Emi Group Plc In The Music Publishing And Recording Industry Essay

Music and recording industry present interesting development due to the introduction of new artists and the development of new music genre, to name a few. In addition, the industry also experiences significant challenge due to the advancement in digital technology that drives the industry to find appropriate ways in winning the competition. The challenge occurs since there is a difference circumstances in the competition of media industry where previously the existence of new media does not eliminate the old media. The existence of commercial radio, for example, does not kill the print media like magazines and newspaper. Similarly, the existence of television broadcasting also does not eliminate the existence of radio and newspaper. In many cases, the television broadcaster also owns radio and newspapers companies to complement their media business. However, the situation may be completely different in the digital age where the existence of internet and the development of digital technology like file compression (MP3, mpeg, and file-sharing technologies etc) could completely kill the old model of music distribution such as compact disc. The so-called MP3, often refers to MPEG-1 Audio Layer 3, is an audio encoding format that reduce the file size from tens of megabyte (when using WAV or compact disc format) into less than 5 Megabyte (MB) in MP3 format for one same song. Audio Galaxy and Napster are two companies that employ file-sharing technology that enables their members/customers to exchange their music or video with others members/customers (Karp, 2007). Immediately, the invention of new audio encoding format increases the sales of portable digital music players like iPod. Coupled with the increased international internet bandwidth, the exchange of MP3 files rises significantly. A number of websites that enable users or music lovers to download the desired songs in MP3 format also rises. Despite the attractiveness of MP3 technology for audio, MP4, and MPEG for video, the technologies causes severe violation of copyright as downloading music and video without paying royalties to the owners/singers of the music is considered as piracy in digital world/domains. Concerning the challenges in the music and recording industry, this paper will discuss about Emi Group plc, a giant in music and recording industry. In particular, there are several issues including the identification of strategic choices that EMI performs, EMI and its critical success factors in competing in the industry within the last five years, and the use of appropriate management concepts in evaluating the suitability of EMI’s current strategies to deal with future competition. 2. Aim and Objectives The objectives of this paper are to analyze current and future positions of EMI Group plc in the music publishing and recording industry. Systematically, we can derive the objectives into four points. First is to analyze the strategy of EMI Groups plc that positions the company in the music and recording industry. Second is to use the appropriate research methodology, this paper is to assess EMI Group plc and its critical success factor in the last five years. Third is to use the relationship of research approach, deductive, quantitative to explore key resources and capabilities of EMI in the next five years and assess whether they can create sustainable competitive advantage. And fourth is to use the non-participant observation method, collecting data and analyzing qualitative information from journal, books, magazine and online materials, this paper is to adopt the management concepts to evaluate the appropriateness of EMI’s current strategies for the future. 3. Porter’s Five Forces This section will discuss Porter’s five forces on EMI Group the recording industry which details the threat of new entrants, power of buyers, power of suppliers, rivalry among existing competitors, and the threat of substitute products for market place organizer or transaction service provider industry satisfy following diagram: Figure 1 Diagram of Porter’s Five Forces Source: Porter, 1998 3. 1 Rivalry In music publishing and recording industry, competitive advantage plays a significant role in winning a competition. This is because it represents not only the greater benefits in terms of products but also in other Ps of marketing mix (place, promotion, and price). The possession of specific competitive advantages increasingly important since nowadays, customers use emotional side than rational side when decide which products or services they want to use (Manjoo, 2003). The rivalry in recording industry is quite intense since EMI Group does not only compete with similar company like Universal Music Group, Sony BMG, and Warner Music Group but also illegal distribution both in traditional and web-based distributors through several kinds of file-sharing program like Napster. Napster becomes the catalysts of online music service (Rupley, 2003). In order to prevent the distribution of illegal copy of music, Hodges Shaw and Brian B Shaw (2003) says that government has persuaded users regarding importance of not using file sharing for copyrighted materials over the Internet by considering it as illegal actions. 3. 2 Barriers to Entry One of common barriers to enter a new market is brand loyalty or in terms of multinational business, the main barrier could be the nationalism. In music industry, one significant challenge that continues gains popularity is iTunes, a legal web-based music distribution from Apple Company. In music industry, especially regarding the competition between EMI Music and p2p companies and iTunes, the brand loyalty is obvious since the fever for iPod products has driven the use of iTunes to download legal music (Manjoo, 2003). The entry to some markets like educations gets fiercer as Jason E. Lane and Margaret A Healy (2005) revealed in their article File Sharing, Napster, and Institutional Responses: Educative, Developmental, or Responsive Policy that file sharing (including music, video, and file sharing) has been parts of students activities. They usually use the internet to share their favorite music and movies illegally. In addition, Scott (2001) and Dong et. al (2002) reveals that file sharing remains a popular services due to their offering free downloading music and video. 3. 3 Products Substitution Impact of product substitution is possibly the most overlooked factor although its impact is damaging. Therefore, it is imperative that business must not only look at what the company’s direct competitors are doing, but what other types of products people could buy instead. The products substitution for EMI Group is the introduction of various digital formats like MP3 and MP4 that easily downloadable that enables customers to convert the CD format to MP3 and distribute it by e-mail. This is because EMI Group mostly still relies on the distribution of music in CD format that they believe is still better than others do. Figure 2 Music Format Source: RIAA, 2006 3. 4 Buyer Power In music distribution and recording industry, there are some factors that influence buyer power including size of buyer (larger buyers will have more power over suppliers), number of buyers (when there are a small number of buyers, they will tend to have more power over suppliers), and purchase quantity. 3. 5 Supplier Power Concerning the supplier power in recording industry, we find that digital format developer that invent MP3 and p2p technology continue gain popularity that further drive the customers to increasingly avoid the use of products distributed by recording companies (Manjoo, 2003). 