STRATEGIC ROADMAP November 2017
1 CONTENTS
P3 RECAP P5 CHALLENGES P12 ANTIDOTES P14 VISION P23 ACTIONS P38 NEXT STEPS
2 3 RECAP
THE OBJECTIVE:
Our objective is to create a vision, strategy and roadmap for Global Recorded Music which will enable us to inspire the organization and address the key challenges facing us today, and in the future.
THE PROCESS:
The Mirror: a chance for senior leadership to share their thoughts on our opportunities, challenges and operating realities, which then informed the discussions about priorities going forward.
The Offsite: The Mirror, along with insight gained during the FY18 budget process and ongoing discussion with WMG Corporate / The Board, formed the basis for discussion and stimulus at the offsite meeting in mid October
THE PLAN:
This document summarizes the key conclusions, ideas and outputs.
4 CHALLENGES
5 CHALLENGES
We’re not fully optimized for a streaming-led business where market share is the only metric that matters
As competition for artists and rights intensifies, so does our risk of disintermediation
Our devolved structure makes us strong locally but restricted globally
The ability to understand and interact with consumers has not been developed across the organization
Our workforce and our culture have not fully evolved to anticipate the changing market
6 CHALLENGES
We’re not optimized for a streaming-led business where market share is the only metric that matters
Scale & volume Genre & geographies
“When more is more, how do we manage a volume “Urban is taking over the world right now, the numbers are fucking business AND keep what makes us special?” staggering. We are not setup to be an urban company and we need to get on this”
“What is the strategy to scale our business in an access model?” “We’ve just signed a pretty hot UK rapper because we have to mirror the shift to the urban scene. Teenagers ‘pop music’ is urban, rapper now” “We make our living delivering hits. That’s the only thing there’s no bullshit around, you have hits, or not. Now we have to look at our definition of what’s a hit.” “There’s a big cultural shift towards Latin music. It’s future is incredibly bright. How do we best support that and not miss out?”
“Part of Warner’s identity has been ’less is more’. In streaming based business ’more is more’. We need more priorities in a streaming world, need more guidance”.
7 CHALLENGES
As competition for artists and rights intensifies, so does our risk of disintermediation
Platforms or poachers? Indie & tech-based alternatives No clear value proposition
”Threat number one is the streaming platforms “Artists are more demanding […] the internet “We have to keep working on a suite of services becoming the 800 pound gorilla and is open for everyone, in a streaming world we can offer to artists to show value. It’s part of disintermediating us.” artists don’t need a record company” why people go with a global company”
“How to deal with potential disintermediation. “Why Warner? What’s our unique value Foresee problematic relationships with our proposition? Our answer is not compelling partners” enough”
“We have to be careful, not allow Apple and “How to sell ourselves to the artist community? Spotify to use all that data as a wedge between Tools, culture etc” a label and an artist or manager. If they can paint a more accurate picture it gives them an “What is the core proposition? Everything is opportunity to question the value we add” about amplification. That’s why an artist joins Warner Music Group.”
“Streaming platforms and tech companies speaking our agenda – they have strong, visible leadership”
8 CHALLENGES
Our devolved structure has left us strong locally but restricted globally
Need for strategic vision, clarity and Co-ordinated execution is vital Infrastructure has not kept pace with alignment operating reality “There’s a necessity to be global in a growing “It’s stating the obvious to say we need the “I want to walk away knowing we have a global market vs fighting to survive locally” real fundamentals taken care of” vision” “Now you can promote music throughout the “The tools we have are quite clumsy” “The word is focus. Alignment, all being on the world maybe there is a big opportunity to work same page. Focus and go for it. Stick to the more globally” “We really struggle from a tech point of view, plan.” “I’d like to think we can become as efficient as a our systems are bad, our access to data is bad. This becomes more of a threat every day.” “Success is everybody with the same perception, global entity as most of us are in our local the same takeaways, the same spirit.” entities” ”Warner Music Group has overslept on IT […] all our competitors are ahead “It’s important that we identify what’s culturally “We need more global co-ordination and global of us. and commercially important to us and we agree understanding.” a smart way forward” “Better global co-ordination” ”It would be great to share learnings on a global basis, learn more from mature markets, what “GPS comes up every conference and still steps can we skip, what mistakes can we everyone thinks it’s grossly inadequate” avoid?”
