Disruption Music: Keynote by Jörg Mohaupt, Member of the Board of Warner Music at the NOAH 2012 Conference in London, Old Billingsgate on the 6th of November 2012.

1. November 2012
MUSIC:
PERMANENT DISRUPTION OR TEMPORARY INTERRUPTION?

2. THE RECORDED MUSIC SLUMP
Deflation:
 Market has declined from $28.6 bn at peak in 1999 to $16.7 bn in
2011
 Per capita music purchases were $4.8 in 1999 and $2.4 bn in 2011
– 50% decline
 Meanwhile music consumption has increased and the live music
market is near its peak
Recorded Music Per Capita Music Consumption
4.8
28.6 27.7 5.0 4.5
30
24.3 4.5
23.5 3.9
25 4.0 3.7
21.2
3.5 3.2
20 18.3
16.7 2.7
3.0 2.4
US $
15
US $ 2.5
2.0
10
1.5
5 1.0
0.5
0
0.0
1999 2001 2003 2005 2007 2009 2011
1999 2001 2003 2005 2007 2009 2011
Year
Year

3. THE RECORDED MUSIC SLUMP
Key Factors Causing Deflation:
 Unbundling of the album to single tracks
 Collapse of offline distribution and retail
 Digital enabling easy piracy
 Reduction in quality formats (vinyl → CD → MP3)
Some signs of stabilization now, as digital is overtaking physical

4. THE RECORDED MUSIC SLUMP
'Soft Factors‘
 Commoditization of the music
 Overabundance
 Discovery
?

5. IS THIS THE LIGHT AT THE END OF THE TUNNEL OR A TRAIN COMING?
 Digital (downloads and streaming) is overtaking digital
 Overall market appears to be stabilizing
 Strong anti-piracy momentum
 New retail models tailored for mobile that improve monetization
 Rebuilding of distribution, also in emerging markets (Itunes, Deezer
etc)
 Future shocks in the distribution system still likely, especially in
markets with majority physical business.
Format Change re-invigorating the recorded music industry?

6. EMERGING MARKETS?
 Recorded music industry focus traditionally on Western Europe, North America and
Japan. Limited focus on emerging markets
 Some very promising trends:
 Some of the highest internet engagement (facebook etc)
 Rapid growth of smartphone penetration – key instrument for monetization
 High economic growth and substantial middle classes
 Digital distribution has been limited so far. Amazon, Itunes and streaming
platforms reach limited (Itunes only launched in South America this year, no service
yet in Russia, China, Turkey etc)
Facebook users mm
167.6
60.7 60.5
50.5
39.4 33.2 31.4 29.9 25.3 25
 We are excited about seeing Apple and new players like Deezer enticing these markets

7. WHAT DO WE NEED TO DO?
 Continue to battle piracy
 Establish new digital distribution infrastructure worldwide
 Counter commoditization
 Re-engage listeners
Music Engages!
Roentgenzenidat Social

8. WHAT IS ACCESS INDUSTRIES DOING?
 Significant investment in content → Warner Music Group
acquisition. Continue to develop new music, and not only
pop/EDM
 Development and stimulation of new digital formats
 Active participation in increasing the quality of consumption
(Neil Young's Pono Hi-Def project and others)
 Re-building of distribution (investments in Spotify and Deezer)
 Active engagement in developing digital distribution in emerging
markets (Deezer and Itunes)
 Other Music related investments that are aimed at improving
consumer engagement (Songkick, Crowdsurge, 8Tracks etc)

9. WHAT CAN YOU DO?
 It is not anymore about disrupting the value chain. Napster was
Internet 1.0
 Consumers are looking for engagement, quality, discovery and
ease – of – use. Free music is on YouTube
 It is about re-engaging listeners with music in the digital ages:
 Discovery – where to browse and get advice
 Curation – where are today's John Peel's
 Identification
 Social Engagement
 The deflation has happened, now it is time to rebuild in a digital
world.

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