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Adapt or Die!

                                                 -

                              The Music Industry Case
 ...
medialeaderllc                                         The Music Case Study


                         we know that the vo...
medialeaderllc
                                 The Music Case Study

                      we know that the volume of mus...
medialeaderllc


                   s!
               ne
                 w       this was driven largely by unpaid conten...
medialeaderllc


                    A value greater than ‘Free’ has not been readily perceived



                 Today
...
medialeaderllc

                            A snapshot of USA Music Sales

                           1999        2004    ...
medialeaderllc
                                 The Music Case Study



                         this is ‘classic’ strateg...
medialeaderllc




                         how did this happen?




www.medialeaderllc.com
medialeaderllc

            Music - 15 years of sales growth driven by increased value of CD


                           ...
medialeaderllc

                         Music - 1999 a new ‘value’ proposition

                                Get the t...
medialeaderllc
                                     Music - First line of defense

                         when you won’t...
medialeaderllc
                          Music - 2001 a new ‘value’ proposition
                                          ...
medialeaderllc

                             Music - 2001 a new ‘value’ proposition

                                     ...
medialeaderllc

                                Music - Price alone not enough.
                         A new consumer ‘v...
medialeaderllc

                                 Music - Where CD sales continued
                         there was perce...
medialeaderllc

                   But the ‘industry’ chose not to hear ...




                                          ...
medialeaderllc



      Cavalry to the rescue !

                                                          online
        ...
medialeaderllc

                                     oops!
        The iTunes math - Dollars to Dimes economics


   Apple...
medialeaderllc




               Is the strategic debate over paying for intellectual property?

                        ...
medialeaderllc
                               The Old Music Value Chain
                           Music Company’s ‘Soup-t...
medialeaderllc

                           The Emerging Music Value Chain
                                        Digital ...
medialeaderllc

                           The Emerging Music Value Chain
                                        Digital ...
medialeaderllc           Lessons to be learned - 2006




       The
  organizational
      change
 implications are
   si...
medialeaderllc




   and this can be said for all entertainment media too ...




www.medialeaderllc.com
medialeaderllc




              “Bein
            g the
                   coole
    when      but n      st thi
        ...
medialeaderllc

                           but we know this ‘case’ is
                            not only about music ......
medialeaderllc



                                                      What’s
                                  The      ...
medialeaderllc




                              Feb 10, 2010




www.medialeaderllc.com   28
medialeaderllc

                                                               32+ bil videos
                            ...
medialeaderllc




                 ‘When reality is labeled unthinkable, it creates a
        kind of sickness in an indu...
medialeaderllc
Leadership, Innovation and Transformation of the Corporation in the Digital Age




    A Leadership Develo...
medialeaderllc
Leadership, Innovation and Transformation of the Corporation in the Digital Age




    A Leadership Develo...
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Adam Klein Cross Media Nyc 3 10 2010a

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Adapt or Die! - The Music Industry Case
Slow to recognize and adapt to new industry value-chain by Adam Klein

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Transcript of "Adam Klein Cross Media Nyc 3 10 2010a"

