EMI and the Digital Music Industry - Article Example

EMI and the Digital Music Industry EMI Overview      EMI are the initials of the giant Music Company known as Electronics and Music. EMI Music is among the world’s top music companies, also considering that it is home many a famous and successful recording artist. The company’s history goes back all the way to 1897 when it was formed in the UK. EMI is also the first music organization to embrace digital music distribution (EMI website, 2010). According to the company’s profile, it is able to serve its consumers, artistes and partners through its wide network of licensees and affiliate companies. EMI Music and Music Publishing businesses are well established in about 50 countries in Europe, North and Latin America, Asia and Africa. The organization gets its revenue mainly from the sale of recorded music on DVD, CD and Tape. The company has also managed to collect a sizable income from recorded music sales in digital mode. In a bid to serve both artistes and fans, EMI operates 3 business units, namely: Catalogue, Music Services and New Music. New Music was established to find and develop new and exciting successful music. Virgin, Capital, Capitol Latin, Capital Nashville, EMI Classics, EMI Records, Parlophone, Angel, Blue Note and Astralweck are some of the famous labels that are affiliated to EMI’s New Music business unit. Some of the artistes who are associated with these labels include: Beastie Boys, Pink Floyd, Kylie Minogue, Coldplay, Luke Brian, Iron Maiden, Bat for Lashes, Lily Allen, Norah Jones, Queen, Snoop Dogg, 30 Seconds to Mars and Keith Urban. Other artistes outside the UK and North America include Amaral from Spain, Tiziano Ferro from Italy, LaFee of Germany, Mexico’s Flex, Camille form France, Japan’s Utada Hikaru as well as Australia,s Empire of the Sun. The Catalogue Unit is responsible for maximizing the value of the company’s historic and wide varied music assets. Some of the seminal albums that you can find in the catalogue include David Bowie’s Hunky Dory and Aladin Sane, the Beatles’ Revolver and Sgt. Pepper’s Lonely Heart’s Club Band, Coldplay’s A Rush Of Blood To The Head, Birth Of The Cool by Miles Davis and the sensational Frank Sinatra’s Songs for Swingin’ Lovers. Catalogue also owns Abbey Studios in London and Capitol Studios located in Los Angeles. The Music Services unit is the one that is responsible for offering services to the company’s artistes, and independent labels. The unit gives the artistes and labels access to a wide range of business models and revenue streams. Its main focus is to deliver revenue to the artistes who are associated with the company. The unit is also responsible for synch, licensing and distribution functions of the company (EMI profile, 2010). This paper analyses the relationship between EMI and the digital music industry. I have included an environmental scanning of the music industry to determine an appropriate marketing strategy to help EMI marketing department come up with marketing ideas in the digital music industry. The analysis also includes a SWOT, macro and micro analysis of factors affecting EMI marketing. Environmental Scanning: Forces Affecting EMI’s Marketing Environment According to the Business Dictionary (2010), environmental scanning is the careful examination of an organization’s external and internal environments detecting early signs of threats and opportunities which might influence its present and future plans. It is the process of acquiring and using information and facts about events, relationships and trends found in the external environment of an organization. This information is meant to help the organization’s management forge future courses of action. Environmental scanning is important as it will help EMI focus on what makes it strong and improve on its areas of weaknesses. In other words, this scanning will enable EMI capitalise on its market in order to make as much profit as it can. For the purposes of this paper, I will analyse the social, economic, technological, competitive and regulatory forces that affect the marketing environment of EMI. Social Affects It is quite clear that human beings are music oriented. This makes music to be one of the most vibrant industries all across the world. Being a music oriented company, EMI has to focus on selling its music to as many people as possible. However, there is need to consider the music needs for people from different social backgrounds. This is where music genre marketing comes in. There are some people who prefer listening to hip hop kind of music and there are those who love rock music. The social background of different target audiences will affect what kind of music EMI markets to them. Economical Affects           When marketing music, one of the most important things to consider is the prevalent economic situation. For instance, many parts of the world are dealing with an economic crisis that has affected every aspect of people’s lives. This means that people have to carefully budget for all their needs, even the music that they get. EMI has been badly hit by this unfortunate economic situation, with its record sales plummeting more than ever. When marketing its music, EMI has to consider the economic situation so that it can offer affordable music. The future does not look so glam. The economy is starting to go back to normal in many parts of the world. This means that there is hope for the music industry to get back to its feet, and this means better business for EMI. Technological Affects           Technology has influenced the world of music in a very big way. There are a number