Assignment:
CASE: WARNER MUSIC GROUP'S DIGITAL STRATEGY
In 2008. Warner Music Group (WMG) designated Michael Nash as the executive vice president of digital strategy. His responsibilities included key initiatives such as EC applications, social commerce, and innovative online new music-based services and products.
The Opportunity
Nash played a major foie in the corporate strategy, strategic partnership relations. and expansions (e.g.. new projects) for WMG since 2000. The partnership portfolio Includes AT&T. Amazon.com, Google, Microsoft, Motorola. Verizon. and Sony Ericsson.
WMG. an independent spinoff of AOL, was one of the first brands to team up with You Title. WMG was also a pioneer in licensing their products to other subscription and ad-supported music services. Nash's early assessment of music distribution via the Internet was that, by having numerous partners to sell a product. WMG would increase its profits.
WMG is acquiring companies all over the world (e.g.. in June 2313 it acquired Russia's Gala Records Group).
By implementing this strategy. WMG focused on mobile services and online music sites. The company started with a small group known as Outrigger. The purpose was to see how well Outrigger could sell ads on WMG videos on YouTube. and on social networks. Hogs. or the artist's website. Thus. the strategy was to sell ads through Outrigger and share the revenue with the video site. This strategy differed from that of other companies in the industry who had licensing agreements with distributors or collected royalties when videos were played.
The Results
WMG's revenue grew substantially between 2005 and the first fiscal quarter of 2009. Digital revenues increased to 5184 million. equalling 205) of the company's total revenue. International recorded music revenue climbed 12.7% from the phor year quaver, and U.S. recorded music revenue reached 35%. WMG is and has been in the forefront in digital leadership among the major music companies since 2005. Showing the advantage of ecommerce over physical stores. Sources: Based on Learnmonth (2009). Warner Music Group (2008), and wmg.com (accessed June 2014).
Questions
1. Why did WMG change their distribution strategy?
2. Why did it develop a deal with YouTube? Is this a strategic alliance?
3. Why did WMG start its digital-oriented strategy?
4. Explore the ad arrangement with Outrigger. Does it make sense? Why?
5. Identify the activities in strategy initiation and strategy formulation in this case.