Mac281 Producers, Profit, Pirates & Peers Sem2 2008 9

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Mac281 Producers, Profit, Pirates & Peers Sem2 2008 9

  1. 1. Producers, Profit, Pirates & Peers MAC281
  2. 2. Context <ul><li>AOL-Time Warner </li></ul><ul><li>Sony/BMG </li></ul><ul><li>Universal </li></ul><ul><li>EMI </li></ul><ul><li>Responsible for 80% of global music sales </li></ul><ul><li>Interests in the media, technology & entertainment sectors </li></ul>
  3. 3. 2
  4. 4.
  5. 5. <ul><li>Vivendi-Universal </li></ul><ul><li>$12.5 billion loss in the first 3 financial quarters of 2002 </li></ul><ul><li>( Economist , 16 Jan 2003) </li></ul><ul><li>EMI </li></ul><ul><li>£54.4 million loss in the first 2 quarter of 2001 (£138.4 million profit over same period in 2002) </li></ul><ul><li>( Economist , 18 Jan 2003) </li></ul>
  6. 6. E.M.I. R.I.P? <ul><li>2002 </li></ul><ul><ul><li>EMI sack Mariah </li></ul></ul><ul><ul><li>Cost = $28 million </li></ul></ul><ul><li>2004 </li></ul><ul><ul><li>EMI sack 1,500 staff </li></ul></ul><ul><li>2007 </li></ul><ul><ul><li>Axe boss, Alain Levy </li></ul></ul><ul><ul><li>Profits -10% on ‘06 </li></ul></ul><ul><ul><li>£50 million loss </li></ul></ul>
  7. 7. Causes <ul><li>The Internet </li></ul><ul><li>Peer-2-Peer (P2P) transfer </li></ul><ul><li>Digitisation of music as files </li></ul><ul><li>Broadband growth/penetration (up 23% since 2006: IFPI, 2008: 5) </li></ul><ul><li>2002: 1 billion illegal files (Sanghera) </li></ul><ul><li>2007: ratio of illegal-legal tracks: 20-1 (IFPI, 2008) </li></ul>
  8. 8. Industry voices <ul><li>RIAA (Recording Industry Association of America) </li></ul><ul><ul><li>http://www.riaa.com/ </li></ul></ul><ul><li>IFPI (International Federation of the Phonographic Industry) </li></ul><ul><ul><li>http://www.ifpi.org/ </li></ul></ul><ul><li>BPI (British Phonographic Industry) </li></ul><ul><ul><li>http://www.bpi.co.uk/ </li></ul></ul><ul><li>UK Music </li></ul><ul><ul><li>http://www.ukmusic.org/ </li></ul></ul>
  9. 9. Singles market <ul><li>1970s until 1999: </li></ul><ul><ul><li>annual UK singles sales = 70 million </li></ul></ul><ul><ul><li>Since 1999, this has more than halved. </li></ul></ul><ul><ul><ul><ul><li>(BPI, 2005: p8) </li></ul></ul></ul></ul><ul><li>2008: growth of 33% </li></ul><ul><ul><li>115 million + sales </li></ul></ul><ul><ul><ul><li>(BPI, 2009) </li></ul></ul></ul>
  10. 10. Album market <ul><li>D own 3.2% in 2008 </li></ul><ul><li>Digital albums = 10 million sales </li></ul><ul><ul><li>65% increase on 2007 (= 7.7% of market) </li></ul></ul><ul><li>Optimism? </li></ul><ul><ul><li>UK Grammy success (Radiohead, Coldplay) </li></ul></ul><ul><ul><li>New digital services? </li></ul></ul>
  11. 11.
  12. 12.
  13. 13.
