of transition from physical music sales to digital music sales the rapid increase in digital music shares, so WMG should try to invest more on the digital front and reduce the investment on the physical music. Digital Music can be susceptible to piracy so technologies like water marking, blue ray that prevent piracy have to be adopted. Source:...

References: 1. Kotler, P. et al. (2009), Marketing Management, Pearson Education; England.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The attractiveness of the Music Industry for Warner Music Essay
  • The Aol – Time Warner Merge – Why Being a Successful Business Doesn’t Guarantee Success Essay
  • Aol Time Warner Merger Research Paper
  • Music Piracy Is a Good Thing Essay
  • Prince vs Warner Brothers Essay
  • Essay about Environmental Analysis & Strategy Development for Emi Music
  • Warner Brothers Essay
  • Globalization and Music Industry Research Paper

Become a StudyMode Member

Sign Up - It's Free