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Nicole Golston. Universal Music Group. Pest/Industry analysis. Company Snapshot. Universal Music Group (UMG) was established in 1998 It was originally named Decca Records USA, which started in 1934 and went through many changes to get the current name

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company snapshot
Company Snapshot
  • Universal Music Group (UMG) was established in 1998
  • It was originally named Decca Records USA, which started in 1934 and went through many changes to get the current name
  • In February 2006, the group became 100% owned by French media conglomerate Vivendi SA. It is in the entertainment industry and targets the global music market
  • UMG is the world’s leading music company
  • UMG also sells and distributes music video and DVD products, and licenses recordings, encouraging the legal distribution of music online and over cellular, cable and satellite networks
company snapshot cont
Company Snapshot (cont.)
  • The CEO is Lucian Grainge
  • Currently they have 7,100 employees
  • Representing 98% of the music market, Universal has three key competitors.
    • Sony Music Entertainment
    • Warner Music Group
    • EMI Group
  • UMG has a diverse family of record labels which include:
    • A&M/Octone, Barclay, Decca, Deutsche Grammophon, Disa, ECM, Interscope Geffen A&M Records, Island Def Jam Music Group, Mercury Records, Show Dog–Universal Music, Universal Motown Republic Group, Universal Music Latino, Universal Music Group Nashville, and Verve Music Group
    • This also includes popular artists like Justin Bieber, Black Eyed Peas, Mary J. Blige, Mariah Carey, Sheryl Crow, The Killers, Lady Gaga, Lil Wayne, Ludacris, Maroon 5, M.I.A., Pussycat Dolls, Lionel Richie, Rihanna, Gwen Stefani, Sugarland, Robin Thicke, Stevie Wonder, Sting, 3 Doors Down, and Kanye West
supplier power
Supplier Power
  • The supply of available talent (artists) is very low, so they have a high bargaining position
  • Artists get signed in the beginning of their career, so they don’t have much leverage with UMG
  • Once artists get famous they gain more power and can basically name their own price
buyer power
Buyer Power
  • Music buyers, as a group have a high bargaining power
    • Price to pay
    • Software attached to product
  • May not need or want to buy it
  • Music Retailers have low bargaining power because there are few record companies
threat on new entrants
Threat on New Entrants
  • Barriers to entry are high
  • “Big 4” recording companies control the market so much, independent labels pose no threat
substitute products
Substitute Products
  • Video game and movie companies
  • Online Entertainment
    • Download or stream
    • Mp3s or CDs
suggestions to address key forces
Suggestions to Address Key Forces
  • Universal Music Group is competitive because they have:
    • Loyal customers
    • Technological advancements
    • Loyal suppliers
  • Rivalry could emerge because the market sizes are similar and they have similar organizational structures
blue ocean strategy1
Blue Ocean Strategy
  • Largest Music Company
  • Horizontal Integration- entering other entertainment genres
  • Low prices for unique and valuable products
conclusions
Conclusions
  • Technological and social factors have the greatest impact
  • Barriers of entry, buyer power and supply power are all high for Universal Music Group
  • UMG has the ability to adapt to blue ocean strategy.
  • New strategies will come along under the new management of CEO Lucian Grainge
identification of key competitors
Identification of Key Competitors
  • Sony BMG Music Entertainment
    • Sony BMG Music Entertainment is the second biggest major record label in music sales.
    • Headquartered in New York City
  • Warner Music Group
    • The Warner Music Group is the third major record label in music sales
    • World’s only publicly-trade music company
    • Aimed at helping artists achieve long-term creative and financial success while providing consumers with the highest-quality music content available.
  • EMI Group
    • A business solely focused on music, tracing its history to the very beginnings of recording
    • Headquartered in London, UK
    • The EMI Group is the fourth biggest major record label in music sales.

*Sony and EMI are privately held

strategy business groups in the industry
Strategy Business Groups in the Industry
  • Differentiation Strategy
    • Investing in unique artists
  • Pursue digital distribution
    • Downloads/Online sales
    • Online streaming
    • UMD/ Blu-rays
how competitors compete
How Competitors Compete
  • Loyal Customers
  • Consumer Preference
    • Keep up with the rapidly changing style
  • Commercialize artist
    • Artists must be able to reach different demographics (exploitation)
recorded music market
Recorded music market