  14. 14. UK music market 1997-2008 (millions) Data supplied by The Official Charts Company (BPI Press Release: 7 th Jan 2009)
  15. 15. 2008 UK singles top sellers Data supplied by The Official Charts Company (BPI Press Release: 7 th Jan 2009) Pos Title Artist DUS Label Corporate Group 1 Hallelujah Alexandra Burke 887,933 Syco Music Sony BMG 2 Hero X Factor Finalists 751,243 Syco Music Sony BMG 3 Mercy Duffy 535,664 A&M Universal 4 I Kissed A Girl K a ty Perry 479,453 Virgin EMI 5 Rockstar Nickelback 469,652 Roadrunner Warner 6 American Boy Estelle feat Kanye West 460,474 Atlantic/Homeschool Warner 7 Sex On Fire Kings of Leon 451,499 Hand Me Down Sony BMG 8 Now You’re Gone Basshunter feat DJ Mental Theo 443,534 Hard2Beat MSHK 9 4 Minutes Madonna feat Justin Timberlake 430,064 Warner Bros Warner 10 Black & Gold Sam Sparro 429,086 Island Universal
  16. 16. 2008 UK artist albums Data supplied by The Official Charts Company (BPI Press Release: 7 th Jan 2009) Pos Title Artist DUS Label Corporate Group 1 Rockferry Duffy 1.68 m A&M Universal 2 The Circus Take That 1.45 m Polydor Universal 3 Only By The Night Kings Of Leon 1.18 m Hand Me Down Sony BMG 4 Spirit Leona Lewis 1.11 m Syco Music Sony BMG 5 Viva La Via Or Death And All His Coldplay 1.09 m Parlophone EMI 6 Good Girl Gone Bad Rihanna 820,584 Def Jam Universal 7 Day & Age Killers 703,213 Vertigo Universal 8 Out Of Control Girls Aloud 591,785 Fascination Universal 9 Funhouse Pink 587,984 LaFace Sony BMG 10 Scouting For Girls Scouting For Girls 574,630 Epic Sony BMG
  17. 17. 2008 UK combined albums Data supplied by The Official Charts Company (BPI Press Release: 7 th Jan 2009) Pos Title Artist DUS Label Corporate Group 1 Rockferry Duffy 1.68 m A&M Universal 2 The Circus Take That 1.45 m Polydor Universal 3 Only By The Night Kings Of Leon 1.18 m Hand Me Down Sony BMG 4 Spirit Leona Lewis 1.11 m Syco Music Sony BMG 5 Viva La Via Or Death And All His Coldplay 1.09 m Parlophone EMI 6 Mamma Mia OST 1.01 m Polydor Universal 7 Now 71 Various Artists 964,218 EMI Virgin/UMTV EMI/Universal 8 Now 70 Various Artists 865,333 EMI Virgin/UMTV EMI/Universal 9 Now 69 Various Artists 832,673 EMI Virgin/UMTV EMI/Universal 10 Good Girl Gone Bad Rihanna 820,584 Def Jam Universal
  18. 18. The new marketplace? UK album sales
  19. 19. The Long Tail (Anderson 2004)
  20. 20. The Long Tail (Anderson 2004) <ul><li>Power law distribution curve (aka Pareto curve) </li></ul>20% head 80% tail
  21. 21. The Long Tail (Anderson 2004) <ul><li>Selling more of the ‘tail’ may be the future for t he music industry business model </li></ul>80% tail 20% head
  22. 22. History <ul><li>1970s: home taping and organised crime </li></ul>
  23. 23. History <ul><li>Early IRCs 1990-94 </li></ul><ul><li>Evolved into the P2P networks </li></ul><ul><ul><li>Napster </li></ul></ul><ul><ul><li>Gnutella </li></ul></ul><ul><ul><li>Morpheus </li></ul></ul><ul><ul><li>Kazaa </li></ul></ul><ul><ul><li>Grokster </li></ul></ul><ul><li>Leyshon et al (2005: 180-1) a ‘musical gift economy’ </li></ul>
  24. 24. Business model <ul><li>To ‘find, fund, record, promote and market music. Record companies fund that process by retaining the rights in the artist’s sound recordings’ </li></ul><ul><ul><li>(BPI, 2005: 27) </li></ul></ul><ul><li>stop piracy, increase profitability? </li></ul>
  25. 25. What changed? <ul><li>‘ a set of broader cultural forces … have changed the role of music within society, and relegated its immediacy and importance among many of its consumers’ </li></ul><ul><ul><li>(Leyshon et al, 2005: 181) </li></ul></ul>
  26. 26.
