Emi Group Plc Case Study

SWOT Analysis of EMI Group with USP, Competition, STP (Segmentation, Targeting, Positioning) - Marketing Analysis

EMI

Parent Company

EMI Group – Owned by Sony

Category

Music Publishing and Recorded Music

Sector

IT & Technology

Tagline/ Slogan

Where Songs Live

USP

Has over 100 recording labels featuring some of the greatest rock and pop artists

STP

Segment

Music CDs and recordings

Target Group

Youth and college going population that are highly influenced by music

Positioning

Associated with some of the best artists and compositions in the industry.

SWOT Analysis

Strengths

1. Strong global presence with a market in over 50 countries
2. World’s largest independent music company with a good market share
3. Its financial performance has shown a strong growth in the past few years
4. It has a world class artist roster that has been helping it increase its sales on a regular basis

Weaknesses

1. It has a very weak presence in the US market where there is a potential to grow
2. It has been slowly losing market share to other major global players even in the UK
3. It has shown very reduced performance in the past few years

Opportunities

1. Expansion into different countries would help them maintain their market share
2. Exploit the digital market space by selling songs online
3. Joint ventures have helped EMI in the past and the company should explore such opportunities to enter new markets

4. The company can organize special searches to hunt for potential talent that it can collaborate with

Threats

1. Limited growth of music industry with the onslaught of piracy in digital content
2. High competition in the industry
3. Poaching of good artists by the bigger players in the market

4. Peer sharing sites like Napster which allow for easy download of songs without the company getting any revenue from the sale

Competition

Competitors

1. BMG Music records
2. Warner Brother’s music

3. Universal Music

The table above concludes the EMI Group SWOT analysis along with its marketing and brand parameters.

