Digital Music Distribution
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Digital Music Distribution

Digital Music Distribution

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  • OMG,i just discored the name for the subject i was so into. I did Socio Informatics and Geo Informatics, Music Technology, but never Music Informatics. How can i contact you, want to chat to you and where did you complete this?
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Digital Music Distribution Document Transcript

  • 1. Path and milestones from analogue to digital music distribution Miguel Rodrigues BSc Music Informatics Student Number: 11511645 Module: 2MUS414 – Anatomy of the Music Industry
  • 2. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics Digital Downloading is said to have been the major cause of the difficulties currently facing the Record Industry. In this essay I will try to trace the path of delivery from analogue to digital, highlighting and explaining the significant milestones which have allowed digital downloading to have made such a massive impact on the record business and looking forward over the next few years, I will give my opinion of what changes and the impact that digital music delivery can have on the record music industry. The role of the distributor is to get music from labels or artists to sales outlets, be that in the traditional form of supplying high street retailers (HMV or Virgin Mega store), other music outlets or supermarkets with a physical product such as cassette, CD and vinyl, or supplying digital files to various online outlets including iTunes, Rhapsody, Napster, eMusic and the multitude of other digital stores. Before the arrival of the internet, analog or the traditional distribution channels were divided in four channels; record manufacturer, record distributor, retail outlet and record clubs. Record manufacturers (or we can say the major labels) control around 75% of the music market, and as such, control the distribution of most of 2MUS414 – Anatomy of the Music Industry – 1 Path and milestones from analogue to digital music distribution
  • 3. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics the music available today. While the major labels distribute their own products, record distributors also exist as small independent companies who are paid by bands or independent labels to deliver their products to retail outlets. Finally, record clubs offer CD, cassette or vinyl at reduced prices, bypassing distribution and retail costs by acquiring the products directly from record companies. According to several studies, sales of physical format are declining and being replaced by digital formats. A particular concern for major labels is that album sales could suddenly drop dramatically being replaced by song downloads (singles). However, the independent sector is a congregating force. This means that traditional record companies are signing fewer and fewer artists and that the artist can sell their music immediately without the backing of a record company. The popularity of song downloading, expanding digital catalogues and the rising demand for music videos are factors contributing to the growth of the digital music market. According to In- Stat, by 2011, online sales of digital music will represent 26% of all music purchased worldwide. The internet is now an essential 2MUS414 – Anatomy of the Music Industry – 2 Path and milestones from analogue to digital music distribution
  • 4. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics distribution channel for digital music and online social networking sites such as YouTube, MySpace, Facebook, hi5 and iLike will develop as key drivers for music promotion. In the near future they will substitute the traditional independent promoters such radio and TV stations. Music downloaded to mobile phones is also an important factor for the rise in digital music distribution. The path of digital distribution it is much shorter and easier for record labels, distributors/aggregators and consumers. The paths are: Aggregators acquire the right to distribute music from different sources, aggregators sell music via the World Wide Web and the consumer acquires the music from the web. Web technologies, electronic payment and the appearance of new devices, such as the iPod, that play digital audio formats are increasing in popularity and driving the demand for the MP3- formatted music, creating new marketing forms and new promotion channels such as podcasting and digital radio. It is not always necessary to sell CDs and it is often more cost effective for the artist and the consumer to go through a digital channel. 2MUS414 – Anatomy of the Music Industry – 3 Path and milestones from analogue to digital music distribution
  • 5. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics Major online retailers are finally making music available without copy protection, meaning that consumers will fully enjoy the ease of use made possible by digital technology. According to IFPI, in 2007, the demand for music continues to grow. In the US the unit sales (including online downloads and physical sales) totaled 1.37 billion, an increase of 14.7% in comparison with 2006. The unit sales of CDs fell to 449.2m, which represents a fall of 19%. On the other hand, digital albums and single tracks sales rose 50m, up to 54% (10% of the album sales in the US) and 844.1m, up to 45%, respectively. In the UK, the BPI 2007 retail sales figures show a growth of 29.3% on single sales and that the albums sales dropped by 10.8%. Globally, the digital music market continues rising. Broadband lines growth 34% in 2006, the song catalogue online rose by 100%, single tracks downloaded had a growth of 89%, subscription service users, mobile subscriptions and 3G mobile subscriptions rose by 25%, 11% and 52%, respectively. Finally, portable player sales had a growth of 43% (comparison between 2005 and 2006). 2MUS414 – Anatomy of the Music Industry – 4 Path and milestones from analogue to digital music distribution
  • 6. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics The value to consumers is massive now that consumers have the ability to choose singles, they can spend a lot less to get the music they want and they have been liberated from the domination of the album because they no longer have to buy 10 or 12 songs to get the one or two they want. There are more than four million tracks available online. A big milestone is the introduction of download sales into the charts. This is another positive step in leveling the playing field between small independent artists and established acts. Another important mark on the download sales is the use of mobile phones as portable music devices – the move from ringtones to real music. Mobile music is becoming an important revenue stream for record companies, already accounting for almost half of digital music revenues. Digital music distribution creates new marketing opportunities and gives the opportunity for the emerging new labels (digital-only labels). 2MUS414 – Anatomy of the Music Industry – 5 Path and milestones from analogue to digital music distribution
