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Strategic Management 2007-2008
Group Project Objective: “To apply concepts and tools of strategic analysis covered during the course to the analysis of a firm”
Title: A strategic analysis of the British music group EMI.
Group Katie Welsh0564116 Lauren Leslie0567543 Asta Young-Smith0566397 Cindy Law0561762 Course Co-ordinator: Monia Mtar
Submission date: 12th of March 2008 Word count: 4035
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Table of Contents Introduction .............................................................................................. 3 Overview of the Music Industry.............................................................. 3 The Market Structure............................................................................... 4 Part 1. Appraisal of the Industry Environment...................................... 4 Overview of Key Trends.................................................................. 4 Review of the Broad Environment................................................... 6 Porters Five Forces Analysis............................................................. 6 The Structural Determinants of the Five Forces of Competition...... 7 Assessing the Industry’s overall attractiveness................................. 8 Part 2. Identification of the Firm’s Current Strategy.............................. 9 The Steps EMI is taking to achieve its Strategic Objectives............. 10 Part 3. Evaluation of EMI’s Financial Performance................................ 11 Part 4. Appraisal of EMI’s Internal Resources and Capabilities............ 13 Recommendations......................................................................................... 15 Appendix........................................................................................................ 16 Identifying Key Success Factors..........................................................16 EMI Group Resources and Capabilities................................................17 Financial Tables....................................................................................20 Competitor Analysis: Warner Label......................................................22 The Key Issues Facing EMI...................................................................23 Bibliography......................................................................................................24
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Introduction The purpose of this report is to conduct a strategic analysis on the British music group, EMI. For this the broad environment will be appraised to identify the major trends impacting the industry and the factors affecting its structure. Following this EMI’s current strategy will be identified and its financial performance evaluated. In order to highlight EMI’s strengths and weaknesses the firm’s key resources and capabilities will be appraised. The effectiveness of the firm’s current strategy will then be assessed to determine whether this strategy is exploiting strengths in of resources and capabilities. Recommendations will be offered to enhance the company’s strategy with suggestions made for possible organizational change.
Overview of the Music Industry For this analysis it is important to understand the concept of the music industry’s content and structure. The Standard Industrial Classification (SIC) offers a description of the music industry as involving “businesses and organisations that record, produce, publish, distribute and market recorded music.” 1 In addition to these, four main stakeholders characterise the music industrythe artist, the consumers, the music agents and the distributors. However, in seeking to define the industry it is acknowledged that no one definition can capture its diverse nature in of “(…) musical activity and commerce.”2 In commercial the global music industry “is a multi billion dollar segment of the media industries” (Kozul- Wright, Z & Stanbury, L, 1998, pp14) and has reached a stage of maturity in its lifecycle. However with the rise of the digital era, it is undergoing significant transformation. With a core business sector comprising the record companies and music publishers, the global music industry transcends national boundaries and “pervades virtually every culture and every society.” (Dolfsma, 2008)3
1
This definition corresponds to the International standard industrial classification as appears on http://www.helium.com/tm/404168/music-industry-history-music cited 8/2/08 2 Available http://woc.ec.pt.fuk.getfile.do?tipo=2eid=410 cited on 8/2/08 3 Article entitled “How will the music industry weather the globalization storm?” Available from: http://www.firstmonday.org/issues/issue5_5/dolfsma cited 4/2/08
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The Market Structure Four large music companies – Sony BMG, Universal, EMI and Warner- dominate the industry and in 2005 they ed for 71.7% of the worlds recorded music.4 Having the “financial, legal and technological muscle”5 has enabled this “big four” to influence and control the industry to their advantage. For this reason the music industry has been described as an Oligopolistic market structure with monopolistic tendencies where by this small group has dominated production, distribution, marketing and market share.6 However over the years the nature of the music industry has significantly changed, with greater decentralisation and fragmentation (George, 2007)7 the dominance of the major companies has declined.8
Part 1.
Appraisal of the Industry Environment
In appraising the industry environment, two components should be considered, the broad and the competitive environments. In the past ten years the traditional “recorded –music model” has faced increasing pressure as a result of emerging environmental trends.
Overview of Key Trends The digital revolution has had a huge impact on the global music industry. The advancement of information and communication technology is driving change and is dramatically affecting the industry’s business model and structure. This new technology has lead to innovations in both the production and distribution of music and with this has come greater opportunity to create, enjoy and consume music. (Kozul-Wright and Stanbury, 1998, pp17) One predominant development has been the convergence of mobile and portable music devices (I-Phone) which has greatly expanded on-the-go music consumption.
4
As appears http://www.businessweek.com/globalbiz/content/jun2007/gb200770611_930387.htm cited 8/2/08 5 As appears http://www.oligopolywatch.com/2003/06/28.html cited 8/2/08 6 Available from http://en.wikipedia.org/wiki/Market_form cited on 7/2/08 7 Available from http:www.abc.net.au/news/opinion/items/200704/51896190.htm cited 8/2/08 8 Available from: http:www.ecommercetimes.com/story/A-Broken-Record-Global-music-Biz-losing-waron-piracy-61365.html cited 3/2/08
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Online distribution of music has boomed in recent years with the internet becoming the most important medium for music promotion and distribution. With this “click and mortar” e-tailers are outperforming “brick and mortar” retailers, shifting patterns of music consumption from the physical to the virtual. With this revolution traditional music- consumption is being eroded, diminishing the sale of physical CDs. With consumers growing preference for single tracks over albums, online, single track s are rocketing, proving to be the most popular worldwide music format in 2007.9 Driving this change is a combination of factors. The growth in mp3 s and P2P (peer-topeer) software has provided the “interface for ing and ing with ease.”10These innovations have enabled consumers to file share and music online. This shifting consumption trend has lead to less demand for the physical product and consequently stores have cut CD shelf space for other forms of consumer entertainment products. Another aspect driving this change is the growing number of people burning music on to discs and by implication diminishing the physical purchase of music. With such developments has come the growth of a new music consumer generation- “Gen D” (digital and consumer generation) who are driving consumption change. With the growth of digital technologies and online information consumers experience greater convenience, choice and lower costs and consequently have become more powerful influencing price and music formats. As a result record companies are no longer in a dominant position of control. Digital technologies are also affecting the industry’s structure causing a re-shuffle of the value chain. This has changed the role for many key players whereby distributors can now sell online avoiding high fixed costs of physical stores. Record companies are experiencing a role change whereby they are potentially being usurped from the market, and so lowering their perceived value. Artists are now able to sell directly to consumers via the internet taking a more active role in the industry’s value chain. The implication of this is that some artists are by- ing the record companies in favour of setting up their own independent companies, leveraging the internet as a tool for communication, distribution and marketing. As such the future role of the traditional
9
Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 10 Sourced from: “Assessing the effects of p2p music sharing on the recorded industry” Available from: http://www.helium.com/tm/691163/sharing-program-which-enables cited 5/2/08
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record company looks increasingly uncertain where artists and consumers constitute“(…) the only essential components of the dissemination of music.”11 Whilst technology has brought many opportunities, it has however simultaneously led to a massive increase in piracy. The ease of access and consumption of music online has diminished the perceived value of the industry. It is estimated that for every one, legitimate track sold, twenty are ed illegally. 12 With this mass-availability of illegal and un-paid for music, the industry experienced an overall market decline in 2007.13 This constitutes a major threat to the legitimate music industry in of lost revenues. In 2007 record companies in the US made projected losses from illegal ing of approximately $4 billion14 furthermore the artists themselves missed out on royalties.
Review of the Broad Environment It is evident that the music industry is undergoing a significant transformation and with this comes emerging opportunities to reinvigorate growth and profitability. However, these opportunities bring substantial challenges disrupting the status quo of the music industry. To be successful companies must continually monitor their environment, exploit emerging opportunities and re-think their traditional business model. Through diversification strategies the “big four” are expanding into music- merchandise, sponsorships and concerts as a way to overcome the decline in record sale revenues.
Porters Five Forces Analysis To compete effectively, companies must be alert to the dynamics of their industry and markets.15 Using Porter’s five forces the competitive environment of the global music industry can be analyzed. 11
Sourced from: “IFPI International music managers forum: creators and consumers come first: Defining the music industry” Available from: http:www.IMMF.com/IMMFpositiononthefutureofmusic.pdf cited 4/2/08 12 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 13 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 14 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 15 Available from: http://university-essays.tipod.com/porters_5_forces_analysis.html cited 5/2/08
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The Structural Determinants of the Five Forces of Competition 1. Competition from substitutes: Within the music industry the threat of substitutes is extremely high. The internet has created an emerging source of substitute competition in the form of digital music and digital delivery. The availability of substitutes allows consumers to make performance and price comparisons with the option of switching to music. The growth of both illicit and subscription ing is effectively leading to the direct substitution of recorded music for digital alternatives. With little cost or inconvenience consumers are switching, to digital and online music services attracted by the value- added benefits of greater convenience, diversity of choice and lower costs compared with traditional formats. Currently the chance of being caught ing music illegally is low further encouraging the consumer to switch to substitutes. As a result the profitability of the record company is being threatened with the better value alternatives.
2. Threat of entry: The threat from new entrants has increased with the growth of the internet. Lower capital investment and operational costs for online distribution has lowered the entry barriers for new independent record companies. As a direct consequence, new entrants compete on a more level playing field, where size is no longer a determinant of success or failure within the online market. With diversity of demands, new entrants have the opportunity to achieve success through niche target marketing. Furthermore with these evolutionary changes, traditional distribution channels are less relied upon and new entrants can compete through online distribution and marketing. However starting up in the music industry still involves risks, where investing in a new- artist may involve unrecoverable sunk costs. Representing a new artist requires financial resources, experience and substantial networks and with limited resources independents might find it hard to break in to the industry. The major players have already achieved a substantial competitive advantage with well established networks, global reputations and long- term relationships with artists. Their financial muscle and repertoire of artists enables them to spread risk over their range of portfolio projects.