of innovations which have helped the music industry climb to great heights. However, there are also some innovations that have in the past almost crippled the industry. For instance, file sharing over the internet was by many people to download music without paying for it. This dealt a big blow to EMI since most people now turned to the internet whenever they wanted to get a particular song. Competitive Affects Competition in the music industry affects the way a company packages and markets its music. EMI is not the only company that does Music business. There are other big companies such as Columbia records and BMG who have a big market share. All these companies are competing for the same digital target market. This means that EMI has to up its game to stay on top of the competition. Regulatory Affects There are some countries that have stringent rules regarding digital access to music and music services. For instance, in some countries, downloading copyrighted material without paying for it is considered a criminal offence. This would be good for EMI business since the company can collect revenue without worrying about the worrisome piracy. However, when there are no regulations that govern the digital music industry, EMI would stand to loose a lot in terms of resources, clients and partners.         Macro Analysis  Economic Factors The economic situation in any country or region can have far reaching effects on the life and business in that area. The consumer and investor confidence, balance of payments and future trends in the music industry all rely on the prevailing economic situation (Hutchingson, 2008). Consumer and investor confidence: there are many consumers who still have confidence in EMI’s services. However, gaining investor confidence remains a great challenge for the company. The situation is even more difficult now that most investors are facing some tough financial times. Balance of payments: Most music organizations of EMI’s stature operate a wide range of services including payment of artistes’ dues. EMI operates in a similar manner, where it collects revenue and uses it to pay its artistes and labels. However, the recent economic downturn has made it difficult for the company to collect enough revenue to balance with its expenditure. Future trends: developments of the digital world are showing that more and more people are willing to download music from the internet rather than buy it. There are many websites that are offering music for free and many people are getting their favourite songs from there. Lack of finances is making more people turn to the free music and the trend looks like it will continue even after the economic situation stabilizes. Political Factors The politics of an area plays a big role in the success or failure of any business. If and area is politically stable, business is likely to be good and vice versa (Hutchingson, 2008). The music industry in Europe and America is operating in a politically stable environment. This means that EMI and other music organizations do not operate under the risks that are associated with political instability. The music industry also operates in a relatively free market. The restrictions are not as many as in other parts of the world. Legal Factors The legal factors that may affect the music industry are copyright and patent laws, anti-monopoly laws and those legislations that are favourable to business investment. Copyright laws normally protect the artistes against piracy while anti-monopoly laws are there to regulate the industry so that everybody has a level playing field. Most regulations to do with the music industry are favourable to investment. Technology Technology has a major influence on the music industry. This is evidenced by the popularity with which digital music has hit the market. The industrial productivity of major players in the music industry is quite high. There is also a lot of competition from the digital world where new technology for music downloading and sharing are being invented almost every day. Socio-Cultural Factors The music industry focuses on a wide range of target groups. Although most of the target groups are made of the young generation, there are other types of services offered that target the older generation. In Europe and most parts of North America, people from different ethnic, economic and religious backgrounds can access music services from any of the music organizations operating here. A lot of people have lean toward capitalism and free enterprise. This means that most people will buy music services and products from companies that offer them at a low price. Micro Environmental Analysis     Competition from Substitutes: There are other companies that offer more or less similar services to those offered by EMI. Some of the competitors are music companies while others are involved in the digital world. For instance, Apple’s iTunes is one of the most popular sources of music for the young people. Threat of Entry: There are some up coming companies which are attracting a lot of people. Although they are not among the top music organizations, these small companies have the potential of upsetting the balance in the music industry. Rivalry between established players: there is a lot of rivalry among established music organizations. All of them want to dominate the market. This means that they are alwys coming up with new ways of increasing their market share. Bargaining power of Buyers and Supplier: in the UK and North America, the buyers have a lot of bargaining power due to the tough competition that exists among different music companies. The suppliers also have considerable bargaining power, making the UK and North America to be a good place to do business.          