Who is downloading music legally? According to research for this report, the category most likely to download to keep from official sites such as iTunes are those in full-time education at 59% in comparison with 33% from unofficial sites. This is in contrast to the stereotypical student being the one not able or expecting to pay for content. And there are also signs now that legal downloads are beginning to win more share of the pie, especially with moves from Amazon and iTunes to back away from restrictive digital rights management (more for music than video right now). Key analysis: According to the ‘Digital Music Report 2009’ from the IFPI, the UK is showing the biggest growth in legal downloads, with a total of 110m single tracks were purchased in 2008 – up 42% on the year before, with albums sales also up by 65% to 10.3 million. However, given the continuing problems of illegal downloads, it’s looking likely that the digital world is never going to be as profitable as the physical one in the longer term.
Strengths Increase in music formats: The growth of the MP3 player, MP3-enabled car stereos, mobile phones with ever increasing amounts of memory for music storage – all trends that make it possible for people to listen to music wherever they might be, thereby increasing the potential market size for pre-recorded music. New distribution models: By dispensing with physical media, downloads dramatically cut the cost of providing music, while advances in recording technology are simultaneously cutting the cost of making new music. Growing market for music downloads: Once the territory of enthusiasts and geeks, legal download services are attracting an increasingly mainstream customer base, growing the potential market size. Long-tail effect: With falling production and distribution costs, record companies are better able to exploit their back catalogues, re-releasing albums that may not attract enough sales to justify a CD release. Blurring of age boundaries: A generation of forty- and fiftysomethings have grown up in the rock era, and maintain their keen interest in modern music, expanding the market for pre-recorded music beyond the traditional youthful demographic groups. Weaknesses Piracy: The greatest problem facing the record industry is piracy, with copied music freely available to anyone with a modicum of technological savvy. Threat from other media: As the sophistication of other media formats increases, so too does their appeal. Pre-recorded music risks being undermined by the growing popularity of activities such as video gaming. Dislike of DRM: The record companies’ main way of combating piracy has been to insist on DRM. This, however, risks undermining the legal download market – with DRM-protected downloads; users are paying money for inflexible product when they can easily obtain unprotected music for free. Questions about the users privacy are being raised with DRM-free downloads that are available through iTunes. Industry giants struggling to adapt: Although they are making major efforts to adapt to the new environment, many feel that the major record companies’ business model is unsuited to the digital age. The album/tour/album/tour routine, for example, does not necessarily fit into an era where downloads and MP3 players are shifting the balance towards single tracks, rather than albums. Fragmented leisure environment: Young people are able to choose from a far greater range of leisure pursuits than once was the case, while the Internet gives those with niche tastes the chance to find kindred spirits online. With a more fragmented market, finding the next big thing (or ‘Radio Friendly Unit Shifter’, as Nirvana dubbed it) becomes far more difficult for the record companies.
Show all the current existing business model options.. But only a few will be high-lighted – coz it shows more potential? Free download of songs/tracks In-exchange for viewing advertising SpiralFrog, Qtrax Paid download per song/track iTunes Artists sell their work directly on the Web as downloads Arctic Monkey Sellaband&Slicethepie ‘ Branding of Bands’ Download of music onto mobile phones Nokia, Sony Ericsson & Apple Merchandising & Touring LiveNation
Definition Success potential? Why we choose this strategy? If people won’t pay for the music, give them something extra to pay for Live shows, merchandise, DVD’s etc. You can’t download the experience of seeing your favourite band live. Sales of music DVD’s rose 16.1% in 2009 to £33.1 in the UK.
