universal music group - swot, pest, porter analysis

T E A M 3

v i s i o n

“We are UMG, the Universal Music Group.

We are the world’s leading music company.

In everything we do, we are committed to artistry,

innovation and entrepreneurship…”

1937

1999

2001

2004-08

2011

2014

Start of Universal records 1934 as Decca records

Ploygram (Major record Label Philips) acquired bySeagram.

Segram merged in to UMG

UMG acquired an online subscription music service, EMusic.com, which it used to help grow digital sales and

internet related operations

- UMG separated from Universal Studios- Made over six acquisitions making it the largest music catalog in the industry- Acquitted by Vivendi

- Acquired BMG Music Publishing making it the largest music publisher- Acquisition of Univision Music Group

Acquisition of EMI

Universal Music announced the disbandment of Island Def Jam Music, one of four operational umbrella groups within Universal Music

t i m e - l i n e

o r g a n i z a t i o n a l S t r u c t u r e

Lucian GraingeMichelle Anthony

b r a n d s

s w o t - s t r e n g t h s

Strengths

Large global and local marketLarge parent companyStrong management

Brand recognitionArtist portfolio

Large market shareInfluential celebrity power

Rich historyVevo partnershipsArtist placement

Opportunities

Diverse consumer base

Innovative distribution channels

New technologies

More fusion of genres

Festivals, concerts, events collaborations (U-Live)

Transformation from physical to digital

Access to new talent

Threats

International competition

Government regulations (copyright)

Volatile costs

Individual artists

Music value to consumer (price)

s w o t - O P P O R T U N I T I E S

Strengths





Opportunities



New technologies





Weaknesses

Piracy

File Sharing

Technology changing music trends

Lack of discovery

High risk industry

Uncertainty regarding artist deals

Weaknesses

Piracy

File Sharing


Lack of discovery

High risk industry


s w o t - W E A K N E S S E S

Threats



Volatile costs

Individual artists


Opportunities



New technologies





Threats



Volatile costs

Individual artists


s w o t - T H R E AT S

Strengths





Weaknesses

Piracy

File Sharing


Lack of discovery

High risk industry


m u s i c i n d u s t r y r e v e n u e s

DIGITAL DOWNLOADS

37%

STREAMING27%

PHYSICAL32%

RING-TONE

1%

SYNCHRONIZATION

3%

2009 2010 2011 2012 2013 2014

4.44.7

5.36.0

6.46.9

GLOBAL DIGITAL DOWNLOAD

REVENUE

(USD$ BILLIONS)

p e s t - p o l i t i c a l

Political

Global industry - affected by many political environments

Industry employment falling caused by piracy and transformation of music retail and consumers

Legal development of protecting intellectual property worldwide

Independent labels are predicted to grow, taking market share from the major labels

Tax systems and trade barriers affecting the business

Economical

Piracy: 12.5 million losses in music industry

Industry is in a decline

Projected annual growth 1.7%

Forced to change their business plan and channels of distribution

High cost to run a record label today-making money means spending money

Technological

Development of blocking known piracy systems

Becoming easier for independent artists to record,

market and distribute on their own

Technological development working against

the set-up known today, but may be the way

for a new industry structure

Economical





High cost to run a record label today - making money means spending money

We are out of the crisis - but how has it affected people’s value of music

Globalization as a benefit, but can also bring competitors

p e s t - e c o n o m i c a l

Political





Social

Change in consumer habits: How they listen to music, how they purchase

(more individual track purchases than albums)

Devaluation of music value in consumers eyes (Cheaper through streaming services or illegally)

Controlling market: Having the funding and control to decide what music goes

mainstream Social media and streaming services

p e s t - s o c i a l

Social




Controlling market: Having the funding and control to decide what music goes mainstream

Social media and streaming services affecting market

Economical





High cost to run a record label today-making money means spending money

Technological


Becoming easier for independent artists to record,

market and distribute on their own

Technological development working against

the set-up known today, but may be the way


p e s t - t e c h n o l o g i c a l

Social




Controlling market: Having the funding and control to decide what music goes

mainstream Social media and streaming services

Technological

Basic technology needed to listen music - getting more accessible globally


Becoming easier for independent artists to record, market and distribute on their own

Technological development working against the set-up known today, but may be the way


Streaming business increasing sales by 19%

Political





p o r t e r

Rivalry Among Existing Competitors

HIGH

Growing competition and rapidly

shifting consumer preferences

Bargaining Power of Customers

HIGH

Large variety in the market

free music

genres

artists

experiences

distribution channels

Bargaining Power of Suppliers

MODERATE

Suppliers = artists

Artists have choice to choose

between different companies

Established artists have the power

to negotiate pricing and deals

Threat of substitutes

HIGH

battling against

radio

television

social media

internet

piracy

Threat of New Entrants

LOW-MODERATE

High Barriers of Entry

Low startup costs for independent artist, ie. Soundcloud

High time costs to bring artists/products to market

High financial cost and risk:

- acquiring talent and music - distribution

- marketing

m a r k e t s h a r e

SONY36.6%

WARNER22.2%

UMG41.2%

UMG lost market share in 2014, mainly as a result of the sale of the Parlophone Label Group (PLG) to WMG in 2013, which formed part of EMI Recorded Music acquisition requirements. UMG’s loss was WMG’s gain and the smallest of the three majors narrowed the gap on second-placed SME.

Sony/ATV held its lead in music pub-lishing, but the collective share of the independent publishing sector was the highest overall.

a n a ly s i s . p e r s p e c t i v e

Contracts: Before: Record labels limited to producing, distrib-uting, market and selling recorded music.Now: Labels receive income from other sources, art-ists earnings (live performances), merchandise sales, publishing, commercial endorsements (360)Needs to be beneficial for both parts - unique talent to make the deal profitable

Streaming - competitor or partner? (Pandora, Spoti-fy, Deezer, Youtube, etc)

o u r r e c o m m e n d a t i o n s

- Stay up-to-date with consumer trends shifts in social media and music

- Look into Streaming and other distribution channels!

- More research and development with technology to result in faster growth

- Get a more diverse group of artists.. Don't be afraid of new and unique talents

- An effort is events and festivals

- Expand into emerging markets

c o n c l u s i o n

Technology is an important factor that has completely changed the industry

UMG is a big powerful entertainment company with an established history of popular artists and genres

UMG can continue their success by staying up to date in market trends with continuous innovation

Make music valuable for consumers again

Finding a solution to the “streaming issue” - clear strategy needed to overcome this obstacle

v i v e n d i ’ s f i v e y e a r s t r a t e g y

VIVENDI’S FIVE-YEAR DEVELOPMENT PLAN FOR UNIVERSAL MUSIC GROUP

“UMG will accelerate the monetization of music on digital channels, broaden the reach

of its audio and visual content through multiple partnerships with platforms and strengthen

its strategic relationships with brands and sponsors. It will pursue its industry-leading track record

of talent management and development. UMG will also continue investing in high-potential

markets for music, such as Africa, India and China.” - Vivendi press release on July 31, 2015

universal music group - swot, pest, porter analysis

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