Introduction and historical background of the firm
Universal Music Publishing Group (UMPG) is one of the largest music publishing company in the world (Wikström, 2013). The history of UMPG dates back to 1934 during the formation of the American version of the Decca Records. UMPG was initially known as Music Corporation of America (MCA, Inc). In 1962, there was a merger between MCA and American Decca. The present UMPG came into existence when its parent company Seagram acquired Polygram. After the acquisition, the directors merged it with Universal Music Group. This happened in 1998.
As has been mentioned, UMPG is one of the largest music publishing companies in the world. The company owns more than 1 million copyrights and has business operations in more than 41 countries in the world. There are different artists affiliated to UMPG including Hunter Hayes, U2, Maria Carey, Prince Ashanti, Bon Jovi, Shania Twain and 50 Cent among other artists. However in 2006, UMGP was acquired by the French Conglomerate Vivendi (Universal Music Publishing Group, 2014).
Structure and functions of the firm
UMPG has a hierarchical structure in which the Chief Executive Officer Zach Horowitz and other senior managers make the top decisions for the company. Some of these decisions include the choice of artist that the company should recruit or which artist should the company investing more money on. The decisions on the day to day management of the company are made by the lower level managers.
Functions of the firm
- UMPG is a music publishing company and therefore owns and administers copyrights on behalf of its artists.
- The company offers music for sale in different formats like ad driven internet downloads and MP3.
The intellectual property the company represents
There are two main intellectual property represented by UMPG. UMPG owns and administers copyrights on behalf of its clients (Gammons, 2011). The other intellectual property that the company represents is master recording. Through this may not be necessarily owned by UMPG, it plays an important role in protecting the master recording.
The company’s clients
UMPG clients include songwriters and musicians. The company makes deals with songwriters, they then promote the songs composed by songwriters to musicians and other persons including advertisers who might be interested in the song. UMPG then issues licenses for use of the song and collect the licensing fees. The fee is then remitted to the songwriter and musician after the company has deducted its commission.
Company’s range of contractual relationships
Songwriters and composers have a relationship with UMPG that is defined by the publishing contract. The publishing contract stipulates the amount o advances provided for future earnings. UMPG can then determine the amount of commission depending on the royalty. There are different kinds of royalties including mechanical royalties, performance royalties and synchronization royalties. Mechanical royalties is obtained from the sale of music in different formats including CDs or downloads. These royalties are paid by record companies to UMPG. Performance royalties are paid by radio stations or event organizers. Synchronization royalties are paid to the publishing company when the music is used in a soundtrack or in a film. From the above, it can be seen that UMPG has contractual agreements with composers, musicians, TV and radio stations and any other platform in which its music can be played.
The company has a good relationship with collection agencies, artists and other publishing companies. The company pays for the services offered by these agencies. The company has a good working methodology in respect to copyright law and is very strict to ensure that the intellectual property of its artists is not infringed. This has enabled artist affiliated to it to benefit from royalties.
PESTLE analysis of the firm
PESTLE is an acronym for Political, Economic, Social, Technological, Legal and Environmental factors that affect the firm. This gives a broader view of the different factors that affect the operations of the company.
Many countries of the world always want to promote their local content and artists. This has led to regulations that require a certain percentage of all music played in radio stations to be from the local population. This limits the time for music produced by UMPG as its tries to propagate the music of its affiliate artists in different parts of the world.
Economic hardships like the recent economic crisis or any hardship that is experienced in any part of the world reduces the amount of disposable cash. This reduces the amount of money that can be used to purchase the songs produced by UMPG. Another economic issue is fluctuation in exchange rates. Since most prices are quoted in US dollars, when the dollar is strong when compared to the local currency of the consumer, then the consumer may find this expensive. This will reduce the demand for songs in this country.
This is related to the changing consumer tastes. The adaptation of pop culture that started in the west has increased the number of customers for UMPG. Furthermore, UMPG has also tapped on the ringtone market that has been expanding over the years.