3. Rivalry between established players: Internal rivalry and competition within the industry is high and remains tightly concentrated between Sony BMG, Universal, Warner and EMI. With the increase of independent labels 7
entering the industry competition has increased. Large and small companies are now directly competing to attract artists and improve market share in both the physical and online markets. Due to the intense nature of this competition, decisions made by one company can influence others. For the main companies this intense rivalry means that their market share fluctuates through competition and can no longer be guaranteed. With “parallelism” pricing decisions (Grant, 2008, pp 76) CD’s are priced at similar levels and as such companies are looking to their artists as a means of differentiation whilst attempting to offer the most creative channels of music distribution.
4.
Bargaining power of buyers:
The emergence of the digital music market has increased the strength of buyers bargaining power. Through online network communities, consumers’ bargaining power is strengthened by the abundance of online information. Consumers are now much more price sensitive and are becoming an empowered force, directly influencing how music is delivered and in what format. With the growing perception that they offer nothing more than capital, record companies are forced to react, reinventing their business models accordingly.
5.
Bargaining power of suppliers:
The bargaining power of suppliers within the industry has lowered .The artists can now choose to circumvent the suppliers by either setting up their own label or promoting their music via the internet. This has substantially increased artists control over earnings and marketing.
Assessing the Industry’s Overall Attractiveness In of the industry’s attractiveness different perspectives have to be considered. From the record companies stand point, the growing threats posed by competition, substitutes and consumer power combine to diminish the overall attractiveness of the traditional music industry in of assured profitability. In contrast, from the artists and consumers perspective the industry’s attractiveness has significantly increased. Consumers now benefit from greater diversity of supply mediums and better pricing, whilst artists can enjoy greater distribution opportunities and improved control of promotions and revenues.
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Whilst record companies are experiencing a challenging time there still remains tremendous opportunities to make money and profit. The growth potential within the industry is unquestionable and with continual advancements of technology further opportunities will emerge. Whilst the global market for music is practically guaranteed, the question facing record companies is how to ensure a profitable status within the rapidly developing digital environment. To secure long term viability and maximize profit potential record companies will need to develop a strong competitive advantage. The key success factors16 outlined, offer a foundation for future prosperity within the music industry.
Part 2.
Identification of the firm’s current strategy
The British music group EMI is a specialised, private limited company competing in the single industry sector of global music. Based in London, EMI constitutes an international business, operating in over fifty countries and licensing to a further twenty.17 The company’s product scope focuses on two main divisions: EMI Music and EMI Publishing, which have built an extensive range of music labels, recording artists and an impressive catalogue of recorded music with over three million tracks. By vertically integrating activities within the value chain, EMI has held its competitive position alongside its main rivals Universal, Sony, BMG and Warner. EMI’s ongoing strategy is to “deliver music to consumers in any form, at any time and in any place.”18 EMI has been facing tough challenges in recent years with the increasing levels of uncertainty within the global music industry attributable in main to the digital revolution and the subsequent decline in CD sales. As such the company’s performance has deteriorated with pre- tax losses of 263.6million 19 in 2007. In August 2007 the private equity, investment company Terra Firma acquired EMI with the intention of “unlocking [the company’s] hidden value”20and reversing its diminishing performance. As the existing business model at EMI is believed to be unsustainable, change will involve the strategic innovation of a ‘new revolutionary structure for the group that will improve every area 16
Please see Appendix “A Model for identifying the Key Success Factors.” As appears http://www.emigroup.com/default.htm cited 29/1/08. 18 As appears http://www.emigroup.com/default.htm cited 8/2/08 19 As appears on EMI’s official website http://www.emigroup.com cited 5/2/08 20 Available from: http://www.terrafirma.com/about-terra-firma.html cited 5/2/08 17
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of the business.’21 The corporate strategy of EMI is therefore focused on restructuring and reshaping internally to allow the label to compete in the digital music industry. This will completely change the functions within the firm in relation to resource allocation, divestments and diversification. The business strategy on the other hand will be directed towards gaining competitive advantage on the basis of differentiation and also cost reduction. First of all it is important to identify the main forces that are driving change. •
‘85% of what is put out does not make any money while 30% of artists who get advances never produce an album.’22
•
‘Struggling to respond to the challenges posed by a digital environment’23
•
Loss of artists including Radiohead having negative effects on EMI’s reputation
•
Recorded music division less profitable and overstaffed
•
‘Exceeded marketing budgets by about £60m a year and wasted £25m a year on scrapping unsold CDs’24
•
Changing ‘needs of the consumer, making artists less dependent on remaining with a large record label.’25
The steps EMI is taking to achieve its strategic objectives EMI will make changes to its business model over a six month period in an attempt to combat these problems and achieve its strategic objectives. The ‘new strategy to turn EMI around will stress tackling digital challenges, understanding the needs of the consumer and the importance of keeping artists at the heart of what we do’.26 Additional incentives and better services will be offered to artists as encouragement to stay with the label, as well as promoting a relationship ‘based on transparency and trust’.27 Greater emphasis will be put upon making existing artists more profitable. This will be done by maximizing the opportunities associated with digitalisation in relation to promotion, distribution and increasing revenue by diversifying into new areas such 21
EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 23 EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 24 EMI restructuring – www.paidcontent.org cited 10/2/08 25 Preview of Guy Hand’s EMI strategy – www.paidcontent.org cited 10/2/08 26 Preview of Guy Hand’s EMI strategy – www.paidcontent.org cited 10/2/08 22
27
EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08
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as merchandising, corporate sponsorship and touring. Although gs will be limited, EMI will invest more money and resources into its artists and repertoire function which will help discover and develop new talent. The efficient use of social networking sites will also make this process easier. EMI plans to direct its marketing strategy towards digital sales and focusing on promoting single tracks rather than concentrating on the production of full albums. Wastage, inefficiency and unprofitability have become major concerns for EMI, for this reason cost reduction is another key part of the restructuring strategy. Guy Hands, the chairmen of EMI since the Terra Firma takeover hopes to ‘reduce costs by £200m a year by cutting between 1500 and 2000 jobs worldwide’28, mainly within EMI’s Music division. Staff and functions will be made more centralised whereby ‘EMI will be split into two main divisions, one handling the creative side of the business and one dealing with back office.’29 This will ensure greater control over more simplified processes and waste will be reduced as there is less chance of duplications occurring. The marketing budget will be reduced which has created negativity amongst artists who believe they will lose out and be trapped with the new, centralised format. Some of EMI’s 14,000 artists will be cut if they are unprofitable, and pay advancements will be replaced with day rates or salaries which better incorporate success and hard work. Although Guy Hands lacks experience in the music industry he believes that by extending and directing company’s resources and capabilities in the right direction will help him to achieve long due profits.
Part 3.
Evaluation of EMI’s Financial Performance
Horizontal analysis and ratio analysis have been conducted in order to evaluate EMI’s financial performances in recent years.30 Gross profit ratios of the past five years have been stable for EMI. We should however note that the horizontal analysis benchmarking 2007 and 2006 shows that EMI has became less profitable, level of ratio is only sustained because both profit and costs have decreased proportionally. This is evident by the decrease of EPS in the past year. Revenue and group profit have fallen 15.79% and 39.92% respectively. The only profit that has grown is share of profit from associates, which does not relate to EMI operations.
28
EMI set to cut up to 2000 jobs – www.bbc.co.uk cited 11/2/08 EMI plans to tighten and make cuts to tune of 2000 jobs – www.timesonline.co.uk cited 10/2/08 30 Please see appendix for details of the analyses. 29
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Net profit has decreased due to the fall of revenue as well. Result from horizontal analysis shows that net profit has suffered a 60.64 drop. This significant fall is caused by the relatively high costs - operating profit has plummeted by 39.44% while cost of sales, istration expenses have only reduced 13.05%, 12.30% respectively, which are not proportional to the decline of profit. Finance costs rose to 2.01%, mainly due to a high interest payment of bank overdraft and loans. The negative basic and diluted earnings per ordinary share imply that there has been a loss in 2007. Despite the undesired condition, ordinary dividends paid per share in 2007 remained at the same level as 2006. This may comfort long term investors slightly from the decline of profits. This is potentially risky for EMI to have paid a total of £63.2 dividends in 2007. The large cash outflows could have serious adverse impact in a relatively less profitable year. In comparison, one of EMI’s competitors Warner has more impressive gross profit ratios in the past three years. Gross profit ratios are more impressive than EMI’s but achieved negative net profit in 2007 and 2005. The net losses are mainly caused by the huge interest payment on overdraft and loan. The gearing ratios show that debt funding of EMI is relatively high comparing to Warner. The high proportion of debt implies a large interest payment which led to unnecessarily low profit. EMI may consider putting more weight into equity funding to minimise interest payment, as Warner is. Gearing ratios of Warner in the past year have been very stable at the level of 0.5:1, meaning equity funding weights higher than debt funding, hence less risky the financial side of the company is. Return of capital employed has improved significantly in 2007, after the plummet in 2004. This is because both fixed assets and current assets have decreased in 2007. Value of net assets have been brought down as a result, and hence leading to a high ROCE ratio.
Warner, in comparison, has relatively low ROCE ratios for the past three years. Value of assets is huge but profits were very low for a company its size.
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There are a few losses on different areas caused by unfavorable currency movements, despite the fact that EMI has hedged against exchange rate risks using financial derivatives. The inefficient hedging strategies show that financial investment of the firm is poorly managed. For further details on Warner’s strategy and competitive positioning please refer to appendix.
