Current Situation of Sony Entertainment Essay Example

which operates worldwide outside of Japan, and Sony Music Entertainment Japan Inc. (SMEJ), which operates in the Japanese market. Sony has changed its business segment classification from 2010, whereas in 2009 SME was part of all other income.

Increase in Sales

• Due to consolidation of Sony BMG However, when the consolidation is excluded, the sales would have decreased
• Due to lower sales of Sony Music Entertainment Settlement payment to copyright infringement Decline in Operating Income
• Due to copyright infringement costs
• Sony sold ‘’ The sony center am Potsdamer Platz in Berlin, for 10 milion yen less than the actual value Strategy 2009
• Focus on generating hits for both well-known and emerging recording artists
• Create new and Innovative business models for a music market in transaction
• Licensing deals with Sony Ericsson, Apple, Nokia, Vodafone, MySpace and Amazon.

The goal is to expand number of service providers who are offering music from Sony Artists and offer a diversified way of how the consumer acquires music. Sony United Initiative; Integrating its music into wide range of Sony products and related services Sony Music Entertainment 2010 Sony has changed its business segment classification from 2010, whereas music is one segment.

Increase in Sales

• Sales included the full year result of SME which was consolidated on the 1st of oct. 2008
• Withouth the consolidation, sales in music segment would have declined with a percentage of 5
• Releases of Susan Boyle, Michael Jackson and Ikimono-Gakari Operating Income Increased
• Declining expenses of the previous year Improved results of Sony Music Entertainment & Sony Music Entertainment Japan inc. (releases of the albums from artists above) Strategy 2010
• Focus on both well-known and emerging recording artists
• Increased
  

number of digital retailers offering music from Sony Artists The goal is to expand number of service providers who are offering music from Sony Artists and offer a diversified way of how the consumer acquires music.

Increase in Operating Income

Due to decreases in marketing, restructuring and overhead costs SWOT Analysis

Strengths

• Very popular artist base.
• More than 750,000 copyrights on songs.
• Strong online service.

Ability to cross sell with other Sony products.

• Many 360 deals with artists including management rights.
• Are able to fully utilize the fox tail effect with their many labels Weakness
• Try and make money by selling to consumers.
• Bad reputation for suing people who dl illegally.
• Depend on third parties to be vendors for them.
• Slow to adopt new policies to increase public image.
• Lack of innovation

Opportunities

1. Sony Entertainment Network streaming.
2. More sponsorships for tours.
3. Higher distribution through SEN.
4. Digital Market -Public image.
5. More intimate interaction with customers.

Full acceptance of social media and 360 deals that would allow them to reach out to the public

Threats

1. The Internet
2. Piracy
3. Lack of attention from consumers
4. No need for physical distribution channel.
5. Home recording programs.
6. Lack of regulation to
   

stop piracy around the world.

Chapter 3 Marketing

Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. (Kotler, 2010) Marketing Mix

According to Kotler the marketing mix is the set of controllable tactical marketing tools (product,price place and promotion) that the firm blends to produce the response it wants in the target market. Product CD: A tangible good that is mass produced or manufactured on a large scale with a specific volume of unit Brand name| SONY| Functionality| Music carrier| Quality| good| Packaging| Single/album/ double album| Digital Track A tangible good Brand name| SONY| Functionality| Music | Quality| good| Packaging| none| Price Physical Sales – CD’s, 14,99 (euro) per album Product Bundling Pricing Several products are combined in the same package. Double album etc. ) Premium Pricing Use a high price where there is uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Digital Sales – tracks 0, 99 (euro cents) per track Price Skimming Charge a high price because there is a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. . Place See chapter distribution Promotion Promotion is focusing on how the product is going to be communicated to the public.

There are different means for promotion, think here of: Personal Selling, Sales Promotion, Public Relations, Direct Mail, Trade Fairs and

Exhibitions, Advertising and Sponsorship. Sony Music Entertainment has advertising as main promotion. There has been a shift from the traditional advertisement tools as newspapers, magazines, television and radio towards the internet. As mentioned before, Sony increased licensing deals with other companies (Apple, Nokia, Amazon) to expand the number of service providers who are offering music from Sony Artists and offer a diversified way of how the consumer acquires music.

Another promotion tool is the Sony United Initiative whereas Sony is integrating its music into wide range of Sony products and related services.