  27. 27. Scale of music industry <ul><li>‘ no more than 10 percent of records actually recoup the money the record industry invests in its production’ with some companies stating that the real figure is closer to 3 % </li></ul><ul><ul><ul><li>(Leyshon, 2005: 187) </li></ul></ul></ul><ul><li>How does this fit against sales? </li></ul>
  28. 28. Attitude shifts <ul><li>Recent developments within the music industry </li></ul><ul><ul><li>C ontext (clubs; festivals; merchandise) </li></ul></ul><ul><li>Synergetic marketing of music </li></ul><ul><ul><li>C ross platform tie-ins ( X-Factor, Pop Idol ) </li></ul></ul><ul><li>The inability to sustain consumer attention </li></ul><ul><ul><li>Competition for income (games, DVDs, mobiles, Internet subscriptions) </li></ul></ul>
  29. 29. The blame game? <ul><li>Industry has been in trouble at least since the 1980s. </li></ul><ul><ul><li>Temporary delay via CD back catalogues </li></ul></ul><ul><ul><li>(Breen, 1995) </li></ul></ul><ul><li>It is easier to blame an external process (Internet) than to admit the industry itself made a series of errors </li></ul>
  30. 30. Responses <ul><li>‘ Instead of exploring P2P exchange as a business opportunity, they defined it as a piratical threat. In doing so, they inadvertently implied that they had the right to determine how people apply after-sales use of intellectual property by re-asserting commercial copyright in a set of relations that were effectively deregulated.’ </li></ul><ul><ul><li>(Rojek, 2005: 359) </li></ul></ul>
  31. 31. Metallica vs Napster (April 2000) <ul><li>Name and shame users </li></ul><ul><li>Maximum fine of $150,000 per mp3 downloaded </li></ul><ul><li>2007: OiNK.cd and TVLinks closed down </li></ul>
  32. 32.
  33. 33. One down, another appears <ul><li>May 2003 Kazaa: 230.3 million downloads </li></ul><ul><li>New user uptake of 13 million a month </li></ul><ul><ul><li>(Teather, 2003) </li></ul></ul>
  34. 34. BitTorrent protocol <ul><li>1 in 3 broadband users are pirates? </li></ul><ul><ul><li>Torrentfreak, 3 Feb 2009 </li></ul></ul><ul><li>uTorrent user base: 28 million monthly users </li></ul><ul><ul><li>Torrentfreak, 25 Dec 2008 </li></ul></ul>
  35. 35. The Pirate Bay on trial (Feb 2009)
  36. 36. Busted? <ul><li>RIAA PR own-goal: prosecution of 12 year old Brianna LaHara (BBC, 10/9/2003) </li></ul><ul><li>Illinois Senator Dick Durbin: </li></ul><ul><li>‘ Are you headed to junior high schools to round up the usual suspects?’ </li></ul>
  37. 37. Digital Rights Management (DRM) <ul><li>Protected AAC audio format </li></ul><ul><li>Digital downloads = 15% of market </li></ul><ul><li>iTunes = 5 billion+ sold </li></ul><ul><li>< 3% of music on average iPod is bought from iTunes </li></ul>
  38. 38. Apple’s CEO <ul><li>“ DRM’s haven’t worked … to halt music piracy … In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on the CDs by the music companies … So if [they] are selling over 90 percent of the music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system?” </li></ul><ul><ul><li>Steve Jobs, 2007 </li></ul></ul>
  39. 39. Conclusion <ul><li>The traditional music industry business model is under threat and forcing the industry to react: </li></ul><ul><ul><li>prosecute major uploaders </li></ul></ul><ul><ul><li>prosecute downloaders randomly </li></ul></ul><ul><ul><li>develop anti-piracy measures, such as DRM </li></ul></ul><ul><ul><li>pressurise ISPs (3 strikes?) </li></ul></ul><ul><ul><li>n ew innovations? </li></ul></ul>
