GMRO SUMMARY PRESENTATION v21 DOWNLOAD

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STRATEGIC ROADMAP November 2017

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P3 RECAPP5 CHALLENGESP12 ANTIDOTESP14 VISIONP23 ACTIONSP38 NEXT STEPS

CONTENTS

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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.

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CHALLENGES

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CHALLENGES

We’re not fully optimized for a streaming-led business where market share is the only metric that matters

Our workforce and our culture have not fully evolved to anticipate the changing market

As competition for artists and rights intensifies, so does our risk of disintermediation

The ability to understand and interact withconsumers has not been developed across the organization

Our devolved structure makes us strong locally but restricted globally

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We’re not optimized for a streaming-led business where market share is the only metric that matters

CHALLENGES

Scale & volume

“When more is more, how do we manage a volume business AND keep what makes us special?”

“What is the strategy to scale our business in an access model?”

“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.”

“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”.

Genre & geographies

“Urban is taking over the world right now, the numbers are fucking staggering. We are not setup to be an urban company and we need to get on this”

“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”

“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?”

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CHALLENGES

No clear value proposition

“We have to keep working on a suite of services we can offer to artists to show value. It’s part of why people go with a global company”

“Why Warner? What’s our unique value proposition? Our answer is not compelling enough”

“How to sell ourselves to the artist community? Tools, culture etc”

“What is the core proposition? Everything is about amplification. That’s why an artist joins Warner Music Group.”

Indie & tech-based alternatives

“Artists are more demanding […] the internet is open for everyone, in a streaming world artists don’t need a record company”

Platforms or poachers?

”Threat number one is the streaming platforms becoming the 800 pound gorilla and disintermediating us.”

“How to deal with potential disintermediation. Foresee problematic relationships with our partners”

“We have to be careful, not allow Apple and Spotify to use all that data as a wedge between a label and an artist or manager. If they can paint a more accurate picture it gives them an opportunity to question the value we add”

“Streaming platforms and tech companies speaking our agenda – they have strong, visible leadership”


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CHALLENGES

Our devolved structure has left us strong locally but restricted globally

Need for strategic vision, clarity and alignment

“I want to walk away knowing we have a global vision”

“The word is focus. Alignment, all being on the same page. Focus and go for it. Stick to the plan.”

“Success is everybody with the same perception, the same takeaways, the same spirit.”

“It’s important that we identify what’s culturally and commercially important to us and we agree a smart way forward”

”It would be great to share learnings on a global basis, learn more from mature markets, what steps can we skip, what mistakes can we avoid?”

Co-ordinated execution is vital

“There’s a necessity to be global in a growing market vs fighting to survive locally”

“Now you can promote music throughout the world maybe there is a big opportunity to work more globally”

“I’d like to think we can become as efficient as a global entity as most of us are in our local entities”

“We need more global co-ordination and global understanding.”

“Better global co-ordination”

“GPS comes up every conference and still everyone thinks it’s grossly inadequate”

Infrastructure has not kept pace with operating reality

“It’s stating the obvious to say we need the real fundamentals taken care of”

“The tools we have are quite clumsy”

“We really struggle from a tech point of view, our systems are bad, our access to data is bad. This becomes more of a threat every day.”

”Warner Music Group has overslept on IT […] all our competitors are ahead of us.

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Impacts marketing & promo of core business

“We’re lost as marketeers – there’s a problem in our reach to the consumer”

“We need to make sure we are still current in how people consume, how we amplify.”

“We must produce the best possible content, with the artists, get so close to the consumer that it fits like a glove”

“Direct to consumers, that’s the big play. If you have direct access to 500m people, that’s worth something”

No predictive process

“What do we think is the chapter that has not been written yet for the music business? Can we get ahead? E.g. What will the business be like when everything is voice activated?”

Playing catch-up on data

Most exciting is how data can help us understand the consumer, how they want to consumer our music, and how to target them”

“We need better data so we can make better marketing and A&R decisions […] all our competitors are meaningfully ahead of us”

”We are drowning in data. Drowning rather than being able to see a clear picture of what you need to do right now”

“There’s no data science capability. In the absence of data science opinions rule supreme”

The ability to understand and interact with consumers has not been developed across the organization

CHALLENGES

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Our people and our culture are not optimized for an evolving, agile future

CHALLENGES

Changing skillsets

“Can our people adapt to the future? How will our structure look in the future? How do we educate, develop and train people? Do they have the skillsets required in a world dominated by streaming? I’m not sure.”

“Can’t have enough creative people in your business”

“It’s the people, moving people out, bringing people from the outside-in – need new ideas”

”Transforming to a service centre for artists requires a shift in roles and expertise. Storytelling, brand strategy, virtual reality, mixed reality, social media, data insight.”

A compelling proposition and experience

“You have to empower these people, follow them, give them the right tools, give them an opportunity to exchange ideas”

“We need to own our weaknesses and challenges, rather than allow them to be excuses”

“The value of the company is our people […] a growing market for talent requires a culture that is of value to the young guys and girls we need”

“We’re hiring more in the digital space […] one of our top priorities, how we deal with people, what we offer, the culture, benefits and lifestyle”

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ANTIDOTES

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CHALLENGESFive challenges Five antidotes

We’re not fully optimized for a streaming-led business where market share is the only metric that matters

A relevant, irresistible proposition to artists

Our workforce and our culture have not fully evolved to anticipate the changing market


The ability to understand and interact with consumers has not been developed across the organization

Our devolved structure has left us strong locally but restricted globally

Harness data and insight to make us a more consumer-driven organization

Clarity and alignment on global strategy, priorities, communication and execution

A streaming-first organization

A workforce and environment built for Warner's agile, always-evolving future

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VISION

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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.