9 CHALLENGES
The ability to understand and interact with consumers has not been developed across the organization
Impacts marketing & promo of core business No predictive process Playing catch-up on data
“We’re lost as marketeers – there’s a problem in our “What do we think is the chapter that has not Most exciting is how data can help us reach to the consumer” been written yet for the music business? Can we understand the consumer, how they want to get ahead? E.g. What will the business be like consumer our music, and how to target them” “We need to make sure we are still current in how when everything is voice activated?” people consume, how we amplify.” “We need better data so we can make better marketing and A&R decisions […] all our “We must produce the best possible content, with competitors are meaningfully ahead of us” the artists, get so close to the consumer that it fits like a glove” ”We are drowning in data. Drowning rather than being able to see a clear picture of what you “Direct to consumers, that’s the big play. If you have need to do right now” direct access to 500m people, that’s worth something” “There’s no data science capability. In the absence of data science opinions rule supreme”
10 CHALLENGES
Our people and our culture are not optimized for an evolving, agile future
Changing skillsets A compelling proposition and experience
“Can our people adapt to the future? How will our structure look in “You have to empower these people, follow them, give them the the future? How do we educate, develop and train people? Do right tools, give them an opportunity to exchange ideas” they have the skillsets required in a world dominated by streaming? I’m not sure.” “We need to own our weaknesses and challenges, rather than allow them to be excuses” “Can’t have enough creative people in your business” “The value of the company is our people […] a growing market for “It’s the people, moving people out, bringing people from the talent requires a culture that is of value to the young guys and girls outside-in – need new ideas” we need”
”Transforming to a service centre for artists requires a shift in roles “We’re hiring more in the digital space […] one of our top priorities, and expertise. Storytelling, brand strategy, virtual reality, mixed how we deal with people, what we offer, the culture, benefits and reality, social media, data insight.” lifestyle”
11 ANTIDOTES
12 CHALLENGES
Five challenges Five antidotes
We’re not fully optimized for a streaming-led business where market share is the only metric A streaming-first organization that matters
As competition for artists and rights intensifies, A relevant, irresistible proposition to so does our risk of disintermediation artists
Our devolved structure has left us strong Clarity and alignment on global strategy, locally but restricted globally priorities, communication and execution
The ability to understand and interact with Harness data and insight to make us a consumers has not been developed across the more consumer-driven organization organization
Our workforce and our culture have not fully A workforce and environment built for evolved to anticipate the changing market Warner's agile, always-evolving future
13 VISION
14 VISION
A common thread running through our strategic priorities is the need for a clear vision of ‘why Warner?’ – what makes us unique, important and successful. We need this so that we can clearly articulate WHY we’re vital to our stakeholders – employees, artists, partners, consumers - and also help us prioritize WHAT we should focus on in order to preserve and grow that advantage.
But our vision for Warner can’t just be an ‘executive summary’ of the strategic priorities, because these will change. New challenges and opportunities will always emerge for our business.
Instead, our mission needs to focus on the more fundamental DNA of what already makes Warner special today, combined with what would make it even more powerful, more successful, more future-proof tomorrow. So this is based on our aspiration as well as our reality. If we do that, however our industry is disrupted next, we’re ready to win.
Finally – a word on our inspiration. We talked a lot about Southwest Airlines’ success formula and we liked its simplicity, the fact it didn’t jam in EVERYTHING about the company and even deliberately left out some things that were important but maybe not distinctive, e.g. safety.
15 This is our ‘Safety’ – something we don’t want to put in the final version of our ‘winning formula’ but include here as it has to be a priority for us internally. We can’t be successful without this. We know we’re playing catch-up on certain aspects of it, but one day we’d love to be confident enough that we can regard it as hygiene rather than a differentiator.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
16 Our people are essential to the success of our organization. There’s a strong feeling that Warner attracts particularly committed music people which means they have both expertise and credibility. We all felt that if we could foster a more innovative, risk-taking culture, and bring in people who were from a range of forward-looking industries, that would add up to a potent combination, so this wording reflects our stretch objective on top of what we feel we have already.