UMPG has leveraged on technology in production and distribution of its music. For example, the firm has been able to use internet to offer music for downloads at a fee for customers. UMPG has also marketed itself in social networking sites like Facebook and Twitter. These sites have enabled the firm to reach many clients within a short period of time. UMPG developed a working relationship with Apple. Through this relationship, the two companies will develop synergies to help in marketing their products. The success of the iPod and iTunes will specifically help UMPG in marketing through the technological front.
Universal needs to respect the intellectual property of the affiliated artists. It is also important that the company does not engage in anti-competitive practices that may lead to litigation suits.
With the concerns of global warming and climate change, UMPG are always looking for ways of reducing carbon emissions in production and distribution (Bottrill, Liverman & Boykoff, 2010). For example, the company has invested in green production methods. The company also wishes to reduce the amount of waste generated from production and device better ways of disposing of the waste.
PORTER’s five forces analysis of the firm
This is an industry analysis tool that helps marketers to create shareholder value. The five forces analysis helps in determining the attractiveness of the market.
Bargaining power of suppliers
It should be noted that there are many artists that are located in different parts of the world. This creates many substitutes for customers. The suppliers therefore have to be creative in order to satisfy the needs of the customers. Furthermore, internet technologies have increased the power of customers in this industry (Kotler & Keller, 2006).
Bargaining power of customers
As has been mentioned above, internet technology has increased the bargaining power of customers in the music industry. Piracy of music has forced many artists to reduce their prices in order to attract more customers (Sirkeci & Magnu´sdo´ttir, 2011). However, the bargaining power of corporate customers is lower.
Threat to new entrants
Success in the music industry requires massive investment in selection of talent and maintaining the image of the artist selected. More money is needed in developing and maintaining a distribution network which can help in distribution of albums for sale. The massive investments required for success in this industry limits the entry of new competitors.
Threat of substitutes
In this industry, the substitute of paid music or downloads is online free streaming music and pirated music. Free streaming sites such as YouTube and other sites that have pirated content have provided choices and options for customers who opt to listen and download the music from these sites instead of purchasing them from the legitimate sites.
Although there is rivalry from other competitors, UMPG still controls a significant portion of the market. It has been difficult for the company to achieve product differentiation. Differentiation is achieved by offering music in different formats including DVD, CD, Blue-ray and other formats that can be downloaded online.
SWOT analysis of the firm
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.
- UMPG is affiliated to many artists. Most of the artists are doing well with UMPG. Due to this, it has become easy for the company to attract new artists in its staple.
- The high number of artists affiliated to UMPG means that the company has a higher turnover when compared to their competitors. This translates to higher productivity meaning that the company can have extra money to develop new products and services for both the clients and artists.
- UMPG songs are expertly developed and have smart discovery tools. This allows TV, advertising and film personalities to easily identify the music. Through this, UMPG music is easy to find thereby making their songs famous among the audience in different parts of the world.
- UMPG still does not have a strong system with which to curb piracy of the content. UMPG also does not have a way of limiting sharing of albums and videos between two or more customers. This has often resulted in lost revenue for the company and the artists.
- There is no system to monitor how UMPG music is played outside the advanced markets in the United States and Europe.
- The company has had management changes in UK office and other offices in Brazil and Australia. These changes have affected the operations of the company in these countries and have therefore had an effect on the stability of operations.
- There is an opportunity to leverage more on internet technology to increase its presence in different parts of the world. This can be done through development or acquisition of applications that offer faster track and full album downloads at a cheaper price.
- The company has an opportunity to bring in more high flying artists to its staple. This will improve the profile of the company and help it cement its market dominance.
- Threats of competitors who always want to take a bit of the market share owned by UMPG.
- Threat of piracy of content that reduces the amount of income received by UMPG and the artists (Kretschmer, Klimis & Wallis, 2001).
- Threat of government regulation in some countries that may outlaw download of some songs by some artists affiliated to UMPG. This will definitely have an effect on UMPG’s income.
UMPG is one of the music publishing companies in the world. The history of UMPG dates back to 1934 during the formation of the American version of the Decca Records. Over the years, due to mergers and acquisitions, the company has developed to the modern day UMPG. UMPG owns and administers intellectual property on behalf of its clients who include song composers and musicians. The company benefits from the royalties. The company has grown over the years to the extent that it is now a market force in the music publishing industry.
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