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CANDACE KOLLER ~ ZACHARY EVANS
MUSIC & VIDEOSWE’VE GOT YOU COVERED
Wednesday, December 10, 14we are Zach Evans and Candace Koller. We are here to discuss a very important new trend in the music industry. We know that after our presentation you will be excited to move forward with our ideas and be comfortable on how it will benefit Warner Music Group.
WARNER MUSIC STREAMING SERVICES
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Wednesday, December 10, 14Warner Music Group has been a very successful music label, distributor, publisher and label service provider to it’s strong roster of artists. We feel it’s time to think outside of the box and develop our own streaming service that is exclusive for WMG music artists. This will be more than what other streaming services offer. We will offer incentives to our subscribers that will help customers feel that they are getting more than just streaming.
Problem & Solution (3 points each) Explain what challenges this company faces that relate to how your proposal will help. Address how your proposal will benefit the company qualitatively. Answer the question, “Why should they do this?”
PROBLEM&
SOLUTION
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Wednesday, December 10, 14The problems are two fold. 1. Music sales are in a decline. During the 2013 sales year, no one artist was able to achieve platinum sales and more customers would rather tap into a cloud based account for their music listening pleasure. Customers do not want to deal with storing and maintaining a music library be it digital or physical.
WARNER MUSIC STREAMING SERVICESENVIRONMENTAL SCANNING
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Record Sales
Record Sales Record SalesRecord SalesRecord Sales
Label Services
Streaming Services
Wednesday, December 10, 14This new streaming service will allow for continues revenue as the subscriber will pay a minimum monthly subscription fee. It will also allow us to continue to introduce new music to customers who are interested in purchasing digital and physical media as well as bring revenue into the label services which will allow WMG to continue to support their roster of artist.
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WARNER MUSICSTRENGTHS & WEAKNESSES
Wednesday, December 10, 14Warner Music Group has a massive stable of artists whom which have a fan base who is loyal to them. Not only will we be able to help our artist collect royalties they deserve but we will also be able to provide them and their fans direct contact and access to their music. This will allow our artists to recoup appropriate publishing and performance royalties, but also use their label services to continue making music and support their careers.
Weaknesses, there are other subscription based providers who have a broader range of music available than we do. It may be a challenge to get them to buy in or switch to our service.
Financial StandingsAs of March 31, 2014, the company reported a cash balance of $142 million, total long-‐term debt of $2.869 billion and net debt (total long-‐term debt, including the current porDon, minus cash) of $2.720 billion. There was no balance outstanding on the records as of March 31, 2014. Revenue for the company has declined 3% and digital revenue increased 6% both on a constant currency basis. The net loss was $59million versus net income of $4 million in the prior year quarter. (WMG.com)NASDAQ WMG status is a share price of $17.00, shares offered 32,600,000 in common stock. Company financials: revenue $1,008,000,000, Net Income $36,000,000, Total liabiliDes, $5,148,000,000, stock holders equity -‐$125,000,000 with total assets equaling $5,023,000,000. The current CEO Edgar Bronfman, CFO Eric Levin, EVP Brian Roberts and WMG currently employ 4000 staff members. (NASDAQ.com)
WARNER MUSIC COLLABORATORS
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Wednesday, December 10, 14Warner music group has a long list of partnerships and collaborations. One in particular that we feel is a strong and will help our marketing and sales push is the partnership with soundcloud. They have a strong list of people using their service and we hope to use it in conjunction with our streaming service to help unsigned/unknown artists get discovered.
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WARNER MUSIC COMPETITORS
Wednesday, December 10, 14As previously stated there is a growing list of streaming services available to consumers. We think our incentive based subscriptions will bring more customers to our service as well as theirs if not exclusively.
WARNER MUSIC BUSINESS CLIMATE
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Swift Yorkehttps://www.flickr.com/photos/carlos_muller/3388897561
Wednesday, December 10, 14The business climate sees more artists who are declining to have their music sold for free or for minimal residuals and publishing. We would offer are artists to be exclusive with us or they could share their music on our platform and others they choose. We’ve seen companies such as CBS pulling their content from video streaming providers like hulo and netflix and only allowing their content to be viewed from their CBS application only. Allowing them more control of the content and being aware of their share in the market place.
WARNER MUSIC STREAMING SERVICESSTRATEGY FORMULATION
WARNER MUSIC GROUP
MARKETING DISTRIBUTION A & R LEGAL STREAMINGDEPT.