  1. 1. Adapt or Die! - The Music Industry Case Slow to recognize and adapt to new industry value-chain Adam Klein Founder / CEO medialeaderllc March 10, 2010 - Cross Media, New York www.medialeaderllc.com
  2. 2. medialeaderllc The Music Case Study we know that the volume of music ‘consumed’ continues to grow significantly w s! ne o od g the www.medialeaderllc.com
  3. 3. medialeaderllc The Music Case Study we know that the volume of music ‘consumed’ continues to grow significantly w s! - ne b ad at the same time: e th ‘free’ remains the overwhelming payment method & despite significant increases in digital download sales, the total revenues earned by the industry continue to shrink www.medialeaderllc.com
  4. 4. medialeaderllc s! ne w this was driven largely by unpaid content b ad t he www.medialeaderllc.com 4
  5. 5. medialeaderllc A value greater than ‘Free’ has not been readily perceived Today 90%+ not paid for www.medialeaderllc.com 5
  6. 6. medialeaderllc A snapshot of USA Music Sales 1999 2004 2008 2009 CD Units sold 938 mil 767 mil 385 mil - 18% CD $ value $13 bil $11.5 bil $5.5 bil Digital Download tracks sold 144 mil 1.07 bil 1.16 bil Digital Download $ Value $183 mil $1.6 bil Total value ($) $14.6 bil $12.3 bil $8.4 bil -?% RIAA data www.medialeaderllc.com 6 numbers rounded by this presenter
  7. 7. medialeaderllc The Music Case Study this is ‘classic’ strategic “substitution” - any useful discussion must be around how to pay for the creators/artists and legitimate marketing & delivery models - as opposed to protecting outmoded organizational structures www.medialeaderllc.com
  8. 8. medialeaderllc how did this happen? www.medialeaderllc.com
  9. 9. medialeaderllc Music - 15 years of sales growth driven by increased value of CD Peak in 1996 Downloads Driven by substitution - Tape for Vinyl - CD for Tape Germany Music Sales 1961 - 2004 www.medialeaderllc.com 9
  10. 10. medialeaderllc Music - 1999 a new ‘value’ proposition Get the track(s) you want Free NAPSTER www.sean.co.uk Sean McManus - A short history of filesharin; Aug 2003 www.medialeaderllc.com 10
  11. 11. medialeaderllc Music - First line of defense when you won’t add value, you must lower the price! www.medialeaderllc.com 11
  12. 12. medialeaderllc Music - 2001 a new ‘value’ proposition ----- the iPod - ‘ultra -portable’ & to rip in “entire CD collection - 1,000 songs” - fast! ‘That’s where we want to be’ Steve Jobs http://www.youtube.com/watch?v=kN0SVBCJqLs www.medialeaderllc.com 12
  13. 13. medialeaderllc Music - 2001 a new ‘value’ proposition the iPod - ‘ultra -portable’ to rip in “entire CD collection - 1,000 songs” - fast! online ts sales tar ble es s aila Tun s av 3, i ack 26, 200 0 tr p ril ,00 c/track A 200 99 ‘That’s where we want to be’ Steve Jobs http://www.youtube.com/watch?v=kN0SVBCJqLs www.medialeaderllc.com 13
  14. 14. medialeaderllc Music - Price alone not enough. A new consumer ‘value-paradigm’ had emerged 72% wanted tracks www.medialeaderllc.com 14
  15. 15. medialeaderllc Music - Where CD sales continued there was perceived value in owning ‘the collection’ Collection Valued www.medialeaderllc.com 15
  16. 16. medialeaderllc But the ‘industry’ chose not to hear ... www.sean.co.uk Sean McManus - A short history of filesharin; Aug 2003 www.medialeaderllc.com 16
  17. 17. medialeaderllc Cavalry to the rescue ! online ts sales tar ble es s aila Tun s av 3, i ack 26, 200 0 tr p ril ,00 c/track A 200 99 ‘That’s where we want to be’ Steve Jobs http://www.youtube.com/watch?v=kN0SVBCJqLs www.medialeaderllc.com 17
  18. 18. medialeaderllc oops! The iTunes math - Dollars to Dimes economics Apple: 99c/track CD: $10:99 Industry 70c/track Industry $ 6:00 By 2010, 10 billion tracks Over same 10 years $1+ bil gross sales down from $700 mil to music co’s $14.6 bil to $8+ bill Equiv of 1 bil CDs (10/cd) (incl digital) analysis by presenter www.medialeaderllc.com 18
  19. 19. medialeaderllc Is the strategic debate over paying for intellectual property? or Is it really over protecting an old perception of the value chain, and associated bloated business models? www.medialeaderllc.com 19
  20. 20. medialeaderllc The Old Music Value Chain Music Company’s ‘Soup-to-Nuts’ Value Artists Music Co Music Co make ‘finds’ & produces & Bank music ‘signs’ finances A&R Music Co Music Co manufactures distributes CDs CDs Retailers sell to consumer Scale Music Co markets Consumers CDs www.medialeaderllc.com 20
  21. 21. medialeaderllc The Emerging Music Value Chain Digital Disruption ? + Artists Music Co Music Co make ‘finds’ & produces & music ‘signs’ finances ISPs ✖ Music Co Music Co CDs✖ manufactures distributes CDs distributes broadband Retailers ➥ sell to consumer Consumers Music Co markets www.medialeaderllc.com 21 CDs
  22. 22. medialeaderllc The Emerging Music Value Chain Digital Disruption ? + Artists Music Co Music Co make ‘finds’ & produces & music ‘signs’ finances New oppo ISPs ✖ - v✖/prities abou Music Co Music Co manufactures rtun distributes distributes broadband CDs alue CDs Retailers ice - nd ➥ sell to consumer Consumers Music Co markets www.medialeaderllc.com 22 CDs
  23. 23. medialeaderllc Lessons to be learned - 2006 The organizational change implications are significant .. www.medialeaderllc.com 23
  24. 24. medialeaderllc and this can be said for all entertainment media too ... www.medialeaderllc.com
  25. 25. medialeaderllc “Bein g the coole when but n st thi most ot on ng on of the e wit telev coole h a lo ision st thi t of fu is a fe ngs n ture at o lon ger li ve th ere” www.medialeaderllc.com 25
  26. 26. medialeaderllc but we know this ‘case’ is not only about music ... Music 90% Music News acquired not paid for TV Movies www.medialeaderllc.com 26
  27. 27. medialeaderllc What’s The a letter? newspaper says they may stop delivering teenager letters on Saturdays! grandsons tween What’s Grandmother a newspaper? Scott Stantis - in NY Sunday Times 3/7/2010 www.medialeaderllc.com 27
  28. 28. medialeaderllc Feb 10, 2010 www.medialeaderllc.com 28
  29. 29. medialeaderllc 32+ bil videos watched online January -USA Music 90% tell Murdoch to forget paywall 90% Music News acquired not paid for District 9 12.5 mill downloads BitTorrent TV 80% Media Grad Students NO TV set Movies www.medialeaderllc.com 29
  30. 30. medialeaderllc ‘When reality is labeled unthinkable, it creates a kind of sickness in an industry. Leadership becomes faith-based, while employees who have the temerity to suggest that what seems to be happening is in fact happening are herded into Innovation Departments, where they can be ignored en masse.’ Clay Shirky, NYU, March 2009 www.medialeaderllc.com 30
  31. 31. medialeaderllc Leadership, Innovation and Transformation of the Corporation in the Digital Age A Leadership Development Platform for Media Leaders and all consumer facing companies are in media! C Integrated Program Practical skills and knowledge o n s t Working Conferences Established Consumer a Facing Companies n + t Digitally Enabled Leadership/Execs ↵ ↵ ➯ Skills, Frameworks, Tools n I ➯ Managerially Enabled + Technology/Media Co’s ‘Hands-on’ Illustrations n - broken out already - o v + a Proprietary Information t Pushed 24/7 i o n 31
  32. 32. medialeaderllc Leadership, Innovation and Transformation of the Corporation in the Digital Age A Leadership Development Platform for Media Leaders and all consumer facing companies are in media! C Integrated Program Practical skills and knowledge o Who we n Addressing serve what s challenges t Working Conferences Established Consumer a Facing Companies n + t Digitally Enabled Leadership/Execs ↵ ↵ ➯ Skills, Frameworks, Tools n I ➯ Managerially Enabled + Technology/Media Co’s ‘Hands-on’ Illustrations n - broken out already - o v + a Our Proprietary Information t value-added Pushed 24/7 integrated i program o n 32
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