  40. 40. <ul><li>The industry has been partially responsible for its problems: </li></ul><ul><ul><li>it didn’t adapt to change quickly enough </li></ul></ul><ul><ul><li>multinational business interests are split into smaller divisions which are partially responsible for the encouragement of consumer banditry </li></ul></ul><ul><ul><li>hardware/software advances destabilise the traditional role of the industry </li></ul></ul>
  41. 41. Selected sources <ul><li>BBC, 10/9/2003, ‘ Music firms target 12 year old ’ at http://news.bbc.co.uk/1/hi/entertainment/music/3096340.stm </li></ul><ul><li>BBC, 21/02/2006, ‘ Broadband growth speeds forward ’ available at http://news.bbc.co.uk/1/hi/technology/4736526.stm </li></ul><ul><li>BPI, 2005, Illegal Filesharing Fact Sheet </li></ul><ul><li>BPI, 2009, ‘UK reports resilient music sales in 2008’ press release http://www.ifpi.org/content/library/full-year-2008.pdf </li></ul><ul><li>M. Breen, 1995, ‘ The End of the World as We Know it: Popular Music ’ s Cultural Mobility ’ in Cultural Studies ¸ 9 (3): 486-504. </li></ul><ul><li>‘ Lights! Camera! No profits! ’ ,   Economist , 00130613, 1/18/2003, Vol. 366, Issue 8307 </li></ul><ul><li>‘ How to manage a dream factory ’ ,   Economist , 00130613, 1/18/2003, Vol. 366, Issue 8307 </li></ul><ul><li>Malcolm Gladwell, 2000, The Tipping Point: How Little Things Can Make a Big Difference , Abacus </li></ul><ul><li>IFPI, 2007, ‘ Digital Music Report ’ available from http://www.ifpi.org/content/section_resources/index.html </li></ul><ul><li>IFPI, 2008, ‘Digital Music Report ’ available from http://www.ifpi.org/content/library/DMR2008-summary.pdf </li></ul><ul><li>Steve Jobs, 6/2/2007, ‘ Thoughts on music ’ available at http://www.apple.com/hotnews/thoughtsonmusic/ </li></ul><ul><li>Andrew Leyshon, 2003, ‘ Scary Monsters? Software formats, peer-to-peer networks, and the spectre of the gift ’ in Environment and Planning D: Soceity and Space , 21 (5): 533-58. </li></ul><ul><li>H. Parker et al, 1998, Illegal Leisure: the normalization of adolescent recreational drug use , London: Routledge. </li></ul><ul><li>H. Parker et al, 2002, ‘ The normalisation of “ sensible ” recreational drug use: further evidence from the North-West England Longitudinal Study ’ in Sociology , 36 (4): 941-64. </li></ul><ul><li>Chris Rojek, 2005, ‘ P2P Leisure exchange - net banditry and the policing of intellectual property ’ , in Leisure Studies , 24: 4, 357-367. </li></ul><ul><li>Sathnam Sanghera, 2002, ‘ Rock ‘ n ’ Roll Suicide: How Napster, TV-created Pop and a Dearth of Talent are Killing the Record Industry ’ , Financial Times , 15 November, p19. </li></ul><ul><li>David Teather 23/7/2003, ‘ Music firms on pirates ’ tails ’ in The Guardian , available at http://business.guardian.co.uk/story/0,,1004030,00.html </li></ul><ul><li>Sarah Thornton, 1995, Club Cultures , Cambridge: Polity. </li></ul><ul><li>Griffin Mead Woodworth, 2004, ‘ Hackers, Users and Suits: Napster and Representations of Identity ’ in Popular Music and Society , 27: 2, 161-184. </li></ul><ul><li>Richard Wray, 13/01/2007, ‘ EMI sacks music boss as profits drop ’ in The Guardian , available at http://business.guardian.co.uk/story/0,,1989490,00.html </li></ul>

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