Music in the Digital Era


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Lecture given on the International Business School in Hungary, Budapest in 2011. Changes of the Music Industry - New Ways of Music Consumption
Edited by Andras Bodrogi - New Media Manager and Consultant

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Music in the Digital Era

  1. 1. Music in The Digital EraChangesof theMusic IndustryNew Waysof Music ConsumptionEdited by AndrasBodrogiNew MediaManager and ConsultantMédiapark - WMMusicDistribution
  2. 2. Summary• Music Industry vs. Internet Technology• Changes in Music Consumption• Digital Music – Trends and Business Models• Global Market Overview• Market Overview in CEERegion• Market Overview in Hungary• Social Media vs. Music• Social Media Marketing and PR
  3. 3. Music Industry vs. Internet TechnologyInternet vs Industry• Piracy - Illegal FileSharing Networks(P2P)• „Devaluation” of Music• Disrespect of Intellectual Property Rights• Digital Music Distribution
  4. 4. Music Industry vs. Internet TechnologyInternet vs Artists in Music• Online Communication Tools for Artists• DIY Social Media PR, Marketing andDistribution• Fanbase Relation Management
  5. 5. Music Industry vs. Internet TechnologyMusic Industry in MutationAccording to the European Music Office (EMO)„Music industry is today an industry‘in mutation’, withnew consumption methods to be anticipated,new economic models to discover,new activities and new professions to define.”
  6. 6. Music Industry vs. Internet TechnologyMusic Industry must do’s• Optimalization, rationalization in business, in digital music strategy• Look for alternative channels such as mobile, invest in newbusiness models, and come up with attractive services• Without elaborated legal market the illegal will grow• Follow the changes by the development of technology• New laws for the creative industries„ Protecting intellectual property rights is key to growing the digitalbusiness.” - International Federation of Phonographic Industries (IFPI) 2010.
  7. 7. Music Industry vs. Internet TechnologyGlobal Music Industry Turnover (1973-2009)
  8. 8. Changes in Music Consumption• Format change.mp3 - .vaw - .wma• Portable Devicesmusic capable mobile phones, MP3 players, tablets• Mobile Internet - Music is mobileincreasing mobile broadband speed• Music is everywhereaccess to a music catalog, to your own music library
  9. 9. Changes in Music ConsumptionOWN AND/ OR ACCESSPay per Track and/or SubscriptioniTunes, Amazon Spotify, MOG, Vodafone KorlátlanzeneDOWNLOAD and/or STREAMINGActual trend: Cloud Music ServiceWeb storage place - Upload and Store your musicLets You Play and Edit and Sync Your Music From Anywhere and onAny Devices (Web and Mobile) i.e. Amazon, Google, Apple
  10. 10. Changes in Music ConsumptionAccording to eMusic independent research (2011):• 91% prefer to own music because it allows them to listen as many times as theywant• 89% prefer to own the music they like, rather than stream it• 86% feel that ownership gives them security that their files will not disappear• 76% use streaming to discover music that is new to them, before they decidewhether or not to buy• 74% will stream music for free, but wouldnt pay to stream• 13% pay to stream music online; 84% of consumers who pay to stream alsopurchase digital music files• 79% do not think they will ever give up owning music and just stream it online• 39% will store digital music files they own in a cloud-digital locker, so that theycan listen to them anywhere• Only 14% will increase their use of paid streaming servicesSource:
  11. 11. Changes in Music ConsumptionTheNielsen Company research on Global music consumption habitsSource:
  12. 12. Changes in Music ConsumptionTheNielsen Company research on Global music consumption habitsSource:
  13. 13. Digital Music – Trends and Business ModelsBusiness Models
  14. 14. Digital Music – Trends and Business ModelsPay pertrack (one-off payment) modelAdvantage : Simplest model to sell thetrack for oneset price- i.e. iTunes.CRM (Consumer relation management) issuesareminimizedLow level of complexity appealsto customers.Disadvantage: doesnothing to createaservicethat usersfeel compelled to revisitBrand building morecostlyServesto drivepricesand associated marginsdownWays to differentiate such service:Thepriceof thetrackUsability and Accessibility. (what really makesor breaksaservice)Thenumber of clicksit takesto purchaseatrackFavorites, recommendations, push updates, exclusivesand pre-releasecontent, dual download(to PC and mobile)