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Unformatted text preview: EMI GROUP PLC “P.. or Not to P..” Dividends‘ dilemma Case study Introduction to the case EMI Group PLC • EMI was one of the four largest record companies until 2012 (Eric Nicoli was CEO & Martin Stewart was CFO) • Case’s main milestone: 18th April 2007 - EMI’s earnings announcement “EMI’s Revenues are expected to drop by more than 15% with loss from operations”. • EMI’s CFO, Martin Stewart, is facing to this worse forecast and to all challenges this announcement will bring in: Which strategic Corporate Finance and strategic Investment decisions must be taken? How to make the right decision in term of Dividend policy? How to manage the shareholders & Market expectations? Time line Major Events Plastic record CD record Digital audio through Internet & MP3 players & devices The Beatles, Iron maiden, The Beach Boys, … ColdPlay, R. Williams, N. Jones… A.Winehouse Beyoncé, J. Blunt… EMI’s Earning announcement CFO’s strategic management Martin Stewart (EMI’s CFO) Eric Nicoli (EMI’s CEO) with Steve jobs FY2007 Snapshot EMI’s health Consolidated Income statement & Balance sheets Analysis: 2007 forecast Negative profit from operations (loss) EBITDA 40% decrease (compared to 2006) Management team must react with a new financial strategy in order to respond to incomes decrease CFO’s Change Management CFO’s strategy 1/3 As CFO, Martin Stewart’s contribution to successfully managing EMI was • Strategic Investment decision: Restructuration project launch This restructuration at first will cost GBP 150 Million launched in FY2007 with ROI in FY2008 and should save GBP 110 Million per year • Strategic Corporate decision: Apple & EMI collaboration ITunes will sell EMI’s records in digital way without DRM and with high quality sound (free-from digital-rights & sell at a 30% premium high-bitrate AAC format) • Strategic Dividends policy decision: No more dividends payment (detailed on next slides) Dividend’s Dilemma CFO’s strategy 2/3 Dividends’ dilemma applied to EMI • Historical data: EMI has always paid 8p as dividends to shareholders; which represented GBP 61-63 Million of dividend payment CEO & CFO lost their credibility since theirs twice wrong announcements (6-10% drop announced in January 2007 and finally15% drop estimated in April) • Dividends’ impact on main shareholders: If we look to the 3 main shareholders which represent 30% of the total, they care mainly of the Firm’s health and growth more than dividends payment. Fidelity International Ltd. is an investment company which has high assets’ growth expectations Wellington Management Company, LLP is an investment company which expects a high level of strategic management Deutsche Bank AG is a Bank which expects a high Return Over Investment • Dividends’ impact on Market place: Market has always saw negatively the decrease of Dividends payments Decreasing payments is a strong signal that EMI is in troubles and has financial difficulties. The Market responds to this signal by decreasing market value (shareprice fall) Dividend Decision CFO’s strategy 3/3 Dividend policy constraints • EMI has always paid 8p as dividends The forecast of payment of 8p as dividends shows to Martin Stewart two great impacts for FY2008: Cash will be reduced by GBP 63 million Forcasted net profit will decrease to GBP (110) million in FY2008 In regard of the company's bad health; Martin Stewart needs of this amount of GBP 63 million for restructuration investment project and he will decide to not pay the dividends. EMI’s conclusions in FY2008 Results in FY2008 Impact of Management decisions (and global Music-Industry Economy) • Global Music-Industry The decline of physical sales touched all the music industry and not only EMI, 2007 forecast for music industry was 20% drop (1) more than EMI which had a 15% drop. • Success of restructuration plan The final cost of the plan was GBP 125 million instead of GBP 150 million, The plan permitted to remove GBP 110 million from annual costs base. • Collateral damages The plan concerned almost entirely EMI’s recording division. It impacted the quality of the artists care which became poor. (Some artists began to leave this music label), With the shareprice fall, EMI risked a take over: Instead of Warner Music, its was finally Terra Firma investors who bought the firm in August 2007 for GBP 3.2 billion, Terra Firma was a diversified investment group which didn’t knew and didn’t understand Music-industry, The financial health of the company and market value continued to depreciate until 2012 when the company was dispatched and sold to the competitors (warner and universal). (1) from Soundscan calculation for physical music market 2007 What If … Our proposal What if we were EMI’s CFO in 2007 year time. • Restructuration in an other way EMI should focus the main part of sales on digital and not on physical supports, EMI should do a more drastic plan on management layers but also reducing supply chain of recording division. • New funds for Investment EMI should take loans or rise bonds for investments, • New Ideas & New Investments EMI should invest in Digital Marketing for all artists, albums & songs “in a digital way” (creation of a Digital Brand), ITunes sales without DRM is the first step, EMI should invest in music sharing platform and Music On Demand solution with music video streaming, EMI should diversify sales and should innovate with a complete catalog offer with a monthly rate (Providing to customer a new experience by enjoying 1M songs freely with a monthly rated access to the EMI music data base). • Dividend policy: Same no dividend payment policy, Purchasing policy (taxes benefits and confidence signal given to Market). What else… Digital music Future An inefficient digital Business model • What’s wrong? It appears clearly that Music industry is still currently looking for a valid business model. The two separate structures seen in EMI divisions are still remaining nowadays in global music industry: Recording business model is based on physical sales Publishing business model is based on long term contracts with potential songwriters. • “Soundcloud” (or other music social networks) as source of new talent ? A way to reduce cost is to ensure that we invested in the successful song, songwriter or singer. A new wave of social music sharing community appears recently in the model of “Soundcloud” People share songs, text and music in a social way; This social sharing model can be the new source of talents and successful songs for mass customers, instead of producing on potentiality, choosing as survey the preferred talents from those social networks should be a winning game. • “Netflix” business model applied to Music-Industry ? If we try to look to other digital brands (movies & video streaming) a new business model is growing with great benefit potential Netflix is one of the next decade winners on Movies Market This business model should be applied to Music brand in the same matter Thank you APPENDIX References Web & researches : • Contextual References: http://en.wikipedia.org/wiki/Digital_rights_management http://en.wikipedia.org/wiki/EMI http://fr.wikipedia.org/wiki/EMI_Group http://www.universalmusic.com/ http://www.nytimes.com/2006/06/16/business/worldbusiness/16music.html https://www.netflix.com/ https://soundcloud.com/ … • Financial References: Corporate Finance, 3rd Ed. - Jonathan Berk and Peter DeMarzo http://en.wikipedia.org/wiki/Dividend_policy#Irrelevance_of_dividend_policy http://fr.slideshare.net/saravanan25/dividend-policy-3864680 http://fr.slideshare.net/PoojaNarwani/dividend-policy-9334231?next_slideshow=1 http://www.investopedia.com/walkthrough/corporate-finance/5/dividends/policy.aspx http://www.investopedia.com/articles/stocks/07/dividend.asp http://fr.slideshare.net/shengvn/topic-5-dividend-policy-presentation http://fr.slideshare.net/sagar_sjpuc/dividend-decisions-presentation?related=1 … ...
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