SWOT Analysis of EMI Strengths Strong global presence: EMI boasts a worldwide market that spans across 50 countries. It has a wide presence in countries in North America, Europe, Australia, Japan, and Latin America. EMI is the largest private music company (Hutchison, et. al, 2006). This is another one of its strengths that gives it an edge over other companies with similar operations. As of the year 2002, EMI had a world wide market share of 12.6% (Duchene, et. al, 2005). This is a very large market share and it gives EMI the ability to use economies of scale to reduce marketing costs. The large market share also gives the company the benefit of attracting the most qualified staff and artistes in the industry. Financial Performance: EMI has enjoyed a relatively healthy financial performance in the last ten years (Kurtz, MacKenzie and Snow, 2009). Although the company has been affected by the ongoing financial downturn, it has managed to stay on top of its competition. The recent acquisition of EMI by Terra Firma may be a big boost to the financial situation of the organization. World class artist roster: EMI has crème de la crème of the world’s famous artistes. For instance world class artistes such as the Beatles, Snoop Dogg, Robbie William, David Bowie, Coldplay and many more. There are over 1300 artistes from around the world who are signed to EMI, which happens to also sell over 1000 albums every year (Kurtz, MacKenzie and Snow, 2009). This makes the company to be one of the most sought after by artistes all from all over the world. Weaknesses Difficulties in the US Market: EMI has a great presence in the US market (Report Linker, 2008). Although this is essentially a good thing, it also means that it can be greatly affected by any changes in the economy. The US was one of the countries to have been adversely affected by the recent financial crunch and EMI did feel the effects. This dealt a big blow to its finances and it is struggling to get back to its feet. Lack of conglomerate backing : Until recently, EMI had no conglomerate backing. However since Terra Firma took over the company, there seems to be some hope that more resources will be available for more business. A reduction in the worldwide market share: For many years, EMI had the biggest market share in the music industry. However, after major labels such as Columbia opted to move out of the organization, the market share has been decreasing slowly by slowly (Duchene, et. al, 2005). This is because the breakaway and other upcoming labels are taking a big chunk of EMI’s market and the company is not expanding at a rate that is fast enough to replace its lost market. Opportunities Joint Ventures / collaboration: Although there have been some major merger attempts that have been stopped before, there are a number of opportunities which the company can take advantage of in order to gain a wider market share. In the recent past, EMI has enjoyed great success as a result of joint ventures with some big internet operators such as Apple’s iTunes and Yahoo (Peoples and Bruno, 2010). Having more of such ventures and collaborations will help the company solidify its presence in the digital music world, where there is a lot of potential for success. Internet sales: Another area that presents great opportunity for EMI marketing is the internet. Online music marketing has grown by leaps and bounds since the inception of the internet. Thousands of music lovers are opting to download their favorite music as opposed to buying from music shops, and this is a trend that is expected to grow even further (Peoples and Bruno, 2010). As the digital technology grows, more and more opportunities present themselves to the music industry(Duchene, et. al, 2005). EMI can take advantage of the popularity of online music to increase its sales to more people. This opportunity also makes it possible for EMI to access markets that it has never accessed before. EMI does not have to sell its digital music by itself, it can collaborate with other players in the digital world to reach as many consumers as possible. Threats Competition: In any business structure, there has to be some competition in one form or the other. Competition is one of the greatest threats that EMI has to deal with. Some of the biggest music organizations that offer the same services as EMI include Warner Brothers Group, Universal Music Group and BMG Entertainment (Report Linker, 2008). Internet: Another threat that EMI has to contend with is the internet. The internet has become a source of music for many people (Duchene, et. al, 2005). It is possible to get almost any song or even album from the internet in a format that can be played in a wide range of devices. File sharing is also a threat to EMI marketing since it allows people to share songs without necessarily having to pay for them. EMI & UK Music Industry         The UK music industry is a very vibrant one and that is probably the sole reason why EMI has been able to do so well across the European continent. Masnick (2009) states that the music scenario in the UK and indeed in most of Europe is very vibrant; although the global sales of recorded music fell by 7.2%, the digital sales grew by 9.2%. In the UK alone, EMI was able to sell more digital records than physical ones (Giesenow, 2010). EMI was able to get more revenue in the UK as compared to other players because it has embraced the digital technology (Summers, 2004). The company has partnered with Apple and Yahoo to offer music for download to its wide range