GUM Music Company Case Study

Team 9
Kumar Aishwaryadeep
Anirudh Agrawal
Umang Jain
Vasudev
Pradeepta Chopra
Yogesh Bhalla

Agenda
Music Content Industry
Introduction to GUM

Approach & Methodology

Problems
Recommendations
Benefits to the client

Music Content Industry

Music Industry Value Chain:

Industry Revenue and Sales Trends

Creation: Creators, Composers, Performers

Development: Publisher
Packaging and Marketing: Production
companies, record companies, Agents,
Managers, Promoters
Distribution and Consumption: Wholesale,
retail, Online; Buyers, Listeners, TV, Radio
etc.

Trend in Physical and Digital Distribution

Key Takeaways
Global recorded music revenue witnessed a decline
from $24Bn in FY04 to $18Bn in FY08
During the same time, the number of units sold
increased from 2.96Bn to 3.10Bn
While there has been a constant decline in the
physical distribution of music, digital distribution has
witnessed a growth; and the trend is expected to
continue till FY14
Independent labels are gaining prominence in
the industry over the major 4 players

Introduction: GUM Music

Worlds largest music content company

Established: Germany; 18th Century
Headquarters: California, USA
Outsourced manufacturing and distribution
activities to third parties

GUM: Business Divisions

Music Publishing

Discovers &
develops
recording artists

Discovers and
develops song
writers

Sells artist and

music branded
products

Markets &
promotes their
music

Owns &
administers
copyrights to their
compositions

Multiple sales
points: Retail,
Performances and
the internet

Owns one of the

biggest catalogs in
the industry

Also operates as
licensing agent for
artists products

Clients: Some of
the renowned
artists

Sale of
CDs/DVDs

Live
Performances

Merchandising

Merchandizing

Internet
Sales

Licensing

Performance Metrics

Recorded Music

Several formats &

platforms for
music

Sources of Revenue

Project Approach

Preparing Final Deliverables

Data gathering and analysis
Problem
Identification
Management
Objective: Define
long term strategy for
GUM record
Company
Problem Statement:
What are the key
factors affecting the
growth of the music
industry

Understanding Music
Industry
Identifying challenges
faced by music
industry and client

Recommendations
to the client
Implementation
road map

Problems

Emphasis on
physical media
as the main
source of
revenue

Lack of early
talent
acquisition by
GUM labels

Loss of revenues

Piracy and user

expectations of
free content

Recommendations: Focus on Digital Format

Focus on the digital
distribution format

Music Portal

Eliminate
manufacturing
costs

Set up a music
portal for online
song download

Price songs
based on the
popularity

Pass the savings

on to the
consumers

Increase in the
number of
mobile handsets,
internet
penetration

Pay per use

Low cost of
distribution on
digital media

Integration of
Digital Portal with
Social Media

Offer
redeemable
reward points to
customers

Two way
communication
with fans and
gauge their
interests

Promote digital
distribution by
using
differential
pricing and
discounts

Increase in the
online
consumption of
music

Loyalty Management
Program

Leverage Social
Medial

Differential
Pricing Model

Target
promotional
activities through
Smartphones

Promote Talent

Use
Personalization
to offer customer
what he wants

iTunes has reached 575 million accounts

Each iTunes User Generates About $300 A Year For Apple
4.3bn songs were downloaded legally in 2012

Music revenue by format

Other
5%

CD's
86%

2005

Digital
9%

Other
4%
CD's
49%

Global digital revenues (US $ Billions)

2010

Digital
47%

4.7

4.8

5.1

5.6

4.3

2008

2009

2010

2011

2012

4
2

Recommendations: Engage in Live Music

360 Degree Deals:
-CD Sales have dropped and Digital Sales cant make up for the loss
1.2
1
0.8
0.6
0.4
0.2

Revenue from CD Sales in US

Revenue from Digital Music
Sales in US

360 degree deals or expanded/multiple

rights help music companies to capture
revenue streams beyond record sales
Include:
- merchandising,
-touring,
-live performances etc.

U2s album No Line On the Horizon sold

more than 5 Million copies worldwide,
grossing at least $60 Million in Revenue!
The following 360 degree world tour
grossed over $736 Million over the next
three years!

Merchandising:
-Merchandise has always been big business though, in the age of illegal downloads
and plummeting record sales, it accounts for an ever-growing percentage of income
-Merchandise sold in concerns gross into multi millions. If the company has multiple
rights with the band/artist, they get a huge share of these sales

Recommendations: tackle Piracy

Digital piracy broadly divides between peer-to-peer and non peer-to-peer channels.
In the US it was found that just 35 per cent of P2P users also pay for music downloads.

SOLUTION

Take down

Quick take down agreements with Google, Apple and Microsoft to remove mobile
applications from app stores that the industry disapproves of

Disruption

Spotify
Developing other music offering services
Proper implementation of DRM

Investigation

Taking steps such as Implementing a structured notice and take down program targeting
Googles AdSense and DoubleClick advertising networks

Lobbying

Involve other intermediaries, ranging from search engines and advertisers

Litigation

Hadopi
Digital Economy Act

Benefits for client

Tap into the ever growing digital music market to increase revenues
Reduce distribution costs by using alternate media

Targeting young talent early can help GUM enter into long term contracts for
exclusive rights of the performances of the artist
Use analytics on the portal traffic to understand the current trends in customer
demand for music

Thank You