Part 4.
Appraisal of EMI’s Internal Resources and Capabilities 31
Having undertaken an analysis of EMI’s resources and capabilities (see appendix) the principal strengths and weaknesses of the company have been identified. EMI’s key strengths are: •
Intellectual Property EMI possesses one of the strongest and most recognizable brands in the entertainment industry and also has one of the most important music catalogues and archives in the world, with the artists that include The Beatles, David Bowie, Queen and many others. EMI Music Publishing has a catalogue of over 3m track and the world’s largest catalogue of musical arrangements with over 1m copyrights owned, controlled or istered. It is imperative that Global Sales team continue to ensure that this fantastic resource is brought to the widest possible audience.
•
Human Resources The vast pool of artist and songwriters, who are found and nurtured by the A&R, represents another key strength of the company. Guy Moot, former EMI Music Publishing managing director commented,’ Music and great songs remain the foundation on which everything is built in this rapidly changing digital world.’32 EMI Group is dependent on identifying, g and retaining talented artists and songwriters whose music helps to generate great revenues. Therefore, the company continues to invest a great deal of money in discovering the very best musical talent from around the world.
•
Marketing Know-how.
31
Please refer to appendix for the analysis of the resources and capabilities. Article entitled ‘EMI Music Publishing songwriters win top honors at the 52nd Ivor Novello Awards’ Published on the 24th of May 2007 on EMI Group website. http://www.emigroup.com/Press/2007/press36.htm cited 7/3/08 32
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Marketing know-how is another key capability which enables EMI to put their music where their fans are. EMI Music’s business success relies on its marketing efforts nearly as much as the musical talent it promotes. For that reason the group allocates a great number of their resources towards marketing and promotion. Key Weaknesses are: •
Management System Management system is one of the weaknesses that company is experiencing right now. Whilst the company has good policies in place they are very often ignored by a number of employees through the whole management system. However, Terra Firma is planning a major restructuring of company’s internal structure which will hopefully lead to some great changes in the near future.
Having identified resources and capabilities that are important and where EMI is strong, the key task is to ensure that these resources are deployed in their restructuring initiatives to the greatest effect. One of key strengths of EMI is artist, so it is important for the company to seek diversification advantage through merchandising, corporate sponsorship and touring in order to achieve the competitive advantage. EMI’s current business strategy identifies diversification as one of the key strategies. On the other hand management systems that had been developed over a long period of time have important implications for firm’s capacity for change. That’s where EMI’s management systems could benefit from Terra Firma’s experience in strategically transforming business and driving operational change. However, both companies have to watch for culture clashes, personality clashes between senior managers, or incompatibility of management systems that could result in the degradation or destruction.
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Recommendations The following recommendations are provided in light of the key issues facing the company.33 EMI Group revenue has gone down 15.79% in the 2007 fiscal year and led it to low gross profit, net profit and ROCE ratios, as well as undesirable EPS figures. It is vital for EMI to offset the decline in CD sales and adapt to the changes in the environment to remain being attractive to investors and artists. With the growing power of the internet and technologies, the top management may consider to put weight into effective e-commerce marketing instead of continuing with traditional expensive marketing methods. It is also essential to understand that gaining market share in the digital music area should be highly prioritized as the trend of the music industry is clearly moving towards the technological side. Piracy has nonetheless become a serious issue in the industry with the rapid development of technology. It is highly advisable for EMI to cooperate with its competitors to target piracy34. The possibility of achieving a satisfactory result against piracy is high with their dominant power in the industry. By bringing in game theory logic, it would be more sensible to work with the rivals in this scenario to protect revenues in the future. In addition to sales of record music, there are many other income generating activities such as concerts, merchandise and sponsorship. It is, of course, important that EMI continue developing its key strengths whiles adjusting its strategy to the changing environment. The quality of music produced is the core of the business; EMI should definitely try to keep successful artist as well as continuing to identify new artists with potential to growth.
Appendix 33
Please refer to Appendix for The Key Issues Facing EMI.
http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2584565.ece cited 9/3/08 34
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A Model for Identifying Key Success Factors (Adapted from Grant, R. (2008) Contemporary Strategy Analysis, Blackwell Publishing, UK, pp 90)
Prerequisites for success
What do the consumers want?
•
Choice- in how music is consumed.
•
Price- value for money.
•
Access- to music to suit their lifestyle.
•
Convenience- ability to purchase and consume music at their own leisure.
•
Value added online services and products.
How does the firm survive competition?
•
Continually monitor the business environment to identify emerging trends and their implications for the industry.
•
Identify and satisfy consumers’ changing demands and preferences.
•
Innovate in of product development and distribution channels. Provide value-added benefits to consumers through online music services.
•
Differentiate services to provide value added benefits and emphasis points of parity with competitors to achieve competitive advantage.
•
Key Success Factors for the Global Music Industry Through continual monitoring of the broad environment capitalize on emerging business opportunities with flexibility and speed of response.
•
Concentrate on making the delivery of digital music a core capability.
•
Differentiate through a diverse range of quality artists and songs.
•
Make legal, online music more attractive to consumers by offering quality products and value added services.
•
Expand business scope to find new revenue streams in the form of merchandise, advertising, sponsorship and concerts.
•
Co-opetition with other record companies to enforce copyright protection within the digital domain.
EMI Group Resources and Capabilities •
Invest in advertising and innovation of online music services.
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Resources: Emi’s funding relatively dependant on debt. Equity funding is not as heavily weighted in comparison with competitor Warner. It implies that Emi has made good use of resources by maximizing investment with debt funding. This, however, is potentially dangerous if a large proportion of debts is not handled carefully. Intellectual Property EMI Group posses’ many copyrights and trademarks. The major names of trademarks are: Angel, Astralwerks, Blue Note, Capitol, Capitol Nashville, EMI, EMI Classics, EMI CMG, EMI Televisa Music, Mute, Narada, Parlophone and Virgin. EMI possesses one of the strongest and most recognisable brands in the entertainment industry. Location
EMI Music operates through a network of offices throughout the world, most of which are held through lease arrangements. In UK, EMI own and operate two recording studios: Abbey Road and Olympic Studios. They also have three geographic divisions: International, UK & Ireland and North America
Manufacturing operations
All of manufacturing are outsourced.
Distribution
EMI carry out their own physical distribution activities in a number of territories: UK, Ireland, US, Hong Kong, Thailand and Singapore. In the other territories EMI have entered into distribution t-venture arrangements with other music companies. In certain areas distribution services are carried out by third parties
Human Resources
EMI Group has an experienced and talented management team with creative and business minded executives at the international and also local levels. There is also a very good team of digital talent who are fully equipped to realise the full potential of EMI’s music content in a digital world. However, Artists and Repertoire (A&R) who generates fresh, high quality, new music for EMI’s rich catalogue and also artists who create and perform the music are the key resources of EMI’s Group.
Capabilities: Research &
The EMI Group constantly conducts R&D to develop new
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Development
products in the form of artist & repertoire (A&R) to launch new artists. It also explores new product formats, such as ringtones and subscriptions, and digital rights management to protect their intellectual property. Company reinvests around 13% of its turnover into R&D.
Corporate Functions Strategic Innovation. In April 2007 company launched a new product which provides music at a higher sound quality and without the restrictions of digital rights management (DRM) to consumers. EMI is a first major record label to do this by enabling the interoperability of digital music between services and devices. EMI continue to create innovative partnerships with various digital platforms like Yahoo, Napster in , or New York Daily News where news readers are offered free music s from EMI’s music catalogue. Such innovative products and partnerships help EMI to expose their talented artists to the large new audience. Multidivisional coordination. It’s done through ICT, based on Microsoft Technologies. Very little known about how well the Company manages to coordinate their divisions, however this capability should be helping the management to coordinate their divisions more efficiently. Financial control. In the past financial management lacked strong orientation by sometimes ignoring company’s policies like authorizing £20.000 on unwanted parties and gifts for artists and £200.000 annually on flowers and fruit for EMI’s offices.35 EMI Group is going through the implementation of the restructuring initiatives, and the cash flow generation of the business is expected to strengthen significantly when the gains from the cost savings are fully realized. Marketing Effective restructuring and cost cutting. Following a global corporate restructuring, EMI’s IT team with the help from Avanade company, implemented cutting-edge web marketing infrastructure which enables EMI’s labels to focus their marketing efforts on innovative business opportunities rather than data and hosting management.36 The company also has global and international marketing teams, who manage major frontline releases from priority artists, while a global catalogue marketing function handles catalogue campaigns across the world. Digital Distribution
EMI continue to broaden their digital distribution channels
35
‘EMI faces tighter budget’ Financial Times, published 30-12-07, http://www.ft.com/s/0/64d22020b6f8-11dc-aa38-0000779fd2ac.html sited 1/3/08 36 Case Study: EMI Centralizes Online Marketing with Microsoft.Net-Based Web Services. http://www.avanade.com/customers/casestudy.aspx?id=39 Sited 3/3/08.
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and Sales
globally by entering into agreements with partners like Apple or Amazon in U.S., who make EMI music available on their platforms. EMI music repertoire is now available digitally in 70 countries. Digital technology helps the company to approach consumer through online and mobile channels, for example, the EMI Music distributed the 30 Second To Mars video using the latest Web2.0 technology.
