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

1. The Canary in the Digital Coal
Mine
What can publishing learn from a decade of digital music?
Milan, February 2nd 2012

2. Introduction Sascha Lazimbat
Since 2010 Managing Director
A2 Electronic Publishing
2007 - 2010 Managing Director Business &
Corporate Development
Warner Music Group C&EE
2005 – 2007 Co-Founder, Zebralution
Digital Music Distribution
2001 - 2005 Head Of Music & Video
Vodafone Germany

4. Similarities
- Similar traditional value chain
- Similar copyright framework
- Similar operational challenges
- Same new digital retailers

5. 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!

6. What happened to the music industry since
the turn of the century?
- Global recorded music revenues down > 30%
German music industry turnover
2001-2010 in million €, source:
Bundesverband Musikindustrie

7. What happened to the music industry since
the turn of the century?
- Global recorded music revenues down > 30%
- Out of 5 major companies, only 3 survive

8. What happened to the music industry since
the turn of the century?
- Global recorded music revenues down > 30%
- Out of 5 major companies, only 3 survive
x x

9. What happened to the music industry since
the 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

10. What happened to the music industry since
the 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

11. Timeline of physical / digital music units
700,00
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
iPod
500,00
400,00
300,00
200,00
100,00
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
ILLEGAL
All figures for Germany only in millions of units. Sources: GfK MediaControl Download-Report, Brenner-Studie Bundesverband Musikindustrie

12. Shift in music consumer spending
Basis in Mrd. € 5,10 5,13 4,48 4,49
Source: Veranstaltungsstudie 2008 idkV / Musikmarkt/ GfK MediaControl

13. 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

14. Physical products are still the music
industry´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

15. Assumptions
Publishing must...
- support legal alternatives to piracy
- be prepared for decreasing revenues
- look for additional revenue streams
- not neglect its physical product

16. Digital Rights Management
- Apple utilizes Consumer
All major labels Fairplay groups
insist on DRM - other retailers critize Apple
rely on
Windows DRM
Open
letter
From Steve
Jobs, Feb.
2007
„EMI drops DRM“ other majors follow
in 2008
DRM is nowadays only used within subscription conditional download
services like Napster, Spotify etc.!

17. 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

18. 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

19. Ebook digital retail landscape
Who else?

20. 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

21. Turning physical dollars into digital cents

22. Turning physical dollars into digital cents,
Part II

23. 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 €11,99
German Kindle store charts on randomly picked day in January 2012

24. 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 €11,99
German Kindle store charts on randomly picked day in January 2012

25. 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

26. 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

27. DIY: which music artists can do it on their
own?
established artists newcomers with
formerly on majors strong fan base

28. 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

29. 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

30. „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

31. 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!

32. Digital music pricing: superstar vs.
newcomer

33. 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 iBookstore
customer reviews

34. What did Steve Jobs say?
„I can tell you as
one of the largest
sellers of content
on the internet to
date - price it
aggressively and
go for volume.“
Photo: Matt Yohe, used under http://creativecommons.org/licenses/by-sa/2.0/deed.de

35. 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

36. Thank you!
sascha.lazimbat@a2ep.de
http://www.linkedin.com/pub/sascha-
lazimbat/0/5a6/44b