  • 7. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics New digital distribution channels such as podcasting and digital radio (key licensing issues need to be resolved for these new channels to reach their market potential) The vast majority of artists would appear to be benefiting as well from digital distribution. It would appear that many more artists are selling singles than are produced by the established members of the recording industry and the star system of physical album sales did not afford the majority of artists the ability to sell directly to the public as digital distribution does. The traditional value chain treats information as a supporting element of the value-adding process (recording, reproduction, packaging, promotion, marketing and distribution activities), not as a source of value. A virtual value chain exists when value-adding steps are performed through and with information. For digital music distribution there is no longer a physical product to manufacture. Instead the product itself is information. Companies that create value with digital assets may be able to regenerate income with an infinite number of transactions because a song is recorded once, but in a digital format 2MUS414 – Anatomy of the Music Industry – 6 Path and milestones from analogue to digital music distribution
  • 8. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics it can be replicated and distributed an infinite number of times with low costs. With the changes come new opportunities for artists to bypass production of physical CDs and avoid royalty contracts that depend on recouping production costs. Meanwhile, record labels and production companies lose their shares but this changing on the structure of the value chain can have major impacts on the distribution of profits within the industry. Internet demographics of young, educated and well-off customers are suited to music purchases because there are low consumer and seller risks due to relatively low product costs. The digital music market is a newly vulnerable market: easy to enter, attractive to attack and difficult to defend. The vulnerability of record labels is forcing them to adopt new strategies to maintain profit levels. The record labels can provide promotional and production management services, offer piracy prevention and copyright protection, or they can attack online channels to lock out independent distribution. With internet distribution and music piracy, digital music retailers can add new values through marketing, promotions, 2MUS414 – Anatomy of the Music Industry – 7 Path and milestones from analogue to digital music distribution
  • 9. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics copyrighting and licensing, as well as an enforcement of intellectual property rights and piracy prevention. There will be new incentives as the roles of the players in the value chain shift and it is likely to be affected by issues related to intellectual property rights. For the future, the music business needs more support for Digital Rights Management (DRM), which is the key enabler of digital music services allowing new and flexible uses by the consumers. Digital Rights Management is an essential tool, helping to increase consumer choice while protecting the works of music creators from unauthorized distribution and unfair use. The biggest challenge with DRM technologies is to make them operate smoothly enough so that they are largely invisible to consumers, as this remains a very significant problem in the current digital music market. The ultimate structure of the music market is in flux, but these milestones indicate that the music industry is moving in a consumer and artist friendly direction. It remains to be seen how far distribution spreads within the music sector. To support my idea about digital distribution I have included some quotes about digital visions of some industry leaders: 2MUS414 – Anatomy of the Music Industry – 8 Path and milestones from analogue to digital music distribution
  • 10. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics "The expansion in digital music is providing us with more and more new ways to add value for consumers, artists and an ever- growing circle of business partners and brands. Now we - the music industry, retailers and technology companies - must work together to maximise this unique opportunity." Alain Levy, Chairman and CEO, EMI Music. "The proliferation of digital music platforms means that consumers can now, more than ever, enjoy music virtually anytime, anywhere. The digital music revolution is also contributing to the transformation of Warner Music Group from a traditional record and songs-based company into a diverse, music-based content company capable of delivering not only songs and records, but ringtones, master ringtones, music video downloads, album art, lyrics and other content across an ever increasing array of distribution channels, digital devices and music services. Warner Music Group will continue to make digital music and new media a core part of the company's global mission." Alex Zubillaga, Executive vice President, Digital Strategy and Business Development, Warner Music Group. 2MUS414 – Anatomy of the Music Industry – 9 Path and milestones from analogue to digital music distribution
  • 11. Miguel Rodrigues Student Number: 11511645 Course: BSc Music Informatics References • IFPI: 07 – Digital music report. Available at http://www.ifpi.org/content/library/digital-music-report-2007.pdf • IFPI, Music Market Data 2007. Available at http://www.ifpi.org/content/library/MUSIC-MARKET-DATA- 2007.pdf • Chiariglione, L ,The Digital Media Manifesto, Use case no. 05: Music distribution. Available at http://www.chiariglione.org/contrib/2003/030810chiariglione01.h tm • Bockstedt, J., Kauffman, R., Riggins, F (2004), THE MOVE TO ARTISTS-LED ONLINE MUSIC DISTRIBUTION: EXPLAINING STRUCTURAL CHANGES IN THE DIGITAL MUSIC MARKET. Available at http://misrc.umn.edu/workingpapers/fullpapers/2004/0422_0912 04.pdf 2MUS414 – Anatomy of the Music Industry – 10 Path and milestones from analogue to digital music distribution