Financial Tables
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EMI - Ratio Analysis
Gross Profit Net Profit Current Ratio ROCE Gearing
2007
2006
2005
2004
2003
34.9301%
34.8382%
36.9312%
33.7624%
35.6419%
8.5926%
12.0438%
11.9879%
11.7556%
8.3181%
0.7796 : 1
0.8126 : 1
0.8097 : 1
0.8524 : 1
0.7887 : 1
94.9176%
53.4343%
59.6720%
50.1206%
107.6897%
1.1871 : 1
1.4129 : 1
1.3229 : 1
1.3661 : 1
1.4141 : 1
EMI - Horizontal Analysis 2007 £m
2006 £m
Difference £m
Difference in %
Revenue
1751.5
2079.9
(328.4)
-15.79%
Group Profit Share of Profit from Associates Operating Profit
150.5
250.5
(100)
-39.92%
1.8
1.0
0.8
80%
152.3
251.5
(99.2)
-39.44%
Finance Income Finance Cost Total Net Finance Charges
63.0
57.4
5.6
9.76%
(152.6)
(149.6)
(3)
2.01%
(89.6)
(92.2)
2.6
-2.82%
62.7
159.3
(96.6)
-60.64%
(23.8)
(33.1)
9.3
28.10%
10.0 (13.8)
5.0 (28.1)
5.0 14.3
100% -50.89%
48.9
131.2
(82.3)
-62.73%
Income Statement
Net Profit before Taxation Overseas UK Total Taxation Net Profit after Taxation
EMI - Horizontal Analysis (2)
20
2007 £m
2006 £m
(1069.8)
Income Statement Extracts Cost of Sales Distribution Costs Gross Profit istration Expenses Other Operating Income, Net
(1230.4)
Differenc e £m 160.6
Differenc e In % -13.05%
(69.9)
(75.0)
5.1
-6.8%
611.8
774.5
(52.7)
-6.80%
(466.9)
(532.4)
65.5
-12.30%
5.6
8.4
(2.8)
-33.33%
EMI - EPS Earnings per Share
2007
2006
Basic Earnings per Ordinary Share Diluted Earnings per Ordinary Share Underlying Basic Earnings per Ordinary Share Underlying Diluted Earnings per Ordinary Share
(36.3)p (36.3)p 5.8p 5.8p
10.9p 10.5p 16.2p 15.7p
EMI - Dividend Payment Ordinary Dividend
2007 per share
2006 per share
2007 £m
2006 £m
06/05 Final dividend
6p
6p
47.5
47.2
06/05 Interim dividend
2p
2p
15.7
15.7
Total
8p
8p
63.2
62.9
Warner - Ratio Analysis
Gross Profit Net Profit Current Ratio ROCE Gearing
2007
2006
2005
46.1448% -0.6204% 0.6350 : 1 7.9926% 0.5427 : 1
48.1797% 1.7064% 0.7226 : 1 10.4006% 0.5449 : 1
47.1730% -4.8258% 0.7105 : 1 3.0545% 0.5458 : 1
Competitor Analysis: Warner37 Warner’s goals Drive shareholder value and improve competitive positioning Warner’s competitive advantage 37
Information gathered available from: “ Warner’s Annual Report 2007”
21
−
Leading artists and songwriters
−
Stable, highly diversified revenue base
−
Flexible cost structure with low capital expenditure requirements
−
Digital leadership
−
Focus on innovative A&R
−
Leader in independent distribution
Warner’s strategy •
Attract, develop and retain established and emerging recording artists and songwriters
•
Maximize the value of our music assets and capitalize on the growth areas of the music industry
•
Focus on continued management of cost structure
•
Capitalize on digital distribution and emerging technologies
•
Enhance physical business by developing and optimizing Warner’s physical distribution channel strategies and creating new physical formats
•
Contain digital piracy
How Warner targets customers •
Goal is to maximize the likelihood of success for new releases as well as stimulate the success of previous release.
•
Seek to maximize the value of each artist and release, and help artists develop an image that maximizes appeal to consumers.
•
Raise profile of artists, through marketing approach that covers all aspects of their interactions with music consumer (help artist develop creatively in album release, setting strategic release dates and choosing radio singles, creating concepts for videos that are complementary to the artists’ work, coordinating promotion of albums to radio and TV outlets etc.)
•
Windowing of content, create product bundles.
•
Pre-release activities can be customized online.
•
Facilitating TV and radio coverage / live appearances for key artists
•
Corporate, label and artist websites provide additional marketing venues for our artists
Careful coordination of marketing and promotion to create greatest sales momentum
22
The Key Issues Facing EMI •
Liquidity and gearing problems could potentially lead to bankruptcy.
•
Management problems- where policies are in place but are not being implemented with great effect.
•
Not maximising the efficiency of each functional department, with overlaps of responsibilities occurring.
•
Inefficient cost control- unnecessary spending to impress shareholders and artists.
•
Low revenue- as a result of declining CD sales.
•
Artists by ing record companies
•
Lack of leadership- whilst management are highly qualified and experienced within the music industry there appears a lack of coherent direction.
•
Traditional marketing methods no longer as effective because of the rise of e-commerce marketing.
Bibliography Books
23
Doole, I. and Lowe, R. (2007) International marketing Strategy: Analysis, development and Implementation, Thomson Learning, London Grant, R. M. (2008) Contemporary Strategy Analysis (6th Ed) Blackwell Publishing Ltd, Oxford. Grant, R. M. (2008) Cases to Accompany Contemporary Strategy Analysis (6th Ed) Blackwell Publishing Ltd, Oxford. Online Reports “IMPI Digital Music Report 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 Online Articles Bachman, J (2007) “The big Record Labels’ not so big future” BusinessWeek, Available from: http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db2007109_120106 cited 5/2/08 Baker, S (2008) “How the music industry makes its money” BusinessWeek, Available from: http://www.businessweek.com/the_thread/techbeat/archives/2005/03. cited 5/2/08 Black, J. (2003) “Big Music’s Broken Record” BusinessWeek, Available from: http://www.businessweek.com/technology/content/feb2003/tc20030213_9097_tc. cited 5/2/08 Burt, T. (2007) “Singing a happy Tune: why the music industry is upbeat about online sales.” Financial Times, Available from: http://search.ft.com/ftarticle?queryText=music=industry=analysis&aje=false&id=04 0 cited 05/02/2008 Byrne,D (2007) “Davis Byrnes’s Survival Strategies for Emerging Artists –and megastars.” Wired Magazine, Available from: http://www.wired.com/entertainment/music/magazine/1601/ff_byrne?currentPage=all cited 5/3/08 Davis,J (2007) “ Is mobile the future of the music industry” Available from: http://www.three.co.uk/threefiles/pdf./musicreport.pdf. cited 25/2/08
24
Dolfsma, W. (2005) “How will the music industry weather the Globalization Storm” First Monda, Available from: http://www.firstmonday.org/issues/issue5_5/dolfsma/ cited 4/2/08 Fenton, B (2008) “Sales fall spells gloom for music Industry” Financial Times, Available from: http://www.ft.com/cms/s/0/c82101a4-cab8-11dc-a960-000077b07658.html cited 5/2/08 Goessl,L. (2008) “ Assessing the effects of p2p music sharing on the record industry” Helium, Available from:http://www.helium.com/tm/691163/sharing-prgram-whichenables. cited 5/2/08 Green, H, Grover,R. and Hof,R (2003) “ Music Merchants Rush in where Labels have Failed: Can they do better at getting the public to pay for s?” Business Week, Available from: http://www.businessweek.com/magazine/content/03_06/b3819058.htm?chan=search cited 5/2/08 Himowitz, M (2008) “ Music Industry and public need to change” Dailypress.com, Available from: http://www.dailypress.com/features/dp-life_himowitz_0204feb cited 5/2/08 Jeffery,V (2008) “ How the music industry is killing itsel” Helium, Available from; http://helium.com.tm/494190/music-industry-dying-painful cited 5/2/08 Kozul- Wright and Stanbury, L. (1998) “Becoming a Globally Competitive Player: The case of the Music Industry in Jamaica” Available from: http://ideas.repec.org/e/pko166.html?ref=kasshop.com cited 18/2/08 Liebowitz, S (2003) “Will Mp3 s Annihilate the Record Industry: The evidence so far.” Avaliable from: http://www.utdallas.edu/~liebowit/intprop/records.pdf Cited 5/3/08 Preiser,J and Vogel,A (2002) “ The Music Industry in the 21st Century: Facing the Digital Challenge” Screendigest Available from: http://www.screendigest.com/reports/mi2104/NSMH-5SDK6M/sample.pdf cited 12/2/08 Mervis, S (2008) “Artists seek new ways to sell their music” Post-gazette Now, Available from: http://www.post-gazette.com/pg/08036/854769-42.stm cited 5/2/08 Tanner, J. (2007) “Digital Music: In Search of Biz Model” Business week, Available from: http://www.businessweek.com/globalbiz/content?jun2007/gb20070611_930387 cited 5/2/08
25
Skapinker, M. (2004) “No such thing as a free lunch in the music industry” Financial Times, Available from: http://search.ft.com/ftarticle?queryText=music=industry=analysis&page=3&aje=fal s cited 5/2/08 Spellman, P. (2003) “The future of Music Careers: Quantum Career Development in a Transforming Industry.” Available from: http://www.futureofmusic.org/articles/spellmanmusicianbiz.cfm cited 5/2/08 Website Articles “New trends in the music Industry” (2005) Available from: http://billboard.blogs.com/billboardpostplay/2005/06/sales_and_marke.html cited 5/2/08 “Strategic Leadership and Porters Five Forces” Available from: http:www.whatmakesagoodleader.com/Porters-five-forces.html cited 12/2/08 Other websites www.bbc.co.uk www.emigroup.com www.guardian.co.uk www.paidcontent.org www.terrafirma.com www.timesonline.com
26
27
Group Project Objective: “To apply concepts and tools of strategic analysis covered during the course to the analysis of a firm”
Title: A strategic analysis of the British music group EMI.