  15. 15. Digital Music – Trends and Business ModelsSubscription modelOffersadefined level of usagefor aset priceper monthCRM costsarehigherHigh amount of revenuecoming from long term subscribers= higher returnsand profitOnly timewill tell exactly how successful thismodel will beand if they can challengethedominanceof iTunesTo makeusersloyal:Allow usersto keep downloaded tracksAllow usersto savetheir favoritetracksafter their contract expiresThe one and only subscription based music service with a full catalog is theVodafone Unlimited Music Store in Hungary (Oct.2011)
  16. 16. Digital Music – Trends and Business ModelsBundled modelOffering mobilemusic servicesto their subscribersbundled aspart of their monthlyvoiceand messaging subscriptionAttract prepaid subscribersto monthly contractsBundled model for mobilemusic servicescould beserviceswhereaccessto music isbundled with thepurchaseof selected mobiledevices
  17. 17. Digital Music – Trends and Business ModelsAdvertising-funded modelSDC (SecureDigital Container) isproviding an ad-funded mobilemusic servicethat displaysadson thehandset screen whileusersarelistening to tracksMonthly subscription at adiscounted priceif usersopt to haveadvertising playing on their mobilescreen whilethey listen to tracksIt enableslabelsto let userslisten to promotional tracksfreefor alimited period of timeTherevenuefrom advertising isshared with thelabelIf mobilemusic revenuescomewholly or partly from advertising, it becomesmorecomplicated todeterminewho should bepaid how much in royalties
  18. 18. Digital Music TrendsAccording to research group Ovum, thedigital music industry will achieve$20 billion in globalrevenueby 2015 (4.6 billion dollar in 2010).It will besubscription-based music servicesthat will help driveup revenueby 60% in four years.Digital music industry to hit revenuesof $20bn by 2015• Mobilemusic revenuesaregrowing fast• Over 50% of sold mobilephonesaremusic capable• New BusinessModels: subscription services(accessto music)• Operatorsarefinding it difficult to competepurely with pay-per-track services• Theemergenceof selling DRM-freetracks, such asiTunesand Amazon haveforced operatorsto also introduceDRM-freeservicesin variousguises.• Despitemaking substantial investmentsin promoting their music stores, many operatorshavefelt that their brandsarenot strong enough to persuadesubscribersto buy musicSource: InformaTelecoms& MediaMidem
  19. 19. Digital Music Trends„Telcos and Operators have a huge opportunity to curateand lubricate digital content, and to host /curate the socialconversation around it.”ContextualizingConnectingCurationCullingCollatingSource: Music 2.0: TheFutureof music - Gerd Leonhard 2011.
  20. 20. Digital Music TrendsMobile Music TrendsThe numberofmobile musicstreamingsubscribersare increasing
  21. 21. Digital Music TrendsMobile Music TrendsMobile MusicRevenues$18.4billionin 2013
  22. 22. Digital Music TrendsFuture Mobile Music Trends• A good number of mobilemusic businesslaunchescan beexpected in 2011• Operatorswill turn to subscription modelsfor mobilemusic in 2011• MoreD2C (direct to consumer) modelsfor mobilemusic will emergeand thisinparticular will bedriven by theapp storephenomenon.• Moreconvergencebusinessmodelswill emergei.e. music servicesthat can beaccessed on mobile, online, in thecar, and on thehomestereo system.Source: InformaTelecoms& Media Further details can be fo und at m
  23. 23. Global Market Overview• In 2010 - 823 million paid usersof digital music - number isexpected to increaseto1.55 billion in 2014• Thenumber of music usersdownloading viamobilehandsetswill increasefrom483.8 million in 2009 to over 1 billion in 2014• Thegreatest growth in theglobal digital music industry will happen throughsubscriptionsto both onlineand mobilemusic channels• Record company revenuesfrom downloads(full tracks, albums, music video and streamsover thefixed and wirelessnetwork) will reach $21.1 billion in 2014, from theestimated $4.8 billion in 2009Source: Global Digital Music Forecast for online, mobile, and subscription channels, 2010 – 2014. IE Market Research 2010.
  24. 24. Market Overview in CEERegionCENTRALANDEASTERN EUROPEAN MARKET• In 2009, therewere37.5 million paid usersof digital music in EasternEuropeand that number isexpected to grow to 69.3 million in 2014• Onlinemusic download usersin Eastern Europewill increasefrom 11.9million in 2009 to 30 million in 2014• Digital music retail revenuesin Eastern Europewill increasefrom $100.6million in 2009 to$737.5 million in 2014 (59.5%).Source: Digital Music Forecast of Eastern EuropeIE Market Research 2010.