Strengths Availability of recorded music: There is a halo effect resulting from the growing availability and ease of acquiring recorded music. This raises the level of interest in live performance. Growth in venue numbers: The growth in the venues hosting live performance is bringing more artists and concerts closer to more of the population. This wider availability drives its own demand. Booming festival scene: The festival scene is booming, and with over 500 events on offer across the whole of the musical spectrum, it is encouraging new audiences back to live performance. Third age opportunities: An ageing population with time on its hands, money in its pocket, and an interest in the music of its youth signals a big opportunity for live music. But there is a need for more effective marketing to the older concert-goer. Online ticketing: Ticket purchasing has never been easier with the wide availability of online booking portals. There can be little doubt that being able to complete the transaction without any human interaction unleashes its own demand. Weaknesses Weakening economy: The weakening consumer economy will see a marked downturn in non-essential expenditure. Live music could well find itself in the firing line as households attend to the task of managing the rising cost of living. Ticket price increases: Ticket prices have been ratcheted upwards, well in advance of the rate of inflation. In the good times, fans were prepared to pay significant amounts. But the economic downturn will challenge the goodwill of music lovers who have endured major hikes in ticket costs. Competition from ‘in-concert’ content: In a tightening economy, live music will find itself having to compete much more strongly with huge amounts of ‘in-concert’ content available through pre-recorded formats or via broadcast channels. Examples of this could include live content on MTV, YouTube videos, or even unauthorised recordings that can be got from peer-to-peer platforms. Changing audience profile: The audience profile for live music will inevitably change in response to the older population. While an older audience is a positive, if the marketing isn’t right, then that opportunity will not be maximised. Slow to exploit ancillary opportunities: Online platforms give range and depth to the live music inventory. The online booking process creates a proximity to the concert-goer that can’t be achieved offline – but the music industry has been slow to exploit this as a way of driving ancillary income.
The Music BusinessAnkita Chitlangia, Dawei Li, Diaz Baseitov, Hasifah Tengah
Jean-Luc Sequeira, Luke McDermott, Rahul Dhoka, Varun Venta
Introduction: The Music Business
New Business Models
Four major labels dominate:
Sony Music Entertainment
Universal Music Group
Warner Music Group
Trend: Decrease in Sales
$21.1b (2005) to $15b (2007)
Due to rise of digital music:
A. Legal, i.e. iTunes
B. illegal, i.e. LimeWire
2003 2004 2005 2006
Decrease in Sales Volume (UK)
Music downloaded over the
internet for a fee - convenient
Major players: Apple&eMusic
Trend: Increase in sales
2008 – 42% increase
• Sales not enough to recover
lost business from CD sales
• Decline in physical revenue is
bigger than the digital uptake
• 95% of downloads are still
Increase in Sales (UK)
Rise of illegal downloads
Napster - started in 1999 and was
shut down in 2001
Paved the way for new file sharing
software, such as Kazaa, BitTorrent
Creates image that recorded music
is now a free commodity, it no longer
has monetary value
Attempts To Stop Piracy?
The industry has tried to stop piracy in vain for
many years now
Case in point has been the inability to shutdown
Pirate Bay and the various clones of Napster
Sony BMG’s root kit debacle was the most
infamous antipiracy botch up
Companies have started using such DRM technology
but are no where near controlling piracy
Overall trend in the business….
Decline of the
Rise of Digital Music.
However, still insufficient to cover
loss by the record industry
Rise of illegal downloads
with failed attempts to stop it
2001 2002 2003 2004 2005 2006 2007
“The recording business as we
all know is dying, but why is
the music business exploding?”
So, where is the $$$ coming from?
Why is Robbie Williams rich?
What is it?
Pay a certain amount per month in exchange for songs
Usually different price for a certain amount of bandwidth
Examples include Spotify, Rhapsody
Now Napster and Kazaa
Pros & Cons
Access to all songs, anywhere
On laptop, mobile
Use of log-ins
One-off payment per month
Rhapsody - $10 per month
Readiness of people to
‘rent’ their music?
Ubiquity of internet access?
Multiple sharing of log-in
Concerts: Tour & Merchandise
If people refuse to pay for the music, give
them something extra to pay for
Major players include Live Nation, AEG
and Academy Music Group
You cannot download the experience of
seeing your favourite band live
2009 – UK Sales of music DVDs rose from
16.1% to £33.1.
Major artists make 75% of their earnings from touring
Live Nation is the world’s largest promoter
One-stop shop: making albums, selling merchandise, operating
tours, running the website, producing videos and creating new
products, such as Guitar Hero
Madonna, Jay-Z, U2
Increase in number of people attending
concerts, current trends & forecast
E.g. Iron Maiden
Customised their own plane for world tour, enabling them fit
in countries that were previously too difficult to visit
Generated plenty of media coverage
Released a documentary film following the tour
DVD went straight to number 1 in music DVD charts in 22
There are still people willing to pay for hard copies of music,
but they are becoming a minority
Which effective new strategy gona work better? Argue
Opportunities to make record business better? Make the CD
Does illegal downloading really hit the industry that hard?
Might it be good?
People will never buy as much music as is available online,
therefore subscription services like Spotify are a good idea for
People take it because it is free. Might not pay for it otherwise.
Legislation + Govt policies – towards piracy