Group Katie Welsh0564116 Lauren Leslie0567543 Asta Young-Smith0566397 Cindy Law0561762 Course Co-ordinator: Monia Mtar
Submission date: 12th of March 2008 Word count: 4035
1
Table of Contents Introduction .............................................................................................. 3 Overview of the Music Industry.............................................................. 3 The Market Structure............................................................................... 4 Part 1. Appraisal of the Industry Environment...................................... 4 Overview of Key Trends.................................................................. 4 Review of the Broad Environment................................................... 6 Porters Five Forces Analysis............................................................. 6 The Structural Determinants of the Five Forces of Competition...... 7 Assessing the Industry’s overall attractiveness................................. 8 Part 2. Identification of the Firm’s Current Strategy.............................. 9 The Steps EMI is taking to achieve its Strategic Objectives............. 10 Part 3. Evaluation of EMI’s Financial Performance................................ 11 Part 4. Appraisal of EMI’s Internal Resources and Capabilities............ 13 Recommendations......................................................................................... 15 Appendix........................................................................................................ 16 Identifying Key Success Factors..........................................................16 EMI Group Resources and Capabilities................................................17 Financial Tables....................................................................................20 Competitor Analysis: Warner Label......................................................22 The Key Issues Facing EMI...................................................................23 Bibliography......................................................................................................24
2
Introduction The purpose of this report is to conduct a strategic analysis on the British music group, EMI. For this the broad environment will be appraised to identify the major trends impacting the industry and the factors affecting its structure. Following this EMI’s current strategy will be identified and its financial performance evaluated. In order to highlight EMI’s strengths and weaknesses the firm’s key resources and capabilities will be appraised. The effectiveness of the firm’s current strategy will then be assessed to determine whether this strategy is exploiting strengths in of resources and capabilities. Recommendations will be offered to enhance the company’s strategy with suggestions made for possible organizational change.
Overview of the Music Industry For this analysis it is important to understand the concept of the music industry’s content and structure. The Standard Industrial Classification (SIC) offers a description of the music industry as involving “businesses and organisations that record, produce, publish, distribute and market recorded music.” 1 In addition to these, four main stakeholders characterise the music industrythe artist, the consumers, the music agents and the distributors. However, in seeking to define the industry it is acknowledged that no one definition can capture its diverse nature in of “(…) musical activity and commerce.”2 In commercial the global music industry “is a multi billion dollar segment of the media industries” (Kozul- Wright, Z & Stanbury, L, 1998, pp14) and has reached a stage of maturity in its lifecycle. However with the rise of the digital era, it is undergoing significant transformation. With a core business sector comprising the record companies and music publishers, the global music industry transcends national boundaries and “pervades virtually every culture and every society.” (Dolfsma, 2008)3
1
This definition corresponds to the International standard industrial classification as appears on http://www.helium.com/tm/404168/music-industry-history-music cited 8/2/08 2 Available http://woc.ec.pt.fuk.getfile.do?tipo=2eid=410 cited on 8/2/08 3 Article entitled “How will the music industry weather the globalization storm?” Available from: http://www.firstmonday.org/issues/issue5_5/dolfsma cited 4/2/08
3
The Market Structure Four large music companies – Sony BMG, Universal, EMI and Warner- dominate the industry and in 2005 they ed for 71.7% of the worlds recorded music.4 Having the “financial, legal and technological muscle”5 has enabled this “big four” to influence and control the industry to their advantage. For this reason the music industry has been described as an Oligopolistic market structure with monopolistic tendencies where by this small group has dominated production, distribution, marketing and market share.6 However over the years the nature of the music industry has significantly changed, with greater decentralisation and fragmentation (George, 2007)7 the dominance of the major companies has declined.8
Part 1.
Appraisal of the Industry Environment
In appraising the industry environment, two components should be considered, the broad and the competitive environments. In the past ten years the traditional “recorded –music model” has faced increasing pressure as a result of emerging environmental trends.
Overview of Key Trends The digital revolution has had a huge impact on the global music industry. The advancement of information and communication technology is driving change and is dramatically affecting the industry’s business model and structure. This new technology has lead to innovations in both the production and distribution of music and with this has come greater opportunity to create, enjoy and consume music. (Kozul-Wright and Stanbury, 1998, pp17) One predominant development has been the convergence of mobile and portable music devices (I-Phone) which has greatly expanded on-the-go music consumption.
4
As appears http://www.businessweek.com/globalbiz/content/jun2007/gb200770611_930387.htm cited 8/2/08 5 As appears http://www.oligopolywatch.com/2003/06/28.html cited 8/2/08 6 Available from http://en.wikipedia.org/wiki/Market_form cited on 7/2/08 7 Available from http:www.abc.net.au/news/opinion/items/200704/51896190.htm cited 8/2/08 8 Available from: http:www.ecommercetimes.com/story/A-Broken-Record-Global-music-Biz-losing-waron-piracy-61365.html cited 3/2/08
4
Online distribution of music has boomed in recent years with the internet becoming the most important medium for music promotion and distribution. With this “click and mortar” e-tailers are outperforming “brick and mortar” retailers, shifting patterns of music consumption from the physical to the virtual. With this revolution traditional music- consumption is being eroded, diminishing the sale of physical CDs. With consumers growing preference for single tracks over albums, online, single track s are rocketing, proving to be the most popular worldwide music format in 2007.9 Driving this change is a combination of factors. The growth in mp3 s and P2P (peer-topeer) software has provided the “interface for ing and ing with ease.”10These innovations have enabled consumers to file share and music online. This shifting consumption trend has lead to less demand for the physical product and consequently stores have cut CD shelf space for other forms of consumer entertainment products. Another aspect driving this change is the growing number of people burning music on to discs and by implication diminishing the physical purchase of music. With such developments has come the growth of a new music consumer generation- “Gen D” (digital and consumer generation) who are driving consumption change. With the growth of digital technologies and online information consumers experience greater convenience, choice and lower costs and consequently have become more powerful influencing price and music formats. As a result record companies are no longer in a dominant position of control. Digital technologies are also affecting the industry’s structure causing a re-shuffle of the value chain. This has changed the role for many key players whereby distributors can now sell online avoiding high fixed costs of physical stores. Record companies are experiencing a role change whereby they are potentially being usurped from the market, and so lowering their perceived value. Artists are now able to sell directly to consumers via the internet taking a more active role in the industry’s value chain. The implication of this is that some artists are by- ing the record companies in favour of setting up their own independent companies, leveraging the internet as a tool for communication, distribution and marketing. As such the future role of the traditional
9
Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 10 Sourced from: “Assessing the effects of p2p music sharing on the recorded industry” Available from: http://www.helium.com/tm/691163/sharing-program-which-enables cited 5/2/08
5
record company looks increasingly uncertain where artists and consumers constitute“(…) the only essential components of the dissemination of music.”11 Whilst technology has brought many opportunities, it has however simultaneously led to a massive increase in piracy. The ease of access and consumption of music online has diminished the perceived value of the industry. It is estimated that for every one, legitimate track sold, twenty are ed illegally. 12 With this mass-availability of illegal and un-paid for music, the industry experienced an overall market decline in 2007.13 This constitutes a major threat to the legitimate music industry in of lost revenues. In 2007 record companies in the US made projected losses from illegal ing of approximately $4 billion14 furthermore the artists themselves missed out on royalties.
Review of the Broad Environment It is evident that the music industry is undergoing a significant transformation and with this comes emerging opportunities to reinvigorate growth and profitability. However, these opportunities bring substantial challenges disrupting the status quo of the music industry. To be successful companies must continually monitor their environment, exploit emerging opportunities and re-think their traditional business model. Through diversification strategies the “big four” are expanding into music- merchandise, sponsorships and concerts as a way to overcome the decline in record sale revenues.
Porters Five Forces Analysis To compete effectively, companies must be alert to the dynamics of their industry and markets.15 Using Porter’s five forces the competitive environment of the global music industry can be analyzed. 11
Sourced from: “IFPI International music managers forum: creators and consumers come first: Defining the music industry” Available from: http:www.IMMF.com/IMMFpositiononthefutureofmusic.pdf cited 4/2/08 12 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 13 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 14 Sourced from “ IFPI Digital music Report, 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 15 Available from: http://university-essays.tipod.com/porters_5_forces_analysis.html cited 5/2/08
6
The Structural Determinants of the Five Forces of Competition 1. Competition from substitutes: Within the music industry the threat of substitutes is extremely high. The internet has created an emerging source of substitute competition in the form of digital music and digital delivery. The availability of substitutes allows consumers to make performance and price comparisons with the option of switching to music. The growth of both illicit and subscription ing is effectively leading to the direct substitution of recorded music for digital alternatives. With little cost or inconvenience consumers are switching, to digital and online music services attracted by the value- added benefits of greater convenience, diversity of choice and lower costs compared with traditional formats. Currently the chance of being caught ing music illegally is low further encouraging the consumer to switch to substitutes. As a result the profitability of the record company is being threatened with the better value alternatives.
2. Threat of entry: The threat from new entrants has increased with the growth of the internet. Lower capital investment and operational costs for online distribution has lowered the entry barriers for new independent record companies. As a direct consequence, new entrants compete on a more level playing field, where size is no longer a determinant of success or failure within the online market. With diversity of demands, new entrants have the opportunity to achieve success through niche target marketing. Furthermore with these evolutionary changes, traditional distribution channels are less relied upon and new entrants can compete through online distribution and marketing. However starting up in the music industry still involves risks, where investing in a new- artist may involve unrecoverable sunk costs. Representing a new artist requires financial resources, experience and substantial networks and with limited resources independents might find it hard to break in to the industry. The major players have already achieved a substantial competitive advantage with well established networks, global reputations and long- term relationships with artists. Their financial muscle and repertoire of artists enables them to spread risk over their range of portfolio projects.
