Assignment
CASE 13.1: 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 role in the corporate strategy, strategic partnership relations and expansions (e.g., new projects) for WMG since 2000. The partnership portfolio includes AT&T, Amazon, Google, Microsoft, Motorola, Verizon and Sony Ericsson.
WMG, an independent spinoff of AOL was one of the first brands to team up with YouTube. WMG was also a pioneer in licensing their products to other subscription and ad-supported musk 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 2013 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, blogs 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 S184 million, equaling 20% of the company's total revenue. International recorded musk revenue climbed 12.7% from the prior year quarter, and U.S. recorded music revenue reached 35%. WMG is and has been in the forefront in digital leadership among the major musk companies since 2005, showing the advantage of e-commerce over physical stores. Sources: Based on Learmonth (2009). Warner Music Group (2008) and wmg website (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.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.