Chapter 4: Current Distribution Model

What is the current distribution model of Sony Music Entertainment? Now, let’s take a look at the current distribution model. SME uses a lot of different distribution channels, but doesn’t really stand out from its’ competitors. Or should we say didn’t? Because for the largest part of its’ history Sony has been using the traditional channels, as did their competition. But this is going to change.

We’ll start off with the more traditional limbs of this incredibly varied distribution octopus within the company. Labels Sony Music Entertainment is the second-largest global music company (behind Universal Music Group). In order to make this function, SME has divided it’s recording catalogue among a large number of labels -ranking Columbia Records, Epic Records, RCA Records among them-, most of which owning the rights to several smaller labels as well. This fact alone provides a nice description of the value and size of Sony Music Entertainment.

Retail

Let’s start off with the oldest way of making money out of music: physical sales. Whether it’s sheet music, LP’s, cassettes, CD’s, or DVD’s, selling physical music has been a huge

part of the distribution model since we Sony Music Entertainment started out in 1923. And we’ve been buying them in bulk. But since the invention of the internet, physical sales have been dropping and are being replaced by digital downloads. But we’ll focus on these later on in this chapter. Next to these sales is a huge market for merchandise and memorabilia that focuses on a specific artist instead of the music performed.

Consumers want to express themselves more than ever and what better way is there to do this than through music? Clothing, utensils, toys and items even as inconceivable as coffins can be ordered with the logo or image of your favorite band or artist. Radio One of the oldest forms of music distribution is through radio. Ever since it’s invention in the late 19th century, the radio has been a huge success. And even today, this is still a huge market. Estimates varying from 87% to 98% of households around the world owning one or more radios tells us that we shouldn’t underrate its value.

Even though traditional FM- and AM-distributors aren’t producing huge amounts of positive numbers anymore today, the market for radio-distribution is still growing. Digital forms of radio are taking over from the traditional ways and more radios are being sold with an internet-connection every day. Internet-radio tends to sound cleaner (depending on the connection, obviously) and are transmitting on a global network enabling one to listen to his/her local radio station all over the world. Sony and its’ labels are pushing songs and artists on the radio, so they can be heard by a large audience.

And we can see by

the numbers stated above that these audiences can be huge. Television The same transitions are visible in today’s world of television as well. The internet is becoming a more powerful player in the way we consume entertainment (in this particular case music) every day and TV-producers have clearly acknowledged this, by adding internet connections to their latest models. Worldwide household penetration isn’t as large as its auditory counterpart (estimations ranging from 81% to 89%) it is still a mayor contribution factor in global distribution.

Every film, TV-show or –series is provided with supporting music and a soundtrack. And let’s not forget the power of MTV. Although they aren’t broadcasting as much music videos as they used to do in the late 20th century, it functions as one of the biggest influences on an entire generation, which is known as the MTV-generation today. Everyone remembers Sony’s legendary videos from the 80’s and 90’s and even today they are producing iconic videos to enrich their songs. SME uses television and radio mainly for marketing purposes today, but igitization of both media might be a step towards a new way of consuming music. On Demand-features are growing in popularity and digital streams can be very easily monitored, since it is no longer a one-way connection. Live performance As soon as record labels, including SME, noticed the decline in physical record sales, they went looking for other business concepts where a larger margin of profits could be made. Which was found in live performances. Concerts are growing in numbers, size, value and in some cases exclusivity to attract more visitors.

When at the same time, the ticket prices have skyrocketed as

well, arguably adding more value to the concert. Internet The internet has offered a lot of difficulties for the music industry. It has introduced a new way of sharing/copying music on a huge and incredibly fast scale. Digital files can be copied very easily and uploaded for everyone else to enjoy. For free. In theory only one person needs to purchase an album to serve a potential demand of 6. 8 billion people. But we mustn’t forget that the world wide web offers a huge variety of opportunities as well. Most important of all: global distribution.

Legal downloads are exceeding the amount of physical sales by a huge factor when shipping and production costs are nigh on zero (we have to take contributing factors like server space rental and internet access into account). The internet can also be used as a incredibly cheap and multifunctional distribution-, marketing- and commercial tool. Audio and video files can be streamed on websites of the artist in question, tracks and podcasts can be downloaded, subscriptions can be acquired for services and social networks can function as a marketing tool as well as a platform for the fans to stay in touch with each other and the artist.