4. EMI Groups plc Strategic Position in Music Publishing and Recording Industry Realizing the fierce competition that occurs in the music and recording industry, EMI Group develops several strategies such as the selection of new talents that will hit the market and develop sustainable distribution strategy to speed up the existence in new market. Among the distributions system, EMI Group appropriately conduct joint venture with foreign companies in order to smooth their distribution. One of them is with EMI Televisa joint venture that helps EMI Group to distribute Celestial and other English language album (EMI Group, 2006). The decision to conduct joint venture is a good strategy to be implemented for EMI Group since it is a model in business that composes of two or more enterprises that join hand-in-hand to increase their competitive advantages. In this scheme, joint venture is somewhat similar to partnership but joint venture is derived from one business transaction. Joint venture is preferred because it can help companies to divide potencies, reduce threats, and raise competitive advantages in the market. Joint ventures can be formed as separate business units or cooperation between businesses (â€Å"Corporate Venture Strategies†, 2001). Developing a joint venture properly can obtain many benefits and advantages, such as dividing expenses and risks, enhancing right of entry to monetary resources, admission to innovative knowledge and consumers, and admission to new decision-making performs. Moreover, companies are able to have some bearing on structural development of the business. Conduction of knowledge and skills are also accomplished easily (â€Å"Corporate Venture Strategies†, 2001). 5. EMI Strategic Choice EMI Group plc is a well-known company in music and recording industry. The company is currently perceived as the fourth largest recording company in the world behind Universal Music Group, Sony BMG, and Warner Music Group. The company main business is the distribution of compact discs, videos, and other formats under the auspices of their subsidiaries and partners including EMI Records, Capitol, and Virgin (Yahoo Inc, 2008). The label company is behind the success of many famous artists such as Norah Jones, Lenny Kravitz, and The Beastie Boys. Currently, the company also handles more than one million songs. The strategic position of the company has attracted many larger companies such as Warner Music Group (WMG) to takeover EMI Group plc. Although many acquisition attempts, the company finally bought by Terra Firma, a private equity firm, for $4. 9 billion in 2007 (Yahoo Inc, 2008). 6. EMI and Its Critical Success Factor The winning strategy of EMI Group exists since the company is suitably conducting several strategies that benefit the company in the long term. One of popular strategy is the decision to outsource their CD manufacturing in Australia. This decision occurred in 2004 where EMI Music and Warner Music conduct agreement with Summit Technology Australia Pty Ltd to own CD Manufacturing business together (EMI Group, 2006). This strategy provides great benefits for EMI Group since the company significantly obtains costs reduction and helps the company to insulate the business from the effects of changing volumes. Figure 3 Reasons of Outsourcing Source: Outsourcing World Summit This is in line with the general benefits of outsourcing where costs reduction becomes the main issues that companies perceive. When discussing the outsourcing business model, the images refer to advantages that organizations obtain, especially refers to costs reduction. However, the benefits of outsourcing do not merely the cost reduction. Figure 3 shows six main reasons of carrying out outsourcing in an organization like EMI Group according to Outsourcing World Summit. Similarly, to costs reduction, outsourcing also provides benefits of helping the company to focus on core competencies. In theory, outsourcing is only used for delegation of non-core activities concerning the mission statement of the company. Nevertheless, many corporations outsource some of their core functions to gain more value in competitive advantage. Furthermore, many if an organization is able to develop a good relationship with its outsourcing partner, the long-term effect would be a sustainable competitive advantage. Another critical success factor is the decision of EMI Group to take benefits of digital technology. Previously, the company relies on tradition supply chain as shown in the Figure 4 below. In traditional supply chain (figure 4), we witness that recording companies make huge revenue and thus the profits from the two elements (in blue boxes). However, this model soon changes considering technology advancement in music like MP3 that immediately spawned illegal peer-to-peer music download over the Internet. Concerning the issue, coupled with wide coverage of high-speed Internet access, recording labels realize that they should change their supply chain to adopt the advancement in information technology as described in the following section. However due to the benefit that digital distribution provides, the company also offers the digital option for the supply chain (Figure 5). By developing the digital distribution, the company starts receiving significant growth on digital revenues. In 2006, digital revenue contributed about 8. 5% of total Group revenues. In addition, digital revenues also experienced significant growth by 78. 2% in 2006, providing more opportunity to receive more revenue from this technology (EMI Group, 2006). In this web-based supply chain model, we witness that recording labels are massively legalize licensing strategy that significantly fire up a legal digital music subscription (in contrast to Napster that was illegal). 7. Key resources and capabilities of EMI in the last Five Years and Suitability, Feasibility, and Acceptability Concepts There are several key advantages and resources the company possessed within the past five years. First is EMI Music keep finding new talents that bear success in UK and North America, in particular, and in the world, in general including Letoya, 30 Seconds to Mars. This strategy represents the feasibility of strategy taken by EMI Group since competitions between recording industries is mainly regarding the artists that the company manages their music creation. Second is the success of current managed artists including popular artist such as All Saints, Keith Urban, Norah Jones, Robbie Williams, and Depeche Mode. This artist management represents the suitability to manage the popular artists and release the unpopular one. Meanwhile, EMI Music Publishing successfully finds songwriting talent that result in the attractive performance revenues that represents the acceptability (EMI Group, 2006) 8. Conclusion In the basic marketing management study, four factors characterize the successful marketing; they are product, place, promotion, and price. In the recording industry while product represented by the artists, distribution or place factor also provides significant contribution to the company. This is in line with O’Brien and Springman (2004) suggestion that say companies should balance supply and demand since focusing entirely on the supply side may result in unnecessary capital expenditures, inventory investments or suboptimal solutions. Concerning the challenges in the music and recording industry, this paper has discussed about Emi Group plc, a giant in music and recording industry. 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