NOTE: We want to spend more time on this section of our strategy. This subject is so important that we’re going to dedicate time at our next offsite to identifying what it means to “Be Warner” and then bringing that to life.
PIONEERS WITH CREDIBILITY AND CONVICTION We’re a diverse organization of dedicated, inspiring, collaborative experts who move fast, disrupt and deliver.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
17 Music Culture is seen as a real USP for us. It’s something we’re uniquely placed to understand versus some of our newer competitors. It means we have the inside track on what makes artists tick as well as giving us insight into what’s coming next before anyone else.
PIONEERS WITH CREDIBILITY CLOSEST TO MUSIC AND CONVICTION CULTURE We’re a diverse organization of We shape music culture because we dedicated, inspiring, collaborative understand it better than anyone else: experts who move fast, disrupt and we champion artists, we listen to deliver. consumers and we anticipate trends.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
18 On top of the local expertise we deliver, we are also best-placed to create fast, friction-free global amplification due to our structures, systems and collegiate way of working.
PIONEERS WITH CREDIBILITY CLOSEST TO MUSIC LOCAL SUCCESS, AND CONVICTION CULTURE GLOBAL IMPACT
We’re a diverse organization of We shape music culture because we We seamlessly mobilize a powerful dedicated, inspiring, collaborative understand it better than anyone else: global amplification network behind our experts who move fast, disrupt and we champion artists, we listen to artists, creating worldwide results from deliver. consumers and we anticipate trends. local momentum.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
19 ... This statement neatly summarizes all those attributes – the headline in the story we’re creating around our company. This feels like something that would act as a beacon to the kinds of artists, partners and people who share our values.
… However, it still felt something was missing: an ambition, a result that we’d achieve if we did all these things. In summary, an answer to the question – what would the world lose if Warner Music THE HOME OF just disappeared? PASSIONATE MUSIC PEOPLE
Which is why we added this extra layer…. MOVING THE WORLD TOGETHER
PIONEERS WITH CREDIBILITY CLOSEST TO MUSIC LOCAL SUCCESS, AND CONVICTION CULTURE GLOBAL IMPACT
We’re a diverse organization of We shape music culture because we We seamlessly mobilize a powerful dedicated, inspiring, collaborative understand it better than anyone else: global amplification network behind our experts who move fast, disrupt and we champion artists, we listen to artists, creating worldwide results from deliver. consumers and we anticipate trends. local momentum.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
20 THE WORLD’S MOST INFLUENTIAL MUSIC COMPANY
THE HOME OF The home of passionate music people….. is who we want to be. The world’s most influential music PASSIONATE MUSIC PEOPLE company is what that will make us. MOVING THE WORLD TOGETHER
PIONEERS WITH CREDIBILITY CLOSEST TO MUSIC LOCAL SUCCESS, AND CONVICTION CULTURE GLOBAL IMPACT
We’re a diverse organization of We shape music culture because we We seamlessly mobilize a powerful dedicated, inspiring, collaborative understand it better than anyone else: global amplification network behind our experts who move fast, disrupt and we champion artists, we listen to artists, creating worldwide results from deliver. consumers and we anticipate trends. local momentum.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
21 THE WORLD’S MOST INFLUENTIAL MUSIC COMPANY
THE HOME OF PASSIONATE MUSIC PEOPLE MOVING THE WORLD TOGETHER
PIONEERS WITH CREDIBILITY CLOSEST TO MUSIC LOCAL SUCCESS, AND CONVICTION CULTURE GLOBAL IMPACT
We’re a diverse organization of We shape music culture because we We seamlessly mobilize a powerful dedicated, inspiring, collaborative understand it better than anyone else: global amplification network behind our experts who move fast, disrupt and we champion artists, we listen to artists, creating worldwide results from deliver. consumers and we anticipate trends. local momentum.