VISION

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POWERED BY A WINNING TOOLKITWe achieve our goals supported by market-leading intelligence, capabilities and systems

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.

WE ARE WARNER

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We’re a diverse organization of dedicated, inspiring, collaborative experts who move fast, disrupt and

deliver.

PIONEERS WITH CREDIBILITY AND CONVICTION


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.

WE ARE WARNER

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deliver.


We shape music culture because we understand it better than anyone else:

we champion artists, we listen to consumers and we anticipate trends.

CLOSEST TO MUSIC CULTURE


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.

WE ARE WARNER

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deliver.





We seamlessly mobilize a powerful global amplification network behind our artists, creating worldwide results from

local momentum.

LOCAL SUCCESS,GLOBAL IMPACT


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.

WE ARE WARNER

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THE HOME OF PASSIONATE MUSIC PEOPLE

MOVING THE WORLD TOGETHER


deliver.






local momentum.



... 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 just disappeared?

Which is why we added this extra layer….

WE ARE WARNER

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deliver.






local momentum.



The home of passionate music people….. is who we want to be. The world’s most influential music

company is what that will make us.

WE ARE WARNER

THE WORLD’S MOST INFLUENTIAL MUSIC COMPANY

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deliver.






local momentum.



WE ARE WARNER

THE WORLD’S MOST INFLUENTIAL MUSIC COMPANY

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ACTIONS

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ACTIONS - SUMMARY

PIONEERING PEOPLE

LEADING TOOLS

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ROADMAP

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GLOBAL IMPACT: 01: REBOOT GLOBAL AMPLIFICATIONNOWNEXTEXPLORE

ObjectiveBecome recognized leaders in global amplification.

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

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REBOOT GLOBAL AMPLIFICATION SUMMARY

OWNED INFLUENCER

GLOBAL MARKETING

SOCIALCOMMERCIAL

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ObjectiveA strategic / creative Global Marketing function that can utilize the entire suite of assets to deliver powerful campaigns.

GLOBAL IMPACT: 02: GLOBAL MARKETINGNOWNEXTEXPLORE

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 TimingDesign team structure, capabilities and renewed process. Launch Rebooted Global Priorities System.

Jan 18

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NOWNEXTEXPLORE

ObjectiveA 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.

GLOBAL IMPACT: 03: CHANNELS

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 TimingDefine Channel strategy identifying areas of focus, including team structure, capabilities and renewed process

Jan 18

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NOWNEXTEXPLORE

GLOBAL IMPACT: 04: CONTENT

ObjectiveEstablish a leading content creation / editorial engine, helping us to populate our channels with relevant, sticky, viral 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 TimingDefine Content strategy identifying the area of focus, including structural changes and the capabilities we require.

Jan 18

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NOWNEXTEXPLORE

GLOBAL IMPACT: 05: CONSUMER

ObjectiveEnhanced B2C capabilities, forging direct relationships with consumers and using data to build wider potential 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 TimingDefine our Consumer strategy identifying areas of focus, including structural changes and the capabilities we require.

Feb 18

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NOWNEXTEXPLORE

ObjectiveGrow the roster / release schedule to increase streaming market share while maintaining the bespoke spirit of Warner and our dedication to long-term artist development.

GLOBAL IMPACT: 06: BESPOKE AT VOLUME

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 TimingModel net benefit vs cost of market share acquisitionAtlantic US’s best-practice on repertoire flow shared with all markets

Feb 18

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NOWNEXTEXPLORE

GLOBAL IMPACT: 07: WARNER BRAND STRATEGY

ObjectiveDevelop Warner as a consumer-facing brand that unifies and underpins all the assets in the family.

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 TimingMap the hierarchy of channels, how they're used now and how they'll be used in the future.

Mar 18

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NOWNEXTEXPLORE

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.

ObjectiveBuild Warner’s strength, credibility and speed in emerging / exploring genres and geographies.

CLOSEST TO CULTURE: 08: GENRE FOCUS

Next steps TimingAnalyze market trends and implement acceleration plan Mar 18

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NOWNEXTEXPLORE

PIONEERING PEOPLE: 09: TRANSFORMING OUR TEAM

ObjectiveDefine the skills and attributes the organization needs. Identify and resolve the gaps and design a people strategy 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 TimingCommunication of restructuring relief framework. Proposals submitted. Build the first draft of our employee profile and value proposition. Develop our people strategy and define our action plan.

Dec 17 – Feb 18 / May 18 – Jul 18

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NOWNEXTEXPLORE

WINNING TOOLKIT: 10: DATA & TOOLKIT ROLLOUT

ObjectiveSupport the launch, education and adoption for all new data., insight and knowledge share tools across the 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 TimingDefine roll-out and communication plan for 2018 Commencing Dec 17

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ROADMAP - RECAP

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NEXT STEPS

Feedback thoughts to Mel 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?

1st Dec 2017

Mel will be in New York to work with the leads on each of the initiatives to add more detail to the Roadmap

w/c 4th Dec 2017

TheupdatedRoadmapwillbesharedregularlywithyou Monthly

In2018we'llpresentthisdetailtotheWMGBoard FY18 Q2

Yourinvolvementwillbeneededtodeliveryeachinitiativeinyourterritory.

Ongoing

Documents

GMRO SUMMARY PRESENTATION v21 DOWNLOAD