75% of recorded sales come from

  • U.S (31%)
  • Japan
  • U.K
  • Germany
  • France
key trends in the music market
Key Trends in the Music Market
  • Music product to music as a service
    • Just-in-time; customers want music at the click of a button
    • Move away from physical products
  • Technological development
    • High speed downloads
    • Apps
    • Wireless networks
products and service types
Products and Service types
  • Discover and develop artists
  • Market and distribute artists and their recorded music
  • Encourages legal distribution of online music
target market
Target Market
  • Music retailers
  • Consumers that listen to music
    • Ages 16-45
    • All races
    • Middle class or greater
    • Preferably with a computer
market segmentation
Market Segmentation
  • Industry segregation by region
    • Location has a lot to do with the type music people listen to
  • Industry Segregation by genre of music
    • Declining market- Many people opening their taste of music and listening to all different genres
  • Industry Segregation by age
    • The younger generation listens to music more
  • Industry Segregation by technology
    • Those who have the ability to download apps or music in general
    • Growing market- Technology is advancing quickly
social media
Social Media

The music industry is focused around the media

-Artists have Facebook, twitter and YouTube pages in order for consumers to be more connected

-Consumers can play artist music and videos on sites like YouTube and Vevo

-Almost all of the popular social media sites have streaming music, so music can be playing while visiting the site

-There are cell phone apps like Pandora to play music from your phone

-All these sites are great marketing tools for the record label and artist themselves

conclusions1
Conclusions
  • UMG’s Main Competitors
    • Sony BMG Music Entertainment (Privately Held)
    • Warner Music Group (Publicly Traded)
    • EMI Group (Privately Held)
  • Record Labels use the same strategies to get to the goal of successful music
  • Strategies
    • Differentiation
    • Digital Distribution
conclusions2
Conclusions
  • Competitors compete by
    • Loyal Customers
    • Consumer Preference
    • Commercialize artist
  • Key trends for the Music market
    • Music product to music as a service
    • Technological developments
  • Market segmentation
    • Industry Segmentation by
      • Region
      • Genre
      • Age
      • Technology
umg business model
UMG Business Model
  • Diverse group of business divisions has allowed the company to respond quickly and capitalize on the changing music industry
  • Different business divisions at UMG work together in great harmony throughout the whole process of publishing and eventually selling an artist’s music
  • The eLab’s division is responsible for handling the company’s electronic commerce initiatives, internet exploration, and new technology opportunities worldwide
company strategy
Company Strategy
  • Ensure leadership of the core business during the transition to digital
  • Participate in a broader range of music revenue streams
  • Maximize profitability through efficient cost management
company strategy1
Company Strategy
  • Product differentiation
    • Uniqueness of artists and songs
  • The best resources
    • best recording technologies
    • merchandising services
    • management services
    • live music services
resources
Resources
  • interdependence of different business functions and divisions
  • excellent corporate integration and acquisition skills
  • a tremendous ability to attract top talent
bcg matrix
BCG Matrix

High

High Market Rate: UMG is the world’s largest music company, with 35% of the market

Low Growth Rate: The “Big 4” has the industry locked down. There is little opportunity for growth

Industry Growth Rate

Low

High

Low

Relative Market Rate

value chain analysis
Value Chain Analysis
  • UMG controls the entire chain
  • Retailers will be eliminated, since the products will be directly delivered to the client through internet

Brick and Mortar

Digital

slide39

Generic Strategy

Comparative Advantage

Low Cost Higher Cost

Low Cost Comparative Advantage: UMG has reduced the price of products

Broad Competitive Scope: UMG has a broad range of customers to market to

Competitive Scope

Narrow Broad

grand strategy1
Grand Strategy
  • Acquisitions and Mergers
    • In 2001, UMG acquired an online subscription music service, EMusic.com, which it used to help grow digital sales and internet related operations
    • From 2003 to 2008, UMG made over six acquisitions of different record labels which helped the company achieve the largest music catalog in the industry
    • In 2006, UMG acquired BMG Music Publishing and in turn became the world’s largest music publisher
grand strategy2
Grand Strategy
  • Acquisitions and Mergers
    • The acquisition of Univision Music Group in 2008, expanded UMG’s reached to nearly 50% of the Latin music market
    • There are many independent labels UMG can acquire
ansoff s growth matrix
Ansoff’s Growth Matrix
  • UMG should focus on Product Development:
    • publish new albums
    • change album packaging (size, shape, etc.)
    • use different medias to publish albums like online,DVD’s, Blu-Ray Discs, etc.
international markets
International Markets
  • Currently has a network of subsidiaries, joint ventures and licensees in 77 countries
  • Universal Music Group International is the division that manages UMG's businesses in countries outside of North America
  • In some markets outside the U.S., UMG companies handle their own distribution and sales
  • In other markets UMG companies have sub-contracted services to third parties or entered into distribution joint ventures with other record companies
conclusions3
Conclusions
  • Business Model
    • Different business divisions at UMG work together in great harmony throughout the whole process of publishing and eventually selling an artist’s music
  • Generic Strategy
    • Overall Cost Leadership
  • Grand Strategy
    • Acquisitions and Mergers
conclusions4
Conclusions
  • Ansoff’s Growth Matrix
    • Product Development
      • New Albums
      • Use different medias
  • International Markets
    • Currently has offices in 77 countries