And we’ve only covered a tiny layer of the numerous possibilities that are available today. Sony Music collaborated with Universal Music and the Abu Dhabi Media Company by creating Vevo, a YouTube channel where all the content of each music label can be found. These clips are preceded by commercials, making it a new revenue stream for the company. Sony Entertainment Network (Qriosity) But there is one distribution channel that sets Sony Music Entertainment

apart from all the other music companies today. In 2011 Sony introduced Qriosity, a subscription based music network that we know today as Sony Entertainment Network or SEN.

This network offers an On Demand-service for Sony Corporation’s (parent company of SME) music, films, e-books and videogames. It can be accessed via all of Sony’s internet-accessible systems: PlayStations, BRAVIA TV’s, Blu-Ray Disc players, Sony-Ericsson smartphones, Home Theatre Systems and VAIO computers, turning themselves into a huge competitor to Apple’s soft- and hardware i-series. This is a big step into future forms of music consumption and distribution. Sony has opted to endorse the subscription business model, but this could be enhanced to a pay-per-feature model or a one-time all-access acquisition version in the future.

But so far, Sony is a step further forwards in comparison to its competitors. Distribution Version 2 Arists Sony Music Entertainment has many big and emerging artists signed to its record label. Its artists include such hit artists as AC/DC, Britney Spears and Beyonce, while also having up and coming artists as Kings of Leon. By signing such high profile artists and keying in on developing newer artists, Sony Music Entertainment is able to exploit this to their advantage. Music Sales Sony has come to embrace the digital age of music.

They have signed deals with many companies including MySpace, Apple and Amazon in order to have many outlets for their digital catalogue. This has helped them keep their second place market share ahead of such companies as EMI and Warner Brothers. They have also started their own music subscription service called Qriosity which has begun the evolution towards Sony Entertainment Network, which will collaborate with

Sony’s other ventures to offer all of Sony’s media in one source. By having their strong artist selection they have been able to see an increasing market share.

Concerts Sony Music Entertainment highly promotes its artists and with the big names that they have signed it has been able to exploit their ability to sell concert tickets. Over the last three years Sony Music Entertainment has seen over one billion dollars US in concert revenue for the artists that it currently has signed. Being lead by AC/DC who from 2008 to 2010 on their Black Ice World Tour grossed $441,121,000 and sold over four million tickets. Tours such as Britney Spears Circus Tour also grossed well over one hundred million dollars to help add to the total. Music Publishing Sony owns or administers over 750,000 music copyrights.

They own or administer copyrights to songs from such artists as the Beatles, Bob Dylan, as well as newer artists including the Jonas Brothers and Taylor Swift. By having these rights, every time the song is publicly broadcast or used in film or television Sony is able to claim a royalty fee for this. Sony is also entitled to a cut of the sale of any media that is sold with one of their songs included in it, be it a dvd or a cd or a digital copy. With their current catalogue, Sony is able to create much revenue for a long period of time since unless it becomes public domain, Sony has the right for the life of the song.

OtherSony Music Entertainment is also involved in many other ventures in order to promote higher revenue. They manage some

of their artists and therefore gain an extra income from their artists. They are also a great consolidator, purchasing many smaller record labels, some they bring under the Sony Music Entertainment name, while others they leave in order to avoid alienating customers who like to support smaller labels. Some labels which are included but not limited to are Epic Records, Columbia Records, and RCA Records.

Chapter 5: Competitor Analysis

What competitors are existing and how are they doing (revenue, user, profit....? Due to the fact that there are no platforms yet, which are based on creating new experiences of music for consumers, the research is mainly based on existing platforms that offer content and allow users to share, recommend, customize experiences or integrate different services. The main problem though is the fact that these are all relatively new concepts, is the lack of information available. Spotify Description:Spotify is a stream based service offering over 10 million songs to members, available either offline or online. Members can have limited access to these songs, or can choose to subscribe to gain unlimited access.

The subscription model is as following; Premiun: € 9,99 per month - Play local files - Share with friends - Millions of Tracks - Spotify on your mobile -Offline mode for playlists - No advertisements - Unlimited streaming of music. Unlimited: € 4,99 per month - Play local files - Share with friends - Millions of tracks - No advertisements - Unlimited streaming of music. Free: no invitation needed - Play local files - Share with friends - Millions of tracks available instantly. Recently Spotify announced the implementation of applications; these applications can be designed by everyone

who wishes to do so.

