17:29 Case: If at First You Don't Succeed Warner Music Group Corp. is one of four companies that control about 80 percent of the global recording business. The others are Vivendi Universal Music Group, Sony BMG Music Entertainment, and EMI Group PLC. Warner is trying to profit from increased sales of downloaded music from the web and from cellphone networks. In 2006, downloaded music accounted for just 10 percent of the market, but the International Federation of the Phonographic Industry (IFPI) predicts that figure will rise to 25 percent by 2010. In the spring of 2007, EMI Group became the first of the Big Four labels to remove so-called Digital Rights Management (DRM) software that restricts how consumers can play and copy music files. The CEO of Warner thought that was a bad idea, but when Universal Music Group followed EMI's lead, Warner finally agreed in December 2007 to remove the software and sell its music on Amazon,com Inc.'s digital music store. Up to that time, Warner had refused to offer songs by its artists in the MP3 format because they can be copied and burned onto CDs and played on Apple's iPod. In July 2008, cellphone maker Nokia announced that it had signed three of the Big Four labels for its "Comes with Musie" phone service. It is rumoured that Nokia paid the record companies millions of dollars for the right to offer songs free for downloading- Industry observers are very interested in whether Warner's strategy will work, partly because Warner's CEO-. Edgar Bronfman Jr-is the person who made a series of disastrous decisions when he was CEO of Seagram, the iconic Canadian company. Seagram was started by his grandfather Sam Bronfman in the 1920s. In 1957, Sam's son Edgar Sr. became CEO of Seagram, and for the next 40 years the company focused on the production of wine and distilled spirits with well-known brand names like Chivas Regal, Absolut Vodica, and Crown Royal. In the process, Seagram became a houschold name in Canada and the Bronfman family became very wealthy. In 1994, Edgar Jr. took over leadership of the company from his father and before long was making some dramatic strategic moves that steered the company away from its traditional products and toward the high-risk entertainment business. For example, the company bought MCA Inc. (now Universal) and Polygram NV. These high-risk moves caused some people to recall founder Sam Bronfman's observation that third-generation family members often dissipate the family fortune. Edgar Jr. was well aware of this criticism, and he was determined not to fulfill his grandfather's prophecy. Under Edgar Jr.'s leadership, things went reasonably well for a time. Then he met Jean-Marie Messier, the CEO of Vrvendi SA. ral-1-prod-fleet01-xythos.content.blackboardcdn.com 17:29 moves that steered the company away from its traditional products and toward the high-risk entertainment business. For example, the company bought MCA Inc. (now Universal) and Polygram NV. These high-risk moves caused some people to recall founder Sam Bronfman's observation that third-generation family members often dissipate the family fortune. Edgar In. was well aware of this criticism, and he was determined not to fulfill his grandfather's prophecy. Under Edgar Jr.'s leadership, things went reasonably well for a time. Then he met Jean-Marie Messier, the CEO of Vivendi SA, who was trying to convert a French water and utility company into a media conglomerate. In 2000 , Edgar sold Seagram to Vivendi for $33 billion of Vivendi stock. But when Vivendi got into financial trouble shortly thereafter, its stock price dropped sharply and the Seagram family fortune declined-from about USST billion to less than USSI billion. Critics charged that Edgar Jr. had exchanged the Bronfman family fortune for a relatively worthless piece of the New Economy dream. Some people started thinking Sam Bronfman was right after all. After the Vivendi debacle, Edgar moved on to other things in an attempt to repair his reputation as a manager. Determined to get. back on the winning path, he first tried to buy Vivendi's film and TV assets, but he was unsuccessful. Later, he and several partners were able to purchase Wamer Music Group, which includes record labels such as Warner Bros., Atlantic, Electra, and the Christian music producer Word Records. As CEO of Warner, Edgar Jr. adopted a corporate strategy premised on the belief that consumers would increasingly bypass traditional music stores and instead buy online digital music. It is not yet clear what the latest developments in digital music mean for Edgar Bronfman Jr. and for Wamer Music Group. If Warner's strategy works, Edgar Jr. will be seen as a manager who had the vision and insight to position Warner so that it could capitalize on a major trend. Also, if Vivendi somchow overcomes its financial problems, Edgar Jr, will benefit from its increased stock price because he still holds a lot of its shares. If neither of these possibilities works out, critics will say that old Sam Bronfman was right. ral-1-prod-fleet01-xythos.content.blackboardedn.com It is not yet clear what the latest developments in digital music mean for Edgar Bronfman Jr. and for Warner Music Group. If Warner's strategy works, Edgar Jr. will be seen as a manager who had the vision and insight to position Warner so that it could capitalize on a major trend. Also, if Vivendi somehow overcomes its financial problems, Edgar Jr. will benefit from its increased stock price because he still holds a lot of its shares. If neither of these possibilities works out, critics will say that old Sam Bronfman was right. Questions 1. a) What are the various corporate-level strategies that a company might use? b) Which of these corporate-level strategies did Seagram use under Edgar Bronfman Sr? c) Which strategy is Warner Music Group using now? 2. What is involved in each of the four functions of Edgar Bronfman Jr. the most difficulty when he was CEO of Seagram? 3. How do you tell if a person is a good manager? Is Edgar Bronfman Jr. a good manager? 4. What skills do managers need to be effective? In what management? Which of these four functions caused skill did critics say Edgar Bronfman Jr. was weak? Explain. Source: Griffin, R. W., Ebert, R. J, Starke, F. A. and Lang, M. D. (2011). Business: Third custom edition for George Brown College. Toronto; Pearson Education