3. Rivalry between established players: Internal rivalry and competition within the industry is high and remains tightly concentrated between Sony BMG, Universal, Warner and EMI. With the increase of independent labels 7
entering the industry competition has increased. Large and small companies are now directly competing to attract artists and improve market share in both the physical and online markets. Due to the intense nature of this competition, decisions made by one company can influence others. For the main companies this intense rivalry means that their market share fluctuates through competition and can no longer be guaranteed. With “parallelism” pricing decisions (Grant, 2008, pp 76) CD’s are priced at similar levels and as such companies are looking to their artists as a means of differentiation whilst attempting to offer the most creative channels of music distribution.
4.
Bargaining power of buyers:
The emergence of the digital music market has increased the strength of buyers bargaining power. Through online network communities, consumers’ bargaining power is strengthened by the abundance of online information. Consumers are now much more price sensitive and are becoming an empowered force, directly influencing how music is delivered and in what format. With the growing perception that they offer nothing more than capital, record companies are forced to react, reinventing their business models accordingly.
5.
Bargaining power of suppliers:
The bargaining power of suppliers within the industry has lowered .The artists can now choose to circumvent the suppliers by either setting up their own label or promoting their music via the internet. This has substantially increased artists control over earnings and marketing.
Assessing the Industry’s Overall Attractiveness In of the industry’s attractiveness different perspectives have to be considered. From the record companies stand point, the growing threats posed by competition, substitutes and consumer power combine to diminish the overall attractiveness of the traditional music industry in of assured profitability. In contrast, from the artists and consumers perspective the industry’s attractiveness has significantly increased. Consumers now benefit from greater diversity of supply mediums and better pricing, whilst artists can enjoy greater distribution opportunities and improved control of promotions and revenues.
8
Whilst record companies are experiencing a challenging time there still remains tremendous opportunities to make money and profit. The growth potential within the industry is unquestionable and with continual advancements of technology further opportunities will emerge. Whilst the global market for music is practically guaranteed, the question facing record companies is how to ensure a profitable status within the rapidly developing digital environment. To secure long term viability and maximize profit potential record companies will need to develop a strong competitive advantage. The key success factors16 outlined, offer a foundation for future prosperity within the music industry.
Part 2.
Identification of the firm’s current strategy
The British music group EMI is a specialised, private limited company competing in the single industry sector of global music. Based in London, EMI constitutes an international business, operating in over fifty countries and licensing to a further twenty.17 The company’s product scope focuses on two main divisions: EMI Music and EMI Publishing, which have built an extensive range of music labels, recording artists and an impressive catalogue of recorded music with over three million tracks. By vertically integrating activities within the value chain, EMI has held its competitive position alongside its main rivals Universal, Sony, BMG and Warner. EMI’s ongoing strategy is to “deliver music to consumers in any form, at any time and in any place.”18 EMI has been facing tough challenges in recent years with the increasing levels of uncertainty within the global music industry attributable in main to the digital revolution and the subsequent decline in CD sales. As such the company’s performance has deteriorated with pre- tax losses of 263.6million 19 in 2007. In August 2007 the private equity, investment company Terra Firma acquired EMI with the intention of “unlocking [the company’s] hidden value”20and reversing its diminishing performance. As the existing business model at EMI is believed to be unsustainable, change will involve the strategic innovation of a ‘new revolutionary structure for the group that will improve every area 16
Please see Appendix “A Model for identifying the Key Success Factors.” As appears http://www.emigroup.com/default.htm cited 29/1/08. 18 As appears http://www.emigroup.com/default.htm cited 8/2/08 19 As appears on EMI’s official website http://www.emigroup.com cited 5/2/08 20 Available from: http://www.terrafirma.com/about-terra-firma.html cited 5/2/08 17
9
of the business.’21 The corporate strategy of EMI is therefore focused on restructuring and reshaping internally to allow the label to compete in the digital music industry. This will completely change the functions within the firm in relation to resource allocation, divestments and diversification. The business strategy on the other hand will be directed towards gaining competitive advantage on the basis of differentiation and also cost reduction. First of all it is important to identify the main forces that are driving change. •
‘85% of what is put out does not make any money while 30% of artists who get advances never produce an album.’22
•
‘Struggling to respond to the challenges posed by a digital environment’23
•
Loss of artists including Radiohead having negative effects on EMI’s reputation
•
Recorded music division less profitable and overstaffed
•
‘Exceeded marketing budgets by about £60m a year and wasted £25m a year on scrapping unsold CDs’24
•
Changing ‘needs of the consumer, making artists less dependent on remaining with a large record label.’25
The steps EMI is taking to achieve its strategic objectives EMI will make changes to its business model over a six month period in an attempt to combat these problems and achieve its strategic objectives. The ‘new strategy to turn EMI around will stress tackling digital challenges, understanding the needs of the consumer and the importance of keeping artists at the heart of what we do’.26 Additional incentives and better services will be offered to artists as encouragement to stay with the label, as well as promoting a relationship ‘based on transparency and trust’.27 Greater emphasis will be put upon making existing artists more profitable. This will be done by maximizing the opportunities associated with digitalisation in relation to promotion, distribution and increasing revenue by diversifying into new areas such 21
EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 23 EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08 24 EMI restructuring – www.paidcontent.org cited 10/2/08 25 Preview of Guy Hand’s EMI strategy – www.paidcontent.org cited 10/2/08 26 Preview of Guy Hand’s EMI strategy – www.paidcontent.org cited 10/2/08 22
27
EMI confirms thousands of job losses – www.guardian.co.uk cited 18/2/08
10
as merchandising, corporate sponsorship and touring. Although gs will be limited, EMI will invest more money and resources into its artists and repertoire function which will help discover and develop new talent. The efficient use of social networking sites will also make this process easier. EMI plans to direct its marketing strategy towards digital sales and focusing on promoting single tracks rather than concentrating on the production of full albums. Wastage, inefficiency and unprofitability have become major concerns for EMI, for this reason cost reduction is another key part of the restructuring strategy. Guy Hands, the chairmen of EMI since the Terra Firma takeover hopes to ‘reduce costs by £200m a year by cutting between 1500 and 2000 jobs worldwide’28, mainly within EMI’s Music division. Staff and functions will be made more centralised whereby ‘EMI will be split into two main divisions, one handling the creative side of the business and one dealing with back office.’29 This will ensure greater control over more simplified processes and waste will be reduced as there is less chance of duplications occurring. The marketing budget will be reduced which has created negativity amongst artists who believe they will lose out and be trapped with the new, centralised format. Some of EMI’s 14,000 artists will be cut if they are unprofitable, and pay advancements will be replaced with day rates or salaries which better incorporate success and hard work. Although Guy Hands lacks experience in the music industry he believes that by extending and directing company’s resources and capabilities in the right direction will help him to achieve long due profits.
Part 3.
Evaluation of EMI’s Financial Performance
Horizontal analysis and ratio analysis have been conducted in order to evaluate EMI’s financial performances in recent years.30 Gross profit ratios of the past five years have been stable for EMI. We should however note that the horizontal analysis benchmarking 2007 and 2006 shows that EMI has became less profitable, level of ratio is only sustained because both profit and costs have decreased proportionally. This is evident by the decrease of EPS in the past year. Revenue and group profit have fallen 15.79% and 39.92% respectively. The only profit that has grown is share of profit from associates, which does not relate to EMI operations.
28
EMI set to cut up to 2000 jobs – www.bbc.co.uk cited 11/2/08 EMI plans to tighten and make cuts to tune of 2000 jobs – www.timesonline.co.uk cited 10/2/08 30 Please see appendix for details of the analyses. 29
11
Net profit has decreased due to the fall of revenue as well. Result from horizontal analysis shows that net profit has suffered a 60.64 drop. This significant fall is caused by the relatively high costs - operating profit has plummeted by 39.44% while cost of sales, istration expenses have only reduced 13.05%, 12.30% respectively, which are not proportional to the decline of profit. Finance costs rose to 2.01%, mainly due to a high interest payment of bank overdraft and loans. The negative basic and diluted earnings per ordinary share imply that there has been a loss in 2007. Despite the undesired condition, ordinary dividends paid per share in 2007 remained at the same level as 2006. This may comfort long term investors slightly from the decline of profits. This is potentially risky for EMI to have paid a total of £63.2 dividends in 2007. The large cash outflows could have serious adverse impact in a relatively less profitable year. In comparison, one of EMI’s competitors Warner has more impressive gross profit ratios in the past three years. Gross profit ratios are more impressive than EMI’s but achieved negative net profit in 2007 and 2005. The net losses are mainly caused by the huge interest payment on overdraft and loan. The gearing ratios show that debt funding of EMI is relatively high comparing to Warner. The high proportion of debt implies a large interest payment which led to unnecessarily low profit. EMI may consider putting more weight into equity funding to minimise interest payment, as Warner is. Gearing ratios of Warner in the past year have been very stable at the level of 0.5:1, meaning equity funding weights higher than debt funding, hence less risky the financial side of the company is. Return of capital employed has improved significantly in 2007, after the plummet in 2004. This is because both fixed assets and current assets have decreased in 2007. Value of net assets have been brought down as a result, and hence leading to a high ROCE ratio.
Warner, in comparison, has relatively low ROCE ratios for the past three years. Value of assets is huge but profits were very low for a company its size.
12
There are a few losses on different areas caused by unfavorable currency movements, despite the fact that EMI has hedged against exchange rate risks using financial derivatives. The inefficient hedging strategies show that financial investment of the firm is poorly managed. For further details on Warner’s strategy and competitive positioning please refer to appendix.