Spotify provides the tools, in this case a HTML5 platform; so that everyone can develop an app and customize their own experiences. (spotify, 2011) Number of users:According to the Spotify blog, on march 8 2011 Spotify has reached 1 million paying subscribers in total. (spotify, 2011) Revenue: According to dittomusic, Spotify had a total revenue of ? 11. 32 million in 2009 and a total revenue of ? 63. 7 million in 2010. Also it states that in 2010 the revenue was divided as following; ? 45 million on subscriptions and ? 18 million on advertisement. (dittomusic, 2011)

Profit:As shown in the chart by dittomusic above, spotify has made a loss over the last two years according to dittomusic. In 2009 a total loss of 16. 6 million, and in 2010 a total loss of 26. 5 million. (dittomusic, 2011) Google Music & Google Plus Description:Google Music a new platform, that has been in the air since 16-11-2011. The basis is stream based, but does not work as other services such as Spotify. User upload their own catalogue (up to 20. 000 songs), and then these songs are then available via the cloud, on every device. Next to that users can download millions of songs on the integrated android market.

Google Plus is another new platform offered by Google. This social platform gives the opportunity to share information with other users. The platform are not integrated with each other yet, but this integration could work out great. (Google+, Google Music, 2011) Number of users:Google Plus has approximately 18 millions users, there are no numbers known for Google Music. (mashable, 2011) Graph on amount

of users Googe Plus (mashable, 2011) Revenue:Because of the fact that both the platforms provided by Google are still new, there are no exact numbers or reports available on exact revenue streams.

What is quite interesting though Google creates new revenue streams by using new advertisement opportunities. On Google Plus there is the opportunity to ‘+1’ on an advertisement, which is comparable to the ‘like’ button on Facebook. In this way users can share advertisements with friends, which is profitable for the companies; the advertisement will increase in value. (Read Write Web, 2011) Profit: Unkown. Last. fm: Description:Last. fm is a streaming radio service via a program called The Scrobbler, which allow users to discover new music, based on their previous behavior on listening music.

The radio is based on a customers likes and recommends and can share their recommendations. Next to that they can keep track of the developments around the acts that they like, and gain access to concert tickets for instance. (Last. fm, 2011) Number of users:Exact number unknown, last fact; 5,5 million unique visitors in November 2008. (Trechcrunch, 2008) Revenue: Annual Report Last. FM (Scribdd, 2009) Profit:As shown in the annual report above, Last. FM has made a lost in the period ‘08/’09. Respectively ? 2,837,977, with a ? 7,283,429 turnover in 2009 and ? 17,114,542, with a ? 4,193,981 turnover in 2008. Scribdd, 2009) Bandcamp: Description:Bandcamp is a platform that allows artists to sell music and merchandise Directly to the fans. Number of users: Unknown. Revenue:Although there are no annual reports found, there is something remarkable on the way they created a revenue stream; ‘The basic service is free – there are

no signup costs, and no subscription fees. We make money via a 15% revenue share on sales. ’ (Bandcamp, 2011) So every artist, signed or unsigned, has the possibility to sign up and sell music, or give it away. Profit:Unknown. Conclusion: It seems difficult for new services to book financial success.

Although there should be an opportunity to change that, since all the concepts search for new innovational revenue streams. If we could in someway combine these successful factors there is a possibility to create a sustainable and profitable revenue stream. For instance combining Spotify’s D. I. Y. application development with Google+ new advertisement system and a price that fits emotional value. Last Thoughts on possible Competitor adaptions Using the best ideas of our competition and creating new ones Artist-micropages like Bandcamp , MySpace and Facebook (Co-)

Create your own: Album – Kaiser Chiefs

1. Artwork – Kaiser Chiefs, Lorrainville (the band started out by doing this)
2. Setlist – Johan, Sting (hasn’t used this opportunity though)
3. Apparel – Vans, Converse, Cafepress, Books/biographies – Blurb Music Video – Arcade Fire, Ok Go! (html 5 needed)
4. Tattoos (Heeeell no…really? Ooooh Yes! ) – Create My Tattoo All ideas and forthcoming products can be used as official products later on, through a crowdsourcing competition comparable to Sellaband or Lego byME
5. Share: Latest play – Last. FM or Spotify combined with Twitter/Facebook Playlists – Spotify Location vs. Play – FourSquare Pictures – Instagram