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Live Nation

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by

Robert Matarasso

on 30 September 2014

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Transcript of Live Nation

Today's Agenda
June 2008 Strategy
What is Live Nation's Strategy
Early Supply Chain Structure
Industry Background
Change of Environment explained through Porter's five forces
Winners & Losers in the value chain
Value Proposition & Competitive Advantage
Recommendations & Analysis
Major labels did not have relationships with rock bands and feared that selling this new music would risk the goodwill of the older customers

Hundreds of small independent companies entered the industry
Focusing on inexpensive and plentiful supply of young talent
Low-overhead operations, a single hit could mean a lot of profits

In 1962 4 42 different labels were represented on Billboards album charts
The 6 largest record companies accounted for less than 50% of the Billboard albums
Connecting the artist to the fan by increasing shareholder value through the development of new ancillary revenue streams around the live music event and artist themselves. This includes leveraging their global concert leadership into a vertically integrated model.

Live Nation began developing an unique portfolio of assets that would contribute to their growing success as one of the world’s leading music and live music providers.


Presented to Yuan Li
September 2014

Thomas Brag
Matthew Chau
Daniel Gross
Robert Matarasso
Noah Seltzer
AJ Rashkovan

Live Nation

Face the Music
Live Nation's Resources
Financial - Revenues from Lines of Business
Organizational - Formal Organizational Structure, Divisions
Physical - Digital Audio Studios
Technological - MusicToday, UltraStar
Innovation - 360 Deals
Reputation - Suppliers
Live Nation's Capabilities
Intangible: Relationships

Artists: Goal is to connect artist to fans. Artists understand importance of tours = profit.
Concerts and promotions: Bought stake in France’s top concert promoter.
Venues: Deals to handle events internationally, and deals with concessions.

Live Nation's Core Competencies
Ability to create a vertically integrated model that better serves artists and fans.
Allows for 360 deal.

Rapino
Overall: Cost-cutting initiatives
Divest certain lines of business ✓
Trimming the workforce by 10% ✓
Downsizing operations (including artist deals) ✓
Expand efforts to sell CD, DVD & online recordings of its live concerts
Intense focus on: Booking live concerts ✓

Cohl
Expand from its current leading position ✗
Sign major artists ✗
Invest beyond its core live music business ✗

June 2008: Company and Market
Company in Debt:
Financial Instability:
Divest Operations
Divest from CD and DVD
Consumer trends
Decreasing disposable income in 2008
CD sales declining

Focus On Core Competencies:
Downsize some operations
Avoid expansion in new areas
Focus on live events entertainment
Keep signing more artists
Focus on Attractive Areas
Conclusions
Rapino's strategy is imperfect
Distribution is constantly evolving
Focus on core competencies
Focus on live events

Key Characteristics
Artists < Record Companies
Artists:
Relied on the strong distribution of Record Companies
Source of income was dependent upon Record Company sales: royalties
Bound by contract
Creative freedom was a function of popularity

Key Characteristics
Consumers < Record Companies & Traditional Retailers
Consumers:
Only option was to physically go out and buy the music they wanted to listen to
Subject to Record Companies keeping prices up ($12-$25 per album) by bundling songs into albums

MP3s: A Game Changer
Technological advances disrupt a century old supply chain structure
Free platforms such as Napster and Morpheus enabled consumers to cut Record Companies and Traditional Retailers out of the mix
Record Companies had to eventually integrate an online aspect to their distribution: ITunes Store, MusicNet
Digital Music Market is born

Modified Supply Chain Structure
What about Live Nation?
Like Radio, Concerts were traditionally designed to help promote album sales: they were a part of Record Companies’ marketing mixes
Live Nation, a Concert Promoter, as of 2005 shook things up
They backward integrated into roles traditionally taken on by Record Companies and forward integrated into roles traditionally taken on by Venue Operators

What about Live Nation?
Who Won?
Artists
1 option  3 Options (RC, Direct, Live Nation)
1 income model  Creative/Lucrative income models (i.e. Radio Head & 360 Deals)
Having options empowered creative freedom/integrity
Consumers
Could get the music they wanted for less money and in a more convenient way

Record Companies
Increased Competition
Live Nation
Less Barriers to Entry
Decreased Sales & Profits
U.S. Industry Sales shrunk
59 cents vs 46 cents per digital song
5 single downloads required when 3 was the average

Traditional Retailers
Multiple closings of Traditional Chain Music Stores & Independents
Big Box Mass Merchants used CD sales as a loss leader

Who Lost?
Rapino: Cost cutting strategies
Cohl: Expansion strategies
Trim Workforce
Trim Workforce
CD and DVD distribution related workforce
Refocus towards core competencies

Music Industry 1950-1960
Rise of Rock
Music Industry 1960-1980
Leveling the Playing Field

Small record companies got bought out
Industry consolidated to 6 major companies: EMI, Columbia, MCA, PolyGram, Sony, Warner Music

Each had multiple labels with their own musical identity and talent-management approach
They shared overhead, manufacturing, and distribution activities

1972 5 labels accounted for 31% of the charts, but 5 corporations distributed 58% of the output

Music Industry
1990-1999 - The Calm Before the Storm
First computer music experience in the early 1990s
Five major record companies: BMG, EMI, Sony, Universal and Warner Music Group
In 1999: Oligarchy controlling 86% of the U.S. album market
Revenues coming mainly from album sales and song licensing
U.S. record industry sales were at an all-time high of $14.6B in North America
$33B worldwide market

Music Industry 1999-2008
The Storm: Napster & MP3 Arrive to Conquer

Personal computers became popular
High-speed Internet connections
MP3 was introduced in the late 1990s
Napster an online program that enabled file exchange was launched in 1999
Music piracy became very common
In 2008, sales dropped to $10.3B in North America
$19.4 billion worldwide market

Tangible:

Concerts and promotions - acquired: concert productions international, and Spain's largest concert promoter, Music Today: merchandise, tickets, music downloads.
Venues - Ownership and has rights to venues: 125+ globally, 16,000 concerts per year, 1,500 + artists use Live Nation venues.
Merchandise - Owns three companies: Trunk ltd, Signatures Network, and Anthill Trading Ltd: adding to 200 master licences for artists.

Capabilities
Music Industry
1980-1990 Rise of the CD
1982  8 Chains accounted for 17.5% of U.S Retail music sales (by 1992 it rose to 57.8%)
1983  CD created by Sony and Philips
CD rise increases profits for companies
Rapidly became industry standard outselling LP records by 1988
Digital Audio Tape increases quality of recording
Full transcript