  25. 25. Market Overview in Hungary• Thedigital music locally started in 2005T-OnlineMusic Store- closed in 2009 - pay per trackSongo - closed in March 2011 - pay per track• Legal Digital Music Stores (Oct.2011)iTunes Music Store HungaryVodafone Unlimited Music - only local content - pay pertrackzenewebshop - selected local content - pay pertrack• Mobile WAPPortalsT-Mobile - Vodafone Live! - Telenor/djuice
  26. 26. Market Overview in Hungary• In 2005253.794 unitsof downloadsonlineand mobile$ 372 130• In 2008thenumber of total downloaded and streamed digital music content was41.593.837 units$ 922 917• In 2010$ 496 042Source: MAHASZ
  27. 27. Social Media vs. MusicSource: Horn Group 2007
  28. 28. Social Media vs. Music“Theterm Social Media isreally kind of an artifact, amereconstruct.”Networked MediaReal-TimeMediaUser-driven MediaEngaged MediaSource: Gerd Leonhard 2010. MIDEM
  29. 29. Social Media vs. MusicSocial networksarechanging the way howmusic isdiscovered,purchasedand consumed
  30. 30. Social Media vs. MusicA massive importance of music in social networksReflectspersonality and helpsto understand thepersonalityof peopleyou meet on such sitesPeopleexpressthemselvesviamusic and they often makefriendson thebasisof similar music tastes
  31. 31. Social Media vs. MusicMyspace Music• Still the only place online where you can find most of thebands• Opportunity to users to listen to unlimited audio and musicvideo streams (hundreds of thousands tracks)• Users can create own playlists and postup to ten songs ontheir profile pages for others to listen to• Bands can create a personalized and branded profiles filledwith information, music, video, events, blogposts, weblinks…• An important feature: a ‘buy button’ that directs users toAmazonMP3 for DRM-free downloads and Jamster forringtones
  32. 32. Social Media vs. MusicFacebook (Fan Page)• Global Audience: 741,426,860• Hungary - 3,582,320 (30.09.2011)Hungary• 52.2% female- 47.8% male14-17 - 15.9 %18-24 - 23.7 %25-34 - 25.6 %35-44 - 17.4 %45-54 - 8.1 %55-64 - 5.1 %Source:
  33. 33. Social Media vs. MusicFacebook (Fan Page)• The leading social network. Still not the most user-friendly for bands• It brings you closer to millions of fans and helps you discover newfans with unparalleled distribution• Connection: create an authentic connection by sharinginformation. Encourage for support by comments and contentshares with friends• Content: share updates about latest tour or album, stream music,post photos, videos, create event reminders…• Distribution: access to a global audience and grow your fan base.Keep current FB users engaged through News Feed updates
  34. 34. Social Media vs. Music4 Most PopularFacebook Apps ForMusicians• Facebook isfast becoming ahub for music discovery and marketing.• BandPages By Root Music isthe#6 Facebook App with 32M+ MAU(monthly averageusers).• ReverbNationsFacebook app isgaining impressivetraction reacing#25 with 12.5M MAU• Bandsintownslivemusic app isat #117 with 3.4 million MAU• SoundCloud chartsat #281 with 1.4 million MAU
  35. 35. BandPagesBy Root
  36. 36. Reverbnationwww.reverbnation.comFacebook applications
  37. 37. Bandsintowns live music
  38. 38.
  39. 39. Social Media vs. MusicMicro blogging CommunitiesTwitter http://www.twitter.comNearly 200 million usersworldwide- 110 million tweetsper dayIt enablesitsusersto send and read other users messagesText-based postsof up to 140 charactersdisplayed on theauthorsprofilepageLocal: Turulcsirip Yamm usethedatabaseof theHungarian usersof Twitter)Thesefollow around 30-40.000 HungarianTwitter users’ 40-60.000 daily tweets
  40. 40. Social Media vs. MusicTwitter• Thenumber of musiciansusing Twitter to connect with fansisgrowing• Thewaveof servicesto sharemusic on Twitter keepsgrowingFew TwitterApps formusic:• TwitterSearch – you can seewhat fansaresaying at your showsand break down thesearchesinto location, emotion and other features.• Hootsuite – analyzestatsof your Tweets, schedulemessagesin advanceandmanagemultipleaccountsfrom oneplatform.• TweetDeck – Theultimateapplication to manageyour Twitter account, Twitter searches,Facebook, LinkedIn and Myspace.
  41. 41. TwitterTwitterApp - Facebook
  42. 42. Social Media vs. MusicVideo Sharing Sites:YouTube’slargest video sharing community, aGooglepropertythat streamsover abillion videosadayOther: Vevo, Ustream, Vimeo, JustinTVLocal: Videa, IndaVideo, Webcsatorna
  43. 43. YouTube Channel„Everything you need to build andscalecustomized socialmarketing experienceswithspeed and pixel perfect quality.”