Part 4.
Appraisal of EMI’s Internal Resources and Capabilities 31
Having undertaken an analysis of EMI’s resources and capabilities (see appendix) the principal strengths and weaknesses of the company have been identified. EMI’s key strengths are: •
Intellectual Property EMI possesses one of the strongest and most recognizable brands in the entertainment industry and also has one of the most important music catalogues and archives in the world, with the artists that include The Beatles, David Bowie, Queen and many others. EMI Music Publishing has a catalogue of over 3m track and the world’s largest catalogue of musical arrangements with over 1m copyrights owned, controlled or istered. It is imperative that Global Sales team continue to ensure that this fantastic resource is brought to the widest possible audience.
•
Human Resources The vast pool of artist and songwriters, who are found and nurtured by the A&R, represents another key strength of the company. Guy Moot, former EMI Music Publishing managing director commented,’ Music and great songs remain the foundation on which everything is built in this rapidly changing digital world.’32 EMI Group is dependent on identifying, g and retaining talented artists and songwriters whose music helps to generate great revenues. Therefore, the company continues to invest a great deal of money in discovering the very best musical talent from around the world.
•
Marketing Know-how.
31
Please refer to appendix for the analysis of the resources and capabilities. Article entitled ‘EMI Music Publishing songwriters win top honors at the 52nd Ivor Novello Awards’ Published on the 24th of May 2007 on EMI Group website. http://www.emigroup.com/Press/2007/press36.htm cited 7/3/08 32
13
Marketing know-how is another key capability which enables EMI to put their music where their fans are. EMI Music’s business success relies on its marketing efforts nearly as much as the musical talent it promotes. For that reason the group allocates a great number of their resources towards marketing and promotion. Key Weaknesses are: •
Management System Management system is one of the weaknesses that company is experiencing right now. Whilst the company has good policies in place they are very often ignored by a number of employees through the whole management system. However, Terra Firma is planning a major restructuring of company’s internal structure which will hopefully lead to some great changes in the near future.
Having identified resources and capabilities that are important and where EMI is strong, the key task is to ensure that these resources are deployed in their restructuring initiatives to the greatest effect. One of key strengths of EMI is artist, so it is important for the company to seek diversification advantage through merchandising, corporate sponsorship and touring in order to achieve the competitive advantage. EMI’s current business strategy identifies diversification as one of the key strategies. On the other hand management systems that had been developed over a long period of time have important implications for firm’s capacity for change. That’s where EMI’s management systems could benefit from Terra Firma’s experience in strategically transforming business and driving operational change. However, both companies have to watch for culture clashes, personality clashes between senior managers, or incompatibility of management systems that could result in the degradation or destruction.
14
Recommendations The following recommendations are provided in light of the key issues facing the company.33 EMI Group revenue has gone down 15.79% in the 2007 fiscal year and led it to low gross profit, net profit and ROCE ratios, as well as undesirable EPS figures. It is vital for EMI to offset the decline in CD sales and adapt to the changes in the environment to remain being attractive to investors and artists. With the growing power of the internet and technologies, the top management may consider to put weight into effective e-commerce marketing instead of continuing with traditional expensive marketing methods. It is also essential to understand that gaining market share in the digital music area should be highly prioritized as the trend of the music industry is clearly moving towards the technological side. Piracy has nonetheless become a serious issue in the industry with the rapid development of technology. It is highly advisable for EMI to cooperate with its competitors to target piracy34. The possibility of achieving a satisfactory result against piracy is high with their dominant power in the industry. By bringing in game theory logic, it would be more sensible to work with the rivals in this scenario to protect revenues in the future. In addition to sales of record music, there are many other income generating activities such as concerts, merchandise and sponsorship. It is, of course, important that EMI continue developing its key strengths whiles adjusting its strategy to the changing environment. The quality of music produced is the core of the business; EMI should definitely try to keep successful artist as well as continuing to identify new artists with potential to growth.
Appendix 33
Please refer to Appendix for The Key Issues Facing EMI.
http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2584565.ece cited 9/3/08 34
15
A Model for Identifying Key Success Factors (Adapted from Grant, R. (2008) Contemporary Strategy Analysis, Blackwell Publishing, UK, pp 90)
Prerequisites for success
What do the consumers want?
•
Choice- in how music is consumed.
•
Price- value for money.
•
Access- to music to suit their lifestyle.
•
Convenience- ability to purchase and consume music at their own leisure.
•
Value added online services and products.
How does the firm survive competition?
•
Continually monitor the business environment to identify emerging trends and their implications for the industry.
•
Identify and satisfy consumers’ changing demands and preferences.
•
Innovate in of product development and distribution channels. Provide value-added benefits to consumers through online music services.
•
Differentiate services to provide value added benefits and emphasis points of parity with competitors to achieve competitive advantage.
•
Key Success Factors for the Global Music Industry Through continual monitoring of the broad environment capitalize on emerging business opportunities with flexibility and speed of response.
•
Concentrate on making the delivery of digital music a core capability.
•
Differentiate through a diverse range of quality artists and songs.
•
Make legal, online music more attractive to consumers by offering quality products and value added services.
•
Expand business scope to find new revenue streams in the form of merchandise, advertising, sponsorship and concerts.
•
Co-opetition with other record companies to enforce copyright protection within the digital domain.
EMI Group Resources and Capabilities •
Invest in advertising and innovation of online music services.
16
Resources: Emi’s funding relatively dependant on debt. Equity funding is not as heavily weighted in comparison with competitor Warner. It implies that Emi has made good use of resources by maximizing investment with debt funding. This, however, is potentially dangerous if a large proportion of debts is not handled carefully. Intellectual Property EMI Group posses’ many copyrights and trademarks. The major names of trademarks are: Angel, Astralwerks, Blue Note, Capitol, Capitol Nashville, EMI, EMI Classics, EMI CMG, EMI Televisa Music, Mute, Narada, Parlophone and Virgin. EMI possesses one of the strongest and most recognisable brands in the entertainment industry. Location
EMI Music operates through a network of offices throughout the world, most of which are held through lease arrangements. In UK, EMI own and operate two recording studios: Abbey Road and Olympic Studios. They also have three geographic divisions: International, UK & Ireland and North America
Manufacturing operations
All of manufacturing are outsourced.
Distribution
EMI carry out their own physical distribution activities in a number of territories: UK, Ireland, US, Hong Kong, Thailand and Singapore. In the other territories EMI have entered into distribution t-venture arrangements with other music companies. In certain areas distribution services are carried out by third parties
Human Resources
EMI Group has an experienced and talented management team with creative and business minded executives at the international and also local levels. There is also a very good team of digital talent who are fully equipped to realise the full potential of EMI’s music content in a digital world. However, Artists and Repertoire (A&R) who generates fresh, high quality, new music for EMI’s rich catalogue and also artists who create and perform the music are the key resources of EMI’s Group.
Capabilities: Research &
The EMI Group constantly conducts R&D to develop new
17
Development
products in the form of artist & repertoire (A&R) to launch new artists. It also explores new product formats, such as ringtones and subscriptions, and digital rights management to protect their intellectual property. Company reinvests around 13% of its turnover into R&D.
Corporate Functions Strategic Innovation. In April 2007 company launched a new product which provides music at a higher sound quality and without the restrictions of digital rights management (DRM) to consumers. EMI is a first major record label to do this by enabling the interoperability of digital music between services and devices. EMI continue to create innovative partnerships with various digital platforms like Yahoo, Napster in , or New York Daily News where news readers are offered free music s from EMI’s music catalogue. Such innovative products and partnerships help EMI to expose their talented artists to the large new audience. Multidivisional coordination. It’s done through ICT, based on Microsoft Technologies. Very little known about how well the Company manages to coordinate their divisions, however this capability should be helping the management to coordinate their divisions more efficiently. Financial control. In the past financial management lacked strong orientation by sometimes ignoring company’s policies like authorizing £20.000 on unwanted parties and gifts for artists and £200.000 annually on flowers and fruit for EMI’s offices.35 EMI Group is going through the implementation of the restructuring initiatives, and the cash flow generation of the business is expected to strengthen significantly when the gains from the cost savings are fully realized. Marketing Effective restructuring and cost cutting. Following a global corporate restructuring, EMI’s IT team with the help from Avanade company, implemented cutting-edge web marketing infrastructure which enables EMI’s labels to focus their marketing efforts on innovative business opportunities rather than data and hosting management.36 The company also has global and international marketing teams, who manage major frontline releases from priority artists, while a global catalogue marketing function handles catalogue campaigns across the world. Digital Distribution
EMI continue to broaden their digital distribution channels
35
‘EMI faces tighter budget’ Financial Times, published 30-12-07, http://www.ft.com/s/0/64d22020b6f8-11dc-aa38-0000779fd2ac.html sited 1/3/08 36 Case Study: EMI Centralizes Online Marketing with Microsoft.Net-Based Web Services. http://www.avanade.com/customers/casestudy.aspx?id=39 Sited 3/3/08.
18
and Sales
globally by entering into agreements with partners like Apple or Amazon in U.S., who make EMI music available on their platforms. EMI music repertoire is now available digitally in 70 countries. Digital technology helps the company to approach consumer through online and mobile channels, for example, the EMI Music distributed the 30 Second To Mars video using the latest Web2.0 technology.