POWERED BY A WINNING TOOLKIT We achieve our goals supported by market-leading intelligence, capabilities and systems WE ARE WARNER
22 ACTIONS
23 23 ACTIONS - SUMMARY
PIONEERING PEOPLE
LEADING TOOLS
24 ROADMAP
25 GLOBAL IMPACT: 01: REBOOT GLOBAL AMPLIFICATION
NOW Objective NEXT Become recognized leaders in global amplification. EXPLORE
Summary: Global amplification is a key differentiator in our offering to artists and enhances our ability to create success for their music. Four drivers can help us become market leaders in this:
1) A powerful network of marketing and commercial channels that create alternative promotional routes for our artists and the option to hit a 'boom button' for priority campaigns.
2) Leading content creation / editorial capabilities, helping us to populate our channels with relevant, sticky, viral programming that increases the reach of our artists.
3) 3) Enhanced B2C capabilities, forging direct relationships with consumers and using data to build wider potential audiences.
4) 4) A strategic / creative Global Marketing function that can utilize the entire suite of assets to deliver powerful campaigns.
Underpinning each of these specialisms should be a fluid, continuous process for absorbing / communicating best-practice out to the affiliates / RO's to help strengthen local execution
26 REBOOT GLOBAL AMPLIFICATION SUMMARY
GLOBAL MARKETING
COMMERCIAL SOCIAL OWNED INFLUENCER
27 GLOBAL IMPACT: 02: GLOBAL MARKETING
NOW Objective NEXT A strategic / creative Global Marketing function that can utilize the entire suite of assets to deliver powerful campaigns. EXPLORE
Summary: There are four key areas of focus as we refresh Global Marketing:
1) Refreshing the team and structure
2) Empower the team with new tools, data and systems
3) Strengthen alignment across all territories including a rebooted Global Priorities System
4) Create buy-in from the major repertoire centres in the US and UK
Next steps Timing Design team structure, capabilities and renewed process. Jan 18 Launch Rebooted Global Priorities System.
28 GLOBAL IMPACT: 03: CHANNELS
NOW Objective NEXT A powerful network of marketing and commercial channels that create alternative promotional routes for our artists EXPLORE and the option to hit a ‘boom button’ for priority campaigns.
Summary: We will focus on four different areas of our business:
1) Commercial. Ensure we have best practice built into everything we do
2) Social. Develop sector and channel specialists to: - absorb and disseminate best practice throughout the organization - build out non-artist channels
3) Owned. Develop existing assets into viable consumer channels and identify potential acquisitions to strengthen our portfolio of own brands
4) Influencer. Scope a scaleable global influencer network to establish an effective alternative to traditional media outlets and act as a 'creator A&R' to develop a feedback loop with tastemakers Next steps Timing Define Channel strategy identifying areas of focus, including Jan 18 team structure, capabilities and renewed process
29 GLOBAL IMPACT: 04: CONTENT
NOW Objective NEXT Establish a leading content creation / editorial engine, helping us to populate our channels with relevant, sticky, viral EXPLORE programming that increases the reach of our artists.
Summary: There are four content opportunities for us to develop:
1) The Firepit. - A centre of excellence in creating 'destination' formats and programming for commercial and marketing platforms - Using DSP content funds to underwrite an initial slate and developing a long term, sustainable commercial model (IP exploitation/windowing strategy etc) - Currently UK-only, roll out to US based on the results of the initial pitches
2) Channel editorial. Content creation capabilities are required for snackable formats and repurposed content to populate editorial channels
3) Fan-facing. There's an opportunity in fan content similar to Copa90 has exploited in football
4) UGC. Work with those consumers who are eager to develop and share their own music content
Next steps Timing Define Content strategy identifying the area of focus, including Jan 18 structural changes and the capabilities we require.
30 GLOBAL IMPACT: 05: CONSUMER
NOW Objective NEXT Enhanced B2C capabilities, forging direct relationships with consumers and using data to build wider potential EXPLORE audiences.
Summary: There are five key elements to our consumer approach:
1) CRM as a company asset rather than an artist-owned property. We should market our products with the aim of collecting data
2) Education and enforcement on pixel data collection to convert consumers from anonymous to owned
3) Extract maximum consumer data from commercial and non-commercial channels
4) A robust approach to audience segmentation
5) Support for the DMP implementation so we can make better sense of the opportunities in "big data"
Next steps Timing Define our Consumer strategy identifying areas of focus, Feb 18 including structural changes and the capabilities we require.