Wednesday, December 10, 14As for our strategy for this new streaming service we see the necessity of adding a new streaming department. This department would be relatively small and will need minimal support at the onset of this venture. During the launch we will need to enlist the help of the legal department to discuss licensing and royalty agreements with the artist. The marketing department to help get the service out there and start cultivating interest in the service. A team of 15 employees and 2 webmasters that make up the division based
WARNER MUSIC PROJECT BUDGET
Sales
Year 1
Expenses
Year 2 Year 3
Operations
Marketing
Legal
Distribution
Net Profit
57,230,238 60,091,750 63,096,337
TOTAL
6,428,321 6,697,237 6,979,599
5,000,000
150,000
0
5,000,000
160,000
0
5,000,000
170,000
0
$12,149,599 $11,857,237 $11,578,321
$45,651,917 $48,234,513 $50,946,738
Wednesday, December 10, 14The first and largest cost for the implementaDon of Warner Music Group streaming services is the cost of operaDons. Included in operaDons are streaming costs, licensing fees and hosDng as well as the employee budgets associated with it. Due to the streaming service being an added division within Warner Music Group the arDsts and music streamed will mostly be limited to the ones inside of the WMG catalogue, which allows for a lower need to have too many employees. In order for the service to be a success there has to be an awareness surrounding the product which could fit inside of a $5 million dollar budget that would include but not be limited to social media markeDng, terrestrial radio markeDng, print adverDsing and event markeDng. Making people aware that the product exists is important for the launch of the product and once there is an established foundaDon users tesDmonies and word of mouth will be very beneficial to the growth of the services offered.
WARNER MUSIC SALES PROJECTIONS
Year 1 Year 2 Year 3
Sales Projections
Projected Units Sold
Unit Price
Unit Cost
TOTAL
13,944,000
5,378,321
$57,230,238
$3.99-$4.99
14,641,200
$3.99-$4.99
5,647,237
$60,091,750
15,373,260
$3.99-$4.99
5,929,599
$63,096,337
Wednesday, December 10, 14When it comes to how many paid subscribers exist in America the numbers in research varied from 22-28 million. The most recent number with an accurate breakdown states that there are approximately 24.9 million paid subscribers to music streaming services as of November 2014. With the strong presence of countless Warner Music Group artists stretched across every genre past and present and the features that are not matched by current streaming services it is anticipated in good reason that in the first year Warner Music Group streaming services could reach at least 7% of the market share or 1,743,000 million subscribers in the first year.
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Wednesday, December 10, 14First, the WMG team of lawyers would already be relatively familiar with the artists contracts and be an essential tool in giving the department the go ahead to add the artists music to the platform. In the event that there are a few artists who own the majority of the rights to their music the lawyers may need to get the artists permission before adding the music to the catalogue. Adding two lawyers to be dedicated to contracts involved should be around $150,000 the first year.All in all, the benefit of having such a large in house catalogue for WMG gives plenty of content without having to go outside to make the service successful. The second great advantage is that there are virtually no distribution costs that are not already included inside of the operations because everything is digital and there will be no physical distribution of the product.
Strategy Evaluation (3 points) Explain how you will evaluate the success of executing your strategy. This addresses your SMART goals and how you will stay on track.
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WARNER MUSIC MILESTONES
Wednesday, December 10, 14All in all, the benefit of having such a large in house catalogue for WMG gives plenty of content without having to go outside to make the service successful. The second great advantage is that there are virtually no distribuDon costs that are not already included inside of the operaDons because everything is digital and there will be no physical distribuDon of the product. Aber relentless markeDng efforts to build a solid foundaDon the goal is to hit the one million subscribers milestone by September of 2015 through compeDDve pricing and the ability to offer more than the compeDDon. In December of 2015 the goal is to have a least 1.7 million paid subscripDons.
The second year will focus on improving on the progress that has been made. Through evaluaDng the department needs as well as updaDng the placorm it will make users experience even greater than before. In March of 2016 the goal is to hit the 2 million paid subscripDon mark and shortly aber begin creaDvely coming up with ways to offer things that the compeDDon simply cant.
Another large milestone for 2017 is to have at least 3 million paid subscribers and to introduce partnerships with large corporaDons such as car manufacturers to use WMG streaming in their cars and make the audio and visual components readily available inside of their vehicle.
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ONE MILLIONSUBSCRIPTIONS
Wednesday, December 10, 14
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EXCLUSIVE MEMBERSHIP INCENTIVES
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Wednesday, December 10, 14The numbers and research point us to a very logical direcDon, which will help increase revenue in record sales, label services, and the new streaming music subscriber business model. Warner Music Group needs to develop and support our own paid subscripDon music streaming service for the arDsts on our roster. By doing this we will drive traffic to our website, support the payment of licenses to our arDsts owned copyrights, find a revenue stream that consumers are willing to support and will help our label to find new customers and create a stronger bond with our exisDng ones.
WARNER MUSIC STREAMING SERVICESMARKETING
Wednesday, December 10, 14Thank you for your time and attention. I hope you’ve enjoyed the presentation and the ideas that were discussed.