Entertainment Offering Complements Traditional Music BusinessSat, 12/01/2018 - 15:18
Q: Sony Music Entertainment has gone through a business transformation. What challenges arose from this change?
A: We had to change our vision when we went from being a company that sells recorded music to an entertainment company. This transformation allowed for income diversification and a transformation of our activities. We have become active participants in live entertainment. We participate in the industry through strategic agreements with management agencies and concert promotion agencies. We act as an entertainment agency. When there is an opportunity of an advertisement or a communication campaign, we present our creative proposal based on the music and the image of our artists. That is how we came up with campaigns with artists like Chayanne with Coppel or Ricky Martin with Nescafé.
This transformation has allowed us as to have more presence in more aspects related to music than before, when our main activity was the sale of recorded music. Both in Mexico and in Latin America, this situation was forced by the problems we suffered in the past related to piracy, which generated a significant drop in our traditional revenues and forced us to sit down with our partners and our artists to find new agreements to expand our activities.
Q: How does the company maintain profitability in the face of new players such as Spotify and Apple Music?
A: We used to sell recorded, physical mediums, such as vinyl records and CDs. At first, we had to battle piracy issues because it was so easy to go out and find pirated CDs. We also faced pirated music in digital distribution. Today, services like Spotify, Apple Music, Google Play, Vevo and YouTube are legal. They offer content based on agreements with recording companies like Sony Music and we have designed a business model for this. We are not against them. These digital platforms are allowing the revival and growth of the music industry on a global level. In fact, 2016 was a global inflection point, which happened thanks to the presence of digital distribution platforms. The largest growth opportunity is in the speed at which the audience adopts these platforms and in that regard the opportunity for Mexico is enormous. There are still relatively few subscribers paying for music in Mexico but the number is growing rapidly.
Q: What factors have led to the Mexican market being one of the most relevant for Sony Music Entertainment?
A: Mexico is assuming a more relevant role in the industry worldwide, as evidenced by the fact that in 2017, it ranked 18th in the entertainment industry. Mexico is an extremely important country for digital media, which today is the most important means of distributing music. For Spotify, Mexico is the fourth-largest country in the world in terms of total subscribers, just below the US, the UK and Brazil. However, in volume of streams, Mexico is the second-most important country for Spotify, just below the US. Mexicans have a very important connection with music, it is part of their lives.
Q: What are your expectations regarding the future of the entertainment industry?
A: I have an optimistic vision regarding our industry and Sony Music Entertainment. The growth opportunities that will arise from the advance of digitally distributed music are immense. When Mexico has as many subscribers to music streaming services as cable television services, for example, the industry will have the highest values in history. We would like to see double-digit growth. In recent years, the industry has registered annual declines, so talking about double-digit growth means that we are in a situation that fosters a great deal of optimism.
Q: What other business lines could the company venture into?
A: We are analyzing activities that could be related to music, such as gastronomy or sports, but always with music as the core of the business. While it is true that we have transformed the company, the heart of our activities will always be music and the quality of our content and artists. If we do not have great artists and great music, we will not have commercial activities or distribution of recorded or live music.