For Sony Music Entertainment, should we invest more in promoting established artists or discovering and developing new talent to ensure long-term success?

Introduction

The trade-off between investing in established artists versus discovering and developing new talent is a critical decision for Sony Music Entertainment's long-term success. This scenario involves balancing immediate returns with future potential, considering the evolving music industry landscape and changing consumer preferences.

In my response, I'll analyze this trade-off by examining the product ecosystem, identifying key metrics, designing experiments, and providing a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about the current music industry trends. Could you share any recent shifts in consumer behavior or streaming patterns that might influence this decision?

Why it matters: Helps understand the market dynamics affecting both established and new artists. Expected answer: Increased fragmentation of listener preferences, rise of niche genres. Impact on approach: Would influence the balance between broad appeal and targeted development strategies.

• Business Context: Based on Sony's current revenue model, I'm assuming streaming royalties play a significant role. How does the revenue split between established artists and new talent currently look?

Why it matters: Helps quantify the potential financial impact of shifting resources. Expected answer: Established artists contribute 70-80% of revenue. Impact on approach: Would inform the risk tolerance for investing in new talent.

• User Impact: Considering our listener base, I'm curious about engagement patterns. How does user retention differ between fans of established artists versus those discovering new talent?

Why it matters: Indicates long-term value and growth potential of different user segments. Expected answer: New talent fans show higher engagement but lower retention. Impact on approach: Would influence marketing and retention strategies for different artist types.

• Technical: Thinking about our discovery algorithms, how adaptable is our current recommendation system to promoting new, lesser-known artists?

Why it matters: Affects the feasibility of effectively surfacing new talent to listeners. Expected answer: System is flexible but requires fine-tuning for new artist promotion. Impact on approach: Would determine the technical investment needed to support new talent discovery.

• Resource: Considering our A&R team's capacity, how much bandwidth do we currently allocate to scouting and developing new talent versus managing established artists?

Why it matters: Helps understand the operational implications of shifting focus. Expected answer: 30% new talent, 70% established artists. Impact on approach: Would inform the feasibility of scaling up new talent development.