Sony Music Business Overview - SONY Board member workshop
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Transcript of Sony Music Business Overview - SONY Board member workshop
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8/10/2019 Sony Music Business Overview - SONY Board member workshop
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Music Segment
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Sony Music business Overview
Sony MusicEntertainment
Sony/ATVMusic Publishing
Ownership
Sony MusicEntertainment Japan Music
(JV with estate of Michael Jackson)
100% 50%100%
(JV with M
Recorded Music
3,470 Oku-yen (7
Outside Sales : 4,900 Oku-yen
Music Publishing660 Oku-yen (13% of Total)
Visual Media & Platform770 Oku-yen (16% of Total)
SME
SME
J
SAT
V
SME
J
SME
SMEJ SME:
SMEJ:
SMEJ:
SME:
(56%)
(15%)
(12%)
(14%)
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Competitor Comparison Worldwide Music Market Share
Recorded Music Music Publishin
No.2 in Recorded Music and No.1 in Music Publis
*
* Excludes Japan
Revenues & EBITDA Amounts Shown for Comparative Purposes; Adjusted for One-Time and Other ItemsUNI, SME & WMG 12 Months Ended June 30, 2014
Market Share - Worldwide share in CY2013 (Source: IFPI)
(US$ Mil.)
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6.3 6.87.6
8.7
7.0 6.2 5.24.5
$ 13.3B $ 13.0B $ 12.8B $ 13.3B
FYE15 FYE16 FYE17 FYE18
Worldwide Recorded Music Market Projections
+8.0% +11.0%+15.2%
-11.9% -15.5%-12.6%
-2.5%
-1.6%
+3.9%
Source: Internal Estimates.
CAG+11
%
14-1
CAG-
13.4
CAGFla
Recorded music market expected to return to growth throgrowth of digital access models which will more than of
declines in Physical and downloads
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MRP Key Strategy
Sony Music Entertainment Grow market share, expand digital revenue models and enhance international oper
Sony Music Entertainment Japan Expand recorded music and ancillary business as a total entertainment company
Sony Music Publishing (Sony/ATV + EMI) Maintain worlds leading market share position of 30%+ and achieve fair market val
rights in the United States
2,7802,896
1,5981,706
544 617
FYE15 FYE18
240
275
140
1
100
FYE15 FY
SME
SME
SME
SME
SMEJ SMEJ SMEJS
SMP
SMP
SMP
Revenue Operating Profit
+1.4%
+2.2%
+4.3%
+4.6%
+5.6%
+7.0%
CAGRCAGR
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Sony Music Entertainment Key Strategy
25.10%25.35%
25.60%
25.85%
FYE15 FYE16 FYE17 FYE18
Maximize New Talent Development Success Across All Our Creative Repert
Aggressively Invest In New Talent
Expand Our Relationships With Independent Label Sector
Look For Opportunities to Sign Established Talent and Acquire Catalog
Mid-Range Planning PeriodForecast
+0.25%pts
+0.25%pts
+0.25%pts
Flat Growth
Grow Market Share
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Sony Music Entertainment Key Strategy
$686 $701 $706 $752 $830
$577 $636$728
$868
$1,060$1.3 B$1.3 B
$1.4 B
$1.6 B
$1.9 B
TotalCAGR+13%
SME Digital Revenues
IntlCAGR+19%
U.S.
CAGR+7%
Considers Market &Market Share Growth
Estimated $0.6B GrowthIn Digital Revenues Overthe MRP Period Drivenby Significant Growth InPaid Streaming
An Overall 44% GrowthFrom FYE15
Expand and Grow Digital Revenue Models
FYE14A FYE15FC FYE16MRP FYE17MRP FYE18MRP CAGR
Downloads $817 $704 $600 $496 $401 -17%
Streaming (Paid & Ad-Supported) 250 375 558 812 1,148 45%
Video 85 120 158 194 217 22%
Digital Radio 69 90 104 116 123 11%
Other 42 26 13 3 1 -68%
Total $1,263 $1,315 $1,433 $1,621 $1,890 13%
(US$ Mil
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Japan Recorded Music Market
Source: RIAJ, ACPCSMEJ Analysis
Japan original featurephone market
Physical market are continuously reducing,digital market are rapidly decreasing at a peak 2009
Physical
Digital
Other thanexpandingdecreasing Japan
phone After th
during from fe
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Labe
Marketin
Distribu
35%
Solution &
Rights
23%
Visual
32%
Label
Marketing &
Distribution
45%
Solution &
Rights
26%
Visual
13%
Sony Music Entertainment Japan Segment Summary
Revenue Operating Profi
Total 1,600 Oku-yen Total 140 Oku-ye
Artist Management& Music Publishing
9%
Net & Media / Live6%
Artist Management& Music Publishing
8%
SMEJ has been implemented diversified business as a total entertainment comartist management, live and animation business beyond recorded music b
SonCom
(Animation)
(Animation)
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Sony Music Entertainment Japan Key Strategy
Recorded music companies struggle with shrinking record music market anddifficult situation of producing hit products. Although live market isexpanding .
Recorded Music
Grow market share and expand digital streaming business Create an environment to produce hit products
- Begin to exert effect of label reorganization in this April Diversity in ways of developing new artists
- Partnership planning- Develop talent and creators not only artist- Diverse audition process
Maintain physical market- Focus on idols, anime songs and 3rd party acquisitions
Create digital market by SMEJ and regenerate music market- Enter into platform business like LINE Music
Artist Management & Music PublishingAcquire rights other than recorded music
Enhance talent, actor/actress and voice actor business
Live EntertainmentEnhance live hall business and participate entertainment area
1
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Sony Music Entertainment Japan Key Strategy
Important to make profit in non-recorded music business,during contraction of recorded music market
Solution & RightsDecrease disk distribution business due tocontraction of physical marketEnhance merchandise business and digital area
Steady performance in rights businessAcquire new property and rights
Visual (Animation)Success production business target to core userAim to grow further
Focus to produce titles which target a broader user Expand business other than production such as merchandise,
international and game
One-Stop Solution
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Maintain position as the worlds leading music publishing company 30%+ market share
Continue to make accretive acquisitions of new and controlled copyrights Pursue attractive investment opportunities
Achieve fair market value for digital rights in the United States
Sony Music Publishing Key Strategy
Music Publisher Revfor every $1,000 at Retail
Music Publishers are subject to belowmarket rates for digital performance rights inthe United States (Showing the chart as anexample).
Negotiate direct deals with satellite radio(SiriusXM), interactive (Spotify, Deezer), non-interactive (Pandora) and video (YouTube)streaming services at fair market rates
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Digital Performance Rights Royalty Flow U.S. Repertoir
Subscription/Streaming
Internet Radio
ASCAP BMIPerformanceRights Org.
(PRO)
Sony/ATVMusic
Publisher
Use of Digital
PerformanceRights subject toagreement
Digital PerformanceRights entrustedmanagement
Net Royalty
Digital Streaming Service Platform
(Current
Subscription/Streaming
Int
Sony/ATV
(Future )
MusicPublisher
Use of DigitalPerformanceRights subject toagreement
Less 17% FeePRO/Administra
ASCAP BM
Net Royalty
Less 10% Fee
Digital Streaming Service Platform
Higher thancurrentRoyalty rate
MRP Fi i l S (M i S t T t l)
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372
502 506
8.4%
10.0%
9.8%
10
4,417
5,033 5,139 5,212
5,3325,571
MRP Financial Summary (Music Segment Total)
FYE18 KPI: Revenue $4,8005,200OP% 10.511.5 %OIBDA% 13.514.5 %
FYE13 FYE14 FYE15 FYE16 FYE17 FYE18M14M14M13M14M13M13M13 M14BudAct Act
FYE13 FYE14 FYE15 FYM13M13M13 M14BudAct Act
Revenue (Oku-yen) OP (Oku-yen)
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Appendix
S M i E t t i t K St t
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Sony Music Entertainment Key Strategy
PAID STREAMING
WITHIN SUBSCRIBTION SERVICES
AD-SUPPORTED
26M Paid Monthly Subscribers
520M music hours / month
45M monthly listeners
450M music hours / month
1BN monthly users
2.4BN music hours / month
76M monthly listeners
1.6BN music hours / month
DIGITAL VIDEO
DIGITAL RADIO
OTHER CONSUMPTION
Subscription Will Be Leading Revenue Channel b
26M monthly listeners
1.6BN music hours / month
400M monthly listeners
PAID SUBSCRIPT
PHYSICAL
AD-SUPPORTED
$70
$48
$19
$4
DOWNLOADS
AVERAGE REVENUE PER
Strategies to support growth and healthy transition from ownership to acc
N B i i SME
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TV (Auditionprogram etc), $84
Live, $74
Brand/Sponsorship,$37
Merchandising, $6
Artist Management ,$11
Other, $26
Passive Artist RightsParticipation, $23
SME Global FYE15Fct New Business Revenues ($ in Millions)
New Business in SME -Maximize Opportunities With Broader Rights -
Main TV format :A
Program
Artist T shirt
Maximize opportunities with broader rights and new business Capture and exploit broader rights from new artist signings Continue to maximize exploitation of audition program and develop new formats and visual cont
Total
$ 261
Total Op. EBIT$ 70M
Recorded Music Royalty Flow U S
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Recorded Music Royalty Flow U.S.
CD Downloads Subscription/Streaming
Digital Rad
SoundExch
SonyMusic
WarnerUniversalRecorded
MusicCompany
Roy
(Raby CRoy
NPO for collectionPerforming Rights
Physical Digital
CDSales
R
RoyaltyAgreed rate with service
provider and recordedcompany
Sony Music Entertainment Japan Financial Summary
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Sony Music Entertainment Japan Financial Summary
57 64 65 66
111
53 5461 66
37 3537
4013 910
14
4 6
10
15
-24 -27 -28-36
-50
0
50
100
150
200
FY2014 FY2015 FY2016 FY2017
140 141155 165
OP/oku yen
/
Label, M
Distribut
Visual Bus
Solution
Business
Artist Ma
Publishing
Net&Me
HQ/Elim
Visual
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Visual
Theme song hits lead to further promotion of the animation series and expand
Big Hits from Linkage with Successful Animation Se
Recorded Music vs Music Publishing
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Recorded Music vs. Music Publishing
Owns and monetizes an artists masterrecordings
Plays pivotal role in discovering new artistsand helping hone their craft
Ancillary income continues to grow inimportance (e.g. merchandising, TV fees, 360deals)
Music PublishRecorded Music vs
Owns and monetizes an artist(lyrics and melodies)
Predominantly business-to-bumarketing spend
Minimal overhead and low-cos Diverse income streams from
licensing businesses
EMI Music Publishing Overview
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EMI Music Publishing Overview
Nile(Acquisition Company)
39.8% 60.2%
AdministrationServices
15% of NPS
Mubadala and othfinancial investo
MJ Estate25.13%
SCA74.87%
(DH Publishing)
In June 2012, an investor group led by Sony Corporation of America and Mubadala Developmsovereign wealth fund from Abu Dhabi, acquired the music publishing business of EMI
EMI entered into an administration deal with Sony/ATV to administerEMIs copyrights in exequal to 15% of NPS, subject to certain rights afforded to Mubadala and other equity investors
Sony/ATV bears all incremental costs of administering EMI (A&R, Licensing, Royalty Processfor 15% of NPS
Differences of Streaming on Publishers and Record Labels in the United States
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g
On-Demand Streaming
(Spotify, Deezer, Rhapsody, etc.)
Non-Interactive Streaming
(Pandora, Sirius, Slacker, etc.)
92.5%
7.5%
Records Publishing
85.0%
15.0%
Records Publishing
Strategic Alternatives for Digital Performance Rights in the United States
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g g g
Appeal of ASCAPand BMI RateDecisions
US Department of
JusticeConsent Decree
Reform
Withdrawal of
Performing Rightsfrom PROs
Performance Rights Organization in U S
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Performance Rights Organization in U.S.
PROs in U.S.
ASCAP: The American Society of Composers, Authors and Publishers
BMI : Broadcast Music, Inc.
SESAC: Society of European Stage Authors and Composers
A performance rights organization (PRO) provides intermediary functions, particuof royalties for performance, between copyright holders and parties.
Technical term
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Technical term
Downloads : Digital download (e.g. iTunes) Purchase music, video contents and save to a user's local d
computer, phone and smart phone
Streaming : Streaming Service (e.g. Music Unlimited, Spotify, YouTube, VEV Listen music and watch video contents on server of serviceinternet
User-selectable Consist paid and ad-supported (free) service
Digital Radio : Digital Radio Services (e.g. Pandora, SiriusXM)
Listen music and watch video contents on server of serviceinternet and satellite Unable to select music on demand Consist paid and ad-supported (free) service
Interactive : User-selectable streaming services (e.g. Spotify, Deezer
Non-Interactive : Radio service, Unable to select music on demand