of consumers. This means that EMI has a source of income from its joint ventures with the digital world. EMI also has a strong and credible artiste roaster. This makes it a one stop shop for almost all music services. It is also the most sought after music organization in the UK (Paid Content, 2010). Although there is competition from other similar companies, it will take many more years for them to reach the same level as where EMI is at the moment (Vertygo Team, 2010). Just like in most parts of the world, there is widespread piracy going on in the UK. Although EMI has been having a tough time trying to deal with this problem, some regulation have helped the company protect most of its recording artistes from the effects of piracy. The internet and other technologies have not helped much when it comes to piracy (Summers, 2004). Recommendation for Marketing Strategies One of the marketing strategies that EMI can adopt is to embrace the digital technology without any exceptions (Wind, Wind and Mahajan, 2001). More people are getting their music services from the internet and using other digital technologies. Therefore it only makes scene if EMI is to work with the players in the digital world so that they may gain from any new technological exploits. Another marketing strategy would be to acquire more labels. These labels should have talent from across the board (Wind, Wind and Mahajan, 2001). EMI seems to have a lot of artistes from the rock and pop music genres. To expand its market presence, it can acquire those labels that deal with some of the other popular genres of music such as hip hop and reggae. The company should also be actively involved in fighting piracy (Krasilovsky, et al., 2007). This will not only help in its sales, it will also attract more talented artistes to the organizations. Musicians as well as investors want to work in an environment where they are guaranteed to get something in return. By fighting piracy, EMI will be showing that it is committed to its stakeholders’ interests. Advertising is another marketing strategy that EMI can adopt (Lathrop, 2007). Since the digital wave is sweeping across all over the world, there is no denying that it will be hard to compete with. However, if the company advertises its services using the same digital technology, it will be able to not only be able to keep its current consumers; it will also attract more from those parts of the world where the company had no presence. References Business Directory. 2010. Accessed 09 June 2010, http://www.businessdictionary.com/definition/environmental-analysis.html Duchene, A., Peitz, M. And Waelbroeck, P. 2005. Marketing Digital Music: can DRM help? Accessed 10 June, 2010, http://books.google.co.ke/books?id=cE2hMQAACAAJ&dq=digital+music+marketing&hl=en&ei=UOcQTLS6EpKZOO6GydUH&sa=X&oi=book_result&ct=result&resnum=7&ved=0CEoQ6AEwBjgK EMI website. 2010. About EMI Music. Accessed 09 June 2010, http://www.emimusic.com/about/ Giesenow, K. 2010. EMI Music Germany. Accessed 09 June 2010, http://www.sybase.com/detail?id=1025595 Hutchingson, T. 2008. Web Marketing for the Music Business. Accessed 09 June 2010, http://books.google.co.ke/books?id=eZ5uDosZ47YC&dq=digital+music+marketing&source=gbs_navlinks_s Hutchison, T., Macy, A. And Allen, P. 2006. Record Label Marketing. Focal Press. Accessed 09 June 2010, http://books.google.co.ke/books?id=EOSnD903N1kC&dq=digital+music+marketing&source=gbs_navlinks_s Krasilovsky, M., Shemel, S., Gross, J. And Feinstein, J. 2007. This Business of Music: the definitive guide to the music industry. Accessed 09 June 2010, http://books.google.co.ke/books?id=E89YJoeBGxcC&pg=PA443&dq=digital+music+marketing&hl=en&ei=meUQTPWjDNjGOJrNlIsI&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDEQ6AEwAQ Kurtz, D., MacKenzie, S. And Snow, K. 2009. Contemporary Marketing. Accessed 09 June 2010, http://books.google.co.ke/books?id=lf7VKtZcJlgC&dq=EMI+music+marketing+strategies&source=gbs_navlinks_s Lathrop, T. (2007). This Business of Global Music Marketing. Billboard Books, University of Virginia. Accessed 09 June 2010, http://books.google.co.ke/books?id=0HhLAAAAYAAJ&q=digital+music+marketing&dq=digital+music+marketing&hl=en&ei=meUQTPWjDNjGOJrNlIsI&sa=X&oi=book_result&ct=result&resnum=5&ved=0CD8Q6AEwBA Masnick, M. 2009. UK Music Industry Economists Admit: Music Industry Getting Bigger, not Smaller. Accessed 09 June 2010, http://www.techdirt.com/articles/20090723/0351345633.shtml Paid Content. 2010. ’09 Music Sales Shed $1 Billion; US Downloads Stagnant. Accessed 09 June 2010, http://paidcontent.co.uk/article/419-09-music-sales-shed-1-billion-u.s.-downloads-stagnant/ Peoples, G. And Bruno, A. Business Matters: EMI, RIAA, Limewire and more. Billboard Industry News. Accessed 09 June, http://www.billboard.biz/bbbiz/content_display/industry/e3i8ab839c51080663fb5873a43854ecb96 Report Linker. 2008. Music Business in the United States. Accessed 09 June 2010, http://www.reportlinker.com/d010274367/Music-Business-in-the-United-States.html Summers, J. 2004. Making and marketing music: the musician’s guide to financing, distributing and promoting albums. Allworth Communications inc. Accessed 09 June 2010, http://books.google.co.ke/books?id=9SscaWItbmgC&dq=digital+music+marketing&source=gbs_navlinks_s Vertygo Team.2010. EMI Marketing Strategy: Analysis. Accessed 09 June, http://www.vertygoteam.com/EMI_marketing_strategy.php Wind, J., Wind, Y. and Mahajan, V. 2001. Digital Marketing: global strategies from the world’s leading experts. John Wiley and Sons. Accessed 09 June 2010, http://books.google.co.ke/books?id=Esrc5ZfQj3wC&dq=digital+music+marketing&source=gbs_navlinks_s Read More