Financial Tables
19
EMI - Ratio Analysis
Gross Profit Net Profit Current Ratio ROCE Gearing
2007
2006
2005
2004
2003
34.9301%
34.8382%
36.9312%
33.7624%
35.6419%
8.5926%
12.0438%
11.9879%
11.7556%
8.3181%
0.7796 : 1
0.8126 : 1
0.8097 : 1
0.8524 : 1
0.7887 : 1
94.9176%
53.4343%
59.6720%
50.1206%
107.6897%
1.1871 : 1
1.4129 : 1
1.3229 : 1
1.3661 : 1
1.4141 : 1
EMI - Horizontal Analysis 2007 £m
2006 £m
Difference £m
Difference in %
Revenue
1751.5
2079.9
(328.4)
-15.79%
Group Profit Share of Profit from Associates Operating Profit
150.5
250.5
(100)
-39.92%
1.8
1.0
0.8
80%
152.3
251.5
(99.2)
-39.44%
Finance Income Finance Cost Total Net Finance Charges
63.0
57.4
5.6
9.76%
(152.6)
(149.6)
(3)
2.01%
(89.6)
(92.2)
2.6
-2.82%
62.7
159.3
(96.6)
-60.64%
(23.8)
(33.1)
9.3
28.10%
10.0 (13.8)
5.0 (28.1)
5.0 14.3
100% -50.89%
48.9
131.2
(82.3)
-62.73%
Income Statement
Net Profit before Taxation Overseas UK Total Taxation Net Profit after Taxation
EMI - Horizontal Analysis (2)
20
2007 £m
2006 £m
(1069.8)
Income Statement Extracts Cost of Sales Distribution Costs Gross Profit istration Expenses Other Operating Income, Net
(1230.4)
Differenc e £m 160.6
Differenc e In % -13.05%
(69.9)
(75.0)
5.1
-6.8%
611.8
774.5
(52.7)
-6.80%
(466.9)
(532.4)
65.5
-12.30%
5.6
8.4
(2.8)
-33.33%
EMI - EPS Earnings per Share
2007
2006
Basic Earnings per Ordinary Share Diluted Earnings per Ordinary Share Underlying Basic Earnings per Ordinary Share Underlying Diluted Earnings per Ordinary Share
(36.3)p (36.3)p 5.8p 5.8p
10.9p 10.5p 16.2p 15.7p
EMI - Dividend Payment Ordinary Dividend
2007 per share
2006 per share
2007 £m
2006 £m
06/05 Final dividend
6p
6p
47.5
47.2
06/05 Interim dividend
2p
2p
15.7
15.7
Total
8p
8p
63.2
62.9
Warner - Ratio Analysis
Gross Profit Net Profit Current Ratio ROCE Gearing
2007
2006
2005
46.1448% -0.6204% 0.6350 : 1 7.9926% 0.5427 : 1
48.1797% 1.7064% 0.7226 : 1 10.4006% 0.5449 : 1
47.1730% -4.8258% 0.7105 : 1 3.0545% 0.5458 : 1
Competitor Analysis: Warner37 Warner’s goals Drive shareholder value and improve competitive positioning Warner’s competitive advantage 37
Information gathered available from: “ Warner’s Annual Report 2007”
21
−
Leading artists and songwriters
−
Stable, highly diversified revenue base
−
Flexible cost structure with low capital expenditure requirements
−
Digital leadership
−
Focus on innovative A&R
−
Leader in independent distribution
Warner’s strategy •
Attract, develop and retain established and emerging recording artists and songwriters
•
Maximize the value of our music assets and capitalize on the growth areas of the music industry
•
Focus on continued management of cost structure
•
Capitalize on digital distribution and emerging technologies
•
Enhance physical business by developing and optimizing Warner’s physical distribution channel strategies and creating new physical formats
•
Contain digital piracy
How Warner targets customers •
Goal is to maximize the likelihood of success for new releases as well as stimulate the success of previous release.
•
Seek to maximize the value of each artist and release, and help artists develop an image that maximizes appeal to consumers.
•
Raise profile of artists, through marketing approach that covers all aspects of their interactions with music consumer (help artist develop creatively in album release, setting strategic release dates and choosing radio singles, creating concepts for videos that are complementary to the artists’ work, coordinating promotion of albums to radio and TV outlets etc.)
•
Windowing of content, create product bundles.
•
Pre-release activities can be customized online.
•
Facilitating TV and radio coverage / live appearances for key artists
•
Corporate, label and artist websites provide additional marketing venues for our artists
Careful coordination of marketing and promotion to create greatest sales momentum
22
The Key Issues Facing EMI •
Liquidity and gearing problems could potentially lead to bankruptcy.
•
Management problems- where policies are in place but are not being implemented with great effect.
•
Not maximising the efficiency of each functional department, with overlaps of responsibilities occurring.
•
Inefficient cost control- unnecessary spending to impress shareholders and artists.
•
Low revenue- as a result of declining CD sales.
•
Artists by ing record companies
•
Lack of leadership- whilst management are highly qualified and experienced within the music industry there appears a lack of coherent direction.
•
Traditional marketing methods no longer as effective because of the rise of e-commerce marketing.
Bibliography Books
23
Doole, I. and Lowe, R. (2007) International marketing Strategy: Analysis, development and Implementation, Thomson Learning, London Grant, R. M. (2008) Contemporary Strategy Analysis (6th Ed) Blackwell Publishing Ltd, Oxford. Grant, R. M. (2008) Cases to Accompany Contemporary Strategy Analysis (6th Ed) Blackwell Publishing Ltd, Oxford. Online Reports “IMPI Digital Music Report 2008” Available from: http://www.ifpi.org/content/libary/DMR2008.pdf cited 8/2/08 Online Articles Bachman, J (2007) “The big Record Labels’ not so big future” BusinessWeek, Available from: http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db2007109_120106 cited 5/2/08 Baker, S (2008) “How the music industry makes its money” BusinessWeek, Available from: http://www.businessweek.com/the_thread/techbeat/archives/2005/03. cited 5/2/08 Black, J. (2003) “Big Music’s Broken Record” BusinessWeek, Available from: http://www.businessweek.com/technology/content/feb2003/tc20030213_9097_tc. cited 5/2/08 Burt, T. (2007) “Singing a happy Tune: why the music industry is upbeat about online sales.” Financial Times, Available from: http://search.ft.com/ftarticle?queryText=music=industry=analysis&aje=false&id=04 0 cited 05/02/2008 Byrne,D (2007) “Davis Byrnes’s Survival Strategies for Emerging Artists –and megastars.” Wired Magazine, Available from: http://www.wired.com/entertainment/music/magazine/1601/ff_byrne?currentPage=all cited 5/3/08 Davis,J (2007) “ Is mobile the future of the music industry” Available from: http://www.three.co.uk/threefiles/pdf./musicreport.pdf. cited 25/2/08
24
Dolfsma, W. (2005) “How will the music industry weather the Globalization Storm” First Monda, Available from: http://www.firstmonday.org/issues/issue5_5/dolfsma/ cited 4/2/08 Fenton, B (2008) “Sales fall spells gloom for music Industry” Financial Times, Available from: http://www.ft.com/cms/s/0/c82101a4-cab8-11dc-a960-000077b07658.html cited 5/2/08 Goessl,L. (2008) “ Assessing the effects of p2p music sharing on the record industry” Helium, Available from:http://www.helium.com/tm/691163/sharing-prgram-whichenables. cited 5/2/08 Green, H, Grover,R. and Hof,R (2003) “ Music Merchants Rush in where Labels have Failed: Can they do better at getting the public to pay for s?” Business Week, Available from: http://www.businessweek.com/magazine/content/03_06/b3819058.htm?chan=search cited 5/2/08 Himowitz, M (2008) “ Music Industry and public need to change” Dailypress.com, Available from: http://www.dailypress.com/features/dp-life_himowitz_0204feb cited 5/2/08 Jeffery,V (2008) “ How the music industry is killing itsel” Helium, Available from; http://helium.com.tm/494190/music-industry-dying-painful cited 5/2/08 Kozul- Wright and Stanbury, L. (1998) “Becoming a Globally Competitive Player: The case of the Music Industry in Jamaica” Available from: http://ideas.repec.org/e/pko166.html?ref=kasshop.com cited 18/2/08 Liebowitz, S (2003) “Will Mp3 s Annihilate the Record Industry: The evidence so far.” Avaliable from: http://www.utdallas.edu/~liebowit/intprop/records.pdf Cited 5/3/08 Preiser,J and Vogel,A (2002) “ The Music Industry in the 21st Century: Facing the Digital Challenge” Screendigest Available from: http://www.screendigest.com/reports/mi2104/NSMH-5SDK6M/sample.pdf cited 12/2/08 Mervis, S (2008) “Artists seek new ways to sell their music” Post-gazette Now, Available from: http://www.post-gazette.com/pg/08036/854769-42.stm cited 5/2/08 Tanner, J. (2007) “Digital Music: In Search of Biz Model” Business week, Available from: http://www.businessweek.com/globalbiz/content?jun2007/gb20070611_930387 cited 5/2/08
25
Skapinker, M. (2004) “No such thing as a free lunch in the music industry” Financial Times, Available from: http://search.ft.com/ftarticle?queryText=music=industry=analysis&page=3&aje=fal s cited 5/2/08 Spellman, P. (2003) “The future of Music Careers: Quantum Career Development in a Transforming Industry.” Available from: http://www.futureofmusic.org/articles/spellmanmusicianbiz.cfm cited 5/2/08 Website Articles “New trends in the music Industry” (2005) Available from: http://billboard.blogs.com/billboardpostplay/2005/06/sales_and_marke.html cited 5/2/08 “Strategic Leadership and Porters Five Forces” Available from: http:www.whatmakesagoodleader.com/Porters-five-forces.html cited 12/2/08 Other websites www.bbc.co.uk www.emigroup.com www.guardian.co.uk www.paidcontent.org www.terrafirma.com www.timesonline.com
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