31 GLOBAL IMPACT: 06: BESPOKE AT VOLUME
NOW Objective NEXT Grow the roster / release schedule to increase streaming market share while maintaining the bespoke spirit of EXPLORE Warner and our dedication to long-term artist development.
Summary: To be competitive in streaming we're hampered by our size - there's a need to bulk up the roster and release a greater amount of repertoire.
Our levers include deal-making terms, M&A and strategic partnerships as well as the creation of additional entry points for artists into the Warner ecosystem where we retain market share driven by key repertoire owners.
To pursue the right strategies in each of these areas requires further modelling of the long-term net benefit vs cost of market share acquisition.
In addition, ensuring the increased volume travels efficiently through the company will require improved global co- ordination and the creation of an effective process.
Next steps Timing Model net benefit vs cost of market share acquisition Feb 18 Atlantic US’s best-practice on repertoire flow shared with all markets
32 GLOBAL IMPACT: 07: WARNER BRAND STRATEGY
NOW Objective NEXT Develop Warner as a consumer-facing brand that unifies and underpins all the assets in the family. EXPLORE
Summary: The Warner brand has historically been treated as a corporate 'umbrella' for our labels and artists, with little consumer-facing focus.
However, insight from other markets reveals the power of the Warner Music brand - social and content channels branded Warner typically achieve greater engagement than generic, non-artist brands.
As we seek to network audiences and strengthen our direct connection to consumers, there needs to be a clear brand identity along with guidelines and protocols for Warner and its owned brands.
Next steps Timing Map the hierarchy of channels, how they're used now and how Mar 18 they'll be used in the future.
33 CLOSEST TO CULTURE: 08: GENRE FOCUS
NOW Objective NEXT Build Warner’s strength, credibility and speed in emerging / exploring genres and geographies. EXPLORE
Summary: Streaming is accelerating the popularity of a range of genres and music from a wider range of geographies.
For example, Urban music is the fastest growing consumption trend across all streaming platforms however it remains highly localized within WMG. Similarly Latin music has historically been treated as a regional rather than a global opportunity.
Through being closest to culture, harnessing specialist expertise and building cohesive global networks there is an opportunity to capitalise on these, and future emerging trends.
Next steps Timing Analyze market trends and implement acceleration plan Mar 18
34 PIONEERING PEOPLE: 09: TRANSFORMING OUR TEAM
NOW Objective NEXT Define the skills and attributes the organization needs. Identify and resolve the gaps and design a people strategy EXPLORE that meets our future needs.
Summary: Once there is alignment on the vision and strategy we will identify three elements to aid the approach to our people:
1) What do we need from our people? What is it that makes a 'Warner' person?
2) Define our employee value proposition - what does authentic investment in our people look like?
3) Restructuring relief
Next steps Timing Communication of restructuring relief framework. Proposals submitted. Dec 17 – Feb 18 / May 18 – Jul 18 Build the first draft of our employee profile and value proposition. Develop our people strategy and define our action plan.
35 WINNING TOOLKIT: 10: DATA & TOOLKIT ROLLOUT
NOW Objective NEXT Support the launch, education and adoption for all new data., insight and knowledge share tools across the EXPLORE business with a high-impact, consistent and responsive communication programme
Summary: A significant programme is already underway to unify data and provide consistent access and visualizations. The pilot projects are artist-dashboards (OPUS) and the A&R tool (name TBD).
Additional tools and platforms are being developed by other teams, for example WEA and Global Marketing.
The success of these systems will be front-line staff's ability to access, interpret and use the tools effectively which will require education, training and an ongoing engagement programme.
Next steps Timing Define roll-out and communication plan for 2018 Commencing Dec 17
36 ROADMAP - RECAP
37 NEXT STEPS
Feedback thoughts to Mel 1st Dec 2017 Does this inspire me? Would it inspire our key stakeholders - our people, artists, partners, consumers? What changes would I make in my business to make this real?
Mel will be in New York to work with the leads on each of the initiatives to w/c 4th Dec 2017 add more detail to the Roadmap The updated Roadmap will be shared regularly with you Monthly
In 2018 we'll present this detail to the WMG Board FY18 Q2
Your involvement will be needed to delivery each initiative in your Ongoing territory.
38