  44. 44. Social Media vs. MusicPhoto Sharing SitesFlickr• Thepremierephoto sharing site• Very well indexed in Google• They also allow to useand let othersuseyour imageswithcreativecommonslicenses• Also allowsfor video uploadOthers: Picassa, Photobucket, WindowsLivePhotoLocal: Indafotó
  45. 45. Social Media vs. MusicStreaming sites and communities,Last.FM music servicethat learnswhat you liketo listen.It can connect you to other peoplewho likewhat you likeIt recommendssongsfrom their and from your music collectionsBlip.FM placeto createyour own radio station and shareit over Facebook, Twitter,Last.FM, FriendFeed and others.Also discover music based on other DJ’sand tastemakers.Soundcloud to send your tracksVery clean and user friendly servicewith optionsto sharetracks
  46. 46. Social Media vs. MusicMobile ApplicationsMofuse• Createmobilewebsites, track your statsand get iPhoneoptimized• Worksbest with blogpostsand RSSfeedsrunning into it• It can beput on custom domain for free• It hostsAdSenseto makeafew centson advertisingMobile Roadie• Bandscreatetheir own custom iPhoneapplication• Includescontentslikephotos, music streams, YouTubevideos, events,lyrics, news, Twitter and RSSfeeds• Interactivefeatures: "wall” wherefanscan post commentsand photos• Link to Ticketmaster and LiveNation ticket salesinformation• Link to thebandsalbum(s) on iTunes
  47. 47. Social Media vs. MusicOtherToolsReverbNation toolsfor musicians: gig finders, video widgets,email services, digital distribution…etcOthers: Fanbridge- fanbase, email list management,BandmetricsNing way to createyour own social networkThey offer afreeand paid version of theserviceCollaboration Sites - Indaba, Splicemusic, KompozBlogging Platforms - Blogger, Wordpress, LiveJournal
  48. 48. Social Media Marketing and PRWays and techniques to keep up online presence andonline band-fan base interactions• To extend and keep up theonlinepresence: oneof thesignificant keysforfuturetalentsin digital music• Optimally retrievableby search enginesisan important aspect: SEO (searchengineoptimization) and SEM (search enginemarketing)• A continuousand assiduouscontent creation and shareon variousplatformsatthesametime, in diverseformatssuch astextual, visual and audiovisual• Way of tagging, adding uniquekeywordsthat describeand relateto certaincontent, that help usersand search enginesto retrieve
  49. 49. Social Media Marketing and PR• Social MediaAdministrator / Manager• Social MediaMarketer• Street Teams(based on fans)
  50. 50. Social Media Marketing and PRBroadcast mediaisdeclining and expensiveNetworked Mediaisexploding
  51. 51. Social Media Marketing and PRTrust - Attraction - Openness“Trust isthemost important currency online, so tobuild it weadhereto threeprinciplesof openinformation: value, transparency, and control”Source: GoogleSenior VP, Product ManagementJonathan Rosenbergsessay, TheMeaning of Open,published on theOffical GoogleBlog
  52. 52. Social Media Marketing and PRThree challenges• Opennessishard - and not our default setting• Conversationstaketime- and can beareal work• ‘Offering something for freeso that you can ask to getpaid later’ takesreal courage- and believe!“Wehaveto striketheright balancebetween being in touch, andbeing in control. Theirony is, themorein control weare, themoreout of touch become.”A.G Lafley CEO of Procter and Gambleat theANA Annual Conferencein Orlando, October 2006
  53. 53. Social Media Marketing and PRNo!• Push Marketing• Top-down• Domination Plays• Uni-directional marketing• Interrupting consumers• Shout: buy buy buy• 100% control everything
  54. 54. Social Media Marketing and PRYES!• Social-Mobile-Web-NativeMarketing:• Pull ‘Followers, Friends, Fans, Users’• Attract and addict• Low-cost, very targeted• Conversational• Engagement isthegoal• Message: Share. Follow. Talk.• 100% TrustSource: Gerd Leonhard Midem 2010
  55. 55. THANKYOU!
  56. 56. Sources• Hypebot -• Mashable -• Music Industry Report -• Music Ally -• Billboard Biz -• Digital Music News -• Future of Music -• Music Think Tank-• TopSpin-• Indie Music Technology -, Marketers, Futurists:• Derek Shiver-• Bob Baker-• Gerdh Leonard -• Andrew Dubber-• Bob Lefsetz -
  57. 57. ContactWMMusicDistribution Szolgáltató ésKereskedelmi Kft.Address: 1024. Kis Rókus utca 2-6Contact Person:András Bodrogi - New Media ManagerE-mail: