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The Canary in the Digital Coal Mine
 

The Canary in the Digital Coal Mine

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Sascha Lazimbat explores lessons to learn from digital music, with a concrete approach.

Sascha Lazimbat explores lessons to learn from digital music, with a concrete approach.

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    The Canary in the Digital Coal Mine The Canary in the Digital Coal Mine Presentation Transcript

    • The Canary in the Digital Coal MineWhat can publishing learn from a decade of digital music? Milan, February 2nd 2012
    • Introduction Sascha LazimbatSince 2010 Managing Director A2 Electronic Publishing2007 - 2010 Managing Director Business & Corporate Development Warner Music Group C&EE2005 – 2007 Co-Founder, Zebralution Digital Music Distribution2001 - 2005 Head Of Music & Video Vodafone Germany
    • Similarities-  Similar traditional value chain-  Similar copyright framework-  Similar operational challenges-  Same new digital retailers
    • Differences-  Music already became digital with the CD-  Users consume music in a different way-  Songs can „travel“ without translation-  It´s 2012 and the world keeps spinning faster!
    • What happened to the music industry sincethe turn of the century?-  Global recorded music revenues down > 30% German music industry turnover 2001-2010 in million €, source: Bundesverband Musikindustrie
    • What happened to the music industry sincethe turn of the century?-  Global recorded music revenues down > 30%-  Out of 5 major companies, only 3 survive
    • What happened to the music industry sincethe turn of the century?-  Global recorded music revenues down > 30%-  Out of 5 major companies, only 3 survivex x
    • What happened to the music industry sincethe turn of the century?-  Global recorded music revenues down > 30%-  Out of 5 major companies, only 3 survive-  1/3 of jobs in the industry lost Blue line: employees in German music industry 2001-2010, source: Bundesverband Musikindustrie
    • What happened to the music industry sincethe turn of the century?-  Global recorded music revenues down > 30%-  Out of 5 major companies, only 3 survive-  1/3 of jobs in the industry lost-  At the same time: more music released and consumed than ever before
    • Timeline of physical / digital music units700,00 Rio and Napster iPod 2G Musicload iTunes YouTube 100 Mill. iPhone in Rapid- iTunes Creative closes, and Store in Launch MySpace EU share #10 DRM- MP3- Kaazaa MySpace EU, Accounts website free,600,00 Player launches Launch Vodafone worldwide Amazon iTunes MP3 MP3 in SW + phones EU iPod500,00400,00300,00200,00100,00 0,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 PHYSISCHE TONTRÄGER PHYSICAL SALES DIGITALE VERKÄUFE DIGITAL SALES GEBRANNTE CDs/DVDs BURNED CDs/DVDs ILLEGALE DOWNLOADS ILLEGALAll figures for Germany only in millions of units. Sources: GfK MediaControl Download-Report, Brenner-Studie Bundesverband Musikindustrie
    • Shift in music consumer spending Basis in Mrd. € 5,10 5,13 4,48 4,49Source: Veranstaltungsstudie 2008 idkV / Musikmarkt/ GfK MediaControl
    • The record companies´response:the 360° model d2c online ads Synch Merchandising Endorsement fan clubs compass image: Smial, used under http://creativecommons.org/ licenses/by-sa/3.0/deed.en
    • Physical products are still the musicindustry´s cash-cow in Europe Configuration- specific digital market shares for the UK in 2011: - Albums 23,5% - Singles 99,3% Sources: IFPI Digital Music Report 2012, BPI, Trendreport Bundesverband Musikindustrie
    • AssumptionsPublishing must...-  support legal alternatives to piracy-  be prepared for decreasing revenues-  look for additional revenue streams-  not neglect its physical product
    • Digital Rights Management - Apple utilizes ConsumerAll major labels Fairplay groupsinsist on DRM - other retailers critize Apple rely on Windows DRMOpenletterFrom SteveJobs, Feb.2007 „EMI drops DRM“ other majors follow in 2008DRM is nowadays only used within subscription conditional downloadservices like Napster, Spotify etc.!
    • Assumptions-  DRM frustrates consumers when it does not work seamlessly and incompatibilities arise-  DRM benefits closed eco-systems and hurts independent retailers and device makers-  DRM has not saved any media industry, neither will it´s abolishment destroy any industry
    • Digital music retail landscape-  iTunes clear market leader-  Amazon second where the company operates local stores-  Few serious „á la carte“ competitors-  Subscription services strong in some markets
    • Ebook digital retail landscapeWho else?
    • Assumptions-  Amazon will be here to stay, making it difficult even for Apple and Google-  Brick´n´mortar booksellers will struggle to compete with the Internet champions-  There may be niches for specialized retailers and different business models
    • Turning physical dollars into digital cents
    • Turning physical dollars into digital cents,Part II
    • E-Book end consumer prices - a spot check No. Title Source Price 1 Stealing Phoenix For. Publisher €6,45/0,99 2 Entführt Self-Publisher €0,89 3 Grimm´s Märchen For. Publisher €0,99 4 Sonne, Wind und Mond Self-Publisher €0,99 5 Kindle - das inoffizielle Self-Publisher €2,99 Handbuch 6 Der Junge, der Träume Trad. Publisher €8,49 schenkte 7 Holunderküsschen Self-Publisher €2,99 8 Der Beobachter Trad. Publisher €8,99 9 Verblendung Trad. Publisher €8,99 10 Der Hundertjährige, ... Trad. Publisher €11,99German Kindle store charts on randomly picked day in January 2012
    • E-Book end consumer prices - a spot check No. Title Source Price 1 Stealing Phoenix For. Publisher €6,45/0,99 2 Entführt Self-Publisher €0,89 3 Grimm´s Märchen For. publisher €0,99 4 Sonne, Wind und Mond Self-Publisher €0,99 5 Kindle - das inoffizielle Self-Publisher €2,99 Handbuch 6 Der Junge, der Träume Trad. Publisher €8,49 schenkte 7 Holunderküsschen Self-Publisher €2,99 8 Der Beobachter Trad. Publisher €8,99 9 Verblendung Trad. Publisher €8,99 10 Der Hundertjährige, ... Trad. Publisher €11,99German Kindle store charts on randomly picked day in January 2012
    • DIY in the music industry: Long Tail or Long Fail?-  76,685 albums released in the U.S. in 2011-  88,5% of sales from just 1,500 titles-  Only 1,215 albums sold more than 10,000 copies-  80% of titles sold less than 100 copies-  DIY service providers like CD baby pay out an average $100 per artist / annum
    • DIY: in the future, everybody will be famous for fifteen minutes-  Tila Tequila: most famous person on MySpace in 2006-  32 million views of her song-  Releases failed to enter Billboard charts-  Became the star of a now cancelled reality show Photo: Philip Nelson, used under http://creativecommons.org/licenses/by-sa/2.0/deed.de
    • DIY: which music artists can do it on theirown?established artists newcomers withformerly on majors strong fan base
    • Self-Publishing: the eBook revolution-  John Locke and Amanda Hocking enter Kindle million club-  KDP generating substantial Kindle sales-  Apple launches iBooks Author-  Self-publishing platforms
    • Our own experience with self-published titles-  Short stories by one of Germany´s most popular bloggers-  Social media marketing buzz via Twitter-  #1 iBookstore, top 5 Kindle store
    • „eriginals berlin“ e-book imprint-  No traditional marketing or PR-  Social media marketing-  Digital retail marketing-  #1 & #2 iBookstore releases and seven further top 50 ebooks
    • Why does self-publishing work better for ebooks than for music? An assumption...-  Music purchases are triggered by a combination of stimuli -  radio, MTV, billboards, reviews, interviews, live shows etc.-  Readers seem to rely much more on trusted recommendations -  social media/social reading/recommendations will be king! BUT: PRICE MAY BE ANOTHER KEY TO SELF-PUBLISHING´S BIG SUCCESS STORY!
    • Digital music pricing: superstar vs.newcomer
    • What readers say about 99 cent self- published books „For 99 cent it´s „The book is definitely worth well-written and buying!“ perfect for it´s „Big reading fun price tag“ at xxs-price“ „A great book „Total crap! save for the Would be OK for dialogues!“ free but at 0,99 it ´s too expensive“Source: all quotes from German iBookstorecustomer reviews
    • What did Steve Jobs say?„I can tell you asone of the largestsellers of contenton the internet todate - price itaggressively andgo for volume.“ Photo: Matt Yohe, used under http://creativecommons.org/licenses/by-sa/2.0/deed.de
    • Outlook-  More books will be read, but readers will spend less-  Everybody in the business will have to do more to keep afloat-  Only lean organizations will survive-  Self-publishing might be a game-changer
    • Thank you! sascha.lazimbat@a2ep.dehttp://www.linkedin.com/pub/sascha- lazimbat/0/5a6/44b