Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Producers, Profit, Pirates & Peers MAC281 [email_address] @rob_jewitt
Context
2
<ul><li>Vivendi-Universal </li></ul><ul><li>$12.5 billion loss in the first 3 financial quarters of 2002  </li></ul><ul><l...
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><...
E.M.I. R.I.P? <ul><li>2007 </li></ul><ul><ul><li>Terra Firma pay £4.2 billion for EMI </li></ul></ul><ul><ul><li>Citigroup...
EMI today? <ul><li>2009 </li></ul><ul><li>£412 million net loss </li></ul><ul><li>Global economic crisis </li></ul><ul><li...
EMI today? <ul><li>Recorded music </li></ul><ul><li>Back catalogue  </li></ul><ul><li>Music publishing </li></ul><ul><li>I...
EMI today? <ul><li>Nov 2011 - RIP </li></ul><ul><li>Business broken up </li></ul><ul><li>EMI + Universal = 38% of recorded...
Causes <ul><li>The Internet </li></ul><ul><li>Peer-2-Peer (P2P) transfer </li></ul><ul><li>Digitisation of music as files ...
Industry voices <ul><li>RIAA (Recording Industry Association of America) </li></ul><ul><ul><li>http://www.riaa.com/ </li><...
Singles market <ul><li>1970s until 1999: </li></ul><ul><ul><li>annual UK singles sales = 70 million </li></ul></ul><ul><ul...
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% incr...
UK music market 1997-2011 (millions) BPI
UK music market 1997-2011 (millions) BPI
Yet… BPI
Digital music to save the industry?
Digital music to save the industry? Source:  BPI
Digital music to save the industry? Source:  BPI
UK music industry growing! <ul><li>Revenues up by 4.7% </li></ul>
UK music industry levelling out? <ul><li>Revenues down by 4.8% </li></ul><ul><li>Global decline of 11% </li></ul>
The new marketplace? UK album sales (2008)
The Long Tail (Anderson 2004)
The Long Tail (Anderson 2004) <ul><li>Power law distribution curve (aka Pareto curve) </li></ul>20% head 80%  tail
The Long Tail (Anderson 2004) <ul><li>Selling more of the  ‘tail’ may be the future for t he  music industry business mode...
History
History <ul><li>1970s: home taping and organised crime </li></ul>
History <ul><li>Early IRCs 1990-94 </li></ul><ul><li>Evolved into the P2P networks </li></ul><ul><ul><li>Napster  </li></u...
Business model <ul><li>To  ‘ find, fund, record, promote and market music.  Record companies fund that process by retainin...
Scale of music industry <ul><li>‘ no more than 10 percent of records actually recoup the money the record industry invests...
What changed? <ul><li>‘ a set of broader cultural forces … have changed the role of music within society, and relegated it...
Attitude shifts <ul><li>Recent developments within the music industry </li></ul><ul><ul><li>C ontext (clubs; festivals; me...
The blame game? <ul><li>Industry business model has been in trouble  at least  since the 1980s.  </li></ul><ul><ul><li>Tem...
Responses <ul><li>‘ Instead of exploring P2P exchange as a business opportunity, they defined it as a piratical threat.  I...
Metallica vs Napster (April 2000) <ul><li>Name and shame users </li></ul><ul><li>Maximum fine of $150,000 per mp3 download...
One down, another appears <ul><li>May 2003 Kazaa: 230.3 million downloads </li></ul><ul><li>New user uptake of 13 million ...
BitTorrent protocol <ul><li>1 in 3 broadband users are pirates? </li></ul><ul><ul><li>Torrentfreak, 3 Feb 2009 </li></ul><...
The Pirate Bay on trial (Feb 2009)
Busted? <ul><li>RIAA PR own-goal: prosecution of 12 year old Brianna LaHara (BBC, 10/9/2003) </li></ul><ul><li>Illinois Se...
Sue your customers?
Digital Rights Management (DRM) <ul><li>Protected AAC audio format </li></ul><ul><li>Digital downloads = 15% of market (an...
Apple’s CEO <ul><li>“ DRM’s haven’t worked … to halt music piracy … In 2006, under 2 billion DRM-protected songs were sold...
Conclusion <ul><li>The traditional music industry business model is under threat and forcing the industry to react: </li><...
<ul><li>The industry has been partially responsible for its problems: </li></ul><ul><ul><li>it didn ’t adapt to change qui...
Selected sources <ul><li>BBC, 10/9/2003,  ‘ Music firms target 12 year old ’  at  http://news.bbc.co.uk/1/hi/entertainment...
Image sources <ul><li>P1,2, 5, Automania, 2005,  “Christmas Music”,  http://www.flickr.com/photos/automania/74037479/ </li...
Upcoming SlideShare
Loading in …5
×

Mac281 Producers, Profit, Pirates & Peers

1,410 views

Published on

Updated slides based on the problems the music industry faced in lieu of the Internet.
Updated annually

Published in: Education, Technology, Business
  • Be the first to comment

  • Be the first to like this

Mac281 Producers, Profit, Pirates & Peers

  1. 1. Producers, Profit, Pirates & Peers MAC281 [email_address] @rob_jewitt
  2. 2. Context
  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. E.M.I. R.I.P? <ul><li>2007 </li></ul><ul><ul><li>Terra Firma pay £4.2 billion for EMI </li></ul></ul><ul><ul><li>Citigroup provides loan of £2.6 billion </li></ul></ul>
  8. 8. EMI today? <ul><li>2009 </li></ul><ul><li>£412 million net loss </li></ul><ul><li>Global economic crisis </li></ul><ul><li>Problems restructuring debt </li></ul><ul><li>2010 </li></ul><ul><li>£1.56 billion net loss </li></ul><ul><li>Forced to write down the value of its catalogue </li></ul><ul><li>£1.04 billion impairment charge </li></ul><ul><li>Debt of £2.6 billion </li></ul>
  9. 9. EMI today? <ul><li>Recorded music </li></ul><ul><li>Back catalogue </li></ul><ul><li>Music publishing </li></ul><ul><li>Improving top-line operating profits </li></ul><ul><ul><li>from £56m to £163m </li></ul></ul><ul><li>Overall profits: ~£300 million </li></ul><ul><ul><ul><ul><ul><li>Source: Pratley, 2010 </li></ul></ul></ul></ul></ul>
  10. 10. EMI today? <ul><li>Nov 2011 - RIP </li></ul><ul><li>Business broken up </li></ul><ul><li>EMI + Universal = 38% of recorded music sales globally </li></ul>
  11. 11. 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>
  12. 12. 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>
  13. 13. 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>
  14. 14. 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>
  15. 15.
  16. 16.
  17. 17.
  18. 18.
  19. 19. UK music market 1997-2011 (millions) BPI
  20. 20. UK music market 1997-2011 (millions) BPI
  21. 21. Yet… BPI
  22. 22. Digital music to save the industry?
  23. 23. Digital music to save the industry? Source: BPI
  24. 24. Digital music to save the industry? Source: BPI
  25. 25. UK music industry growing! <ul><li>Revenues up by 4.7% </li></ul>
  26. 26. UK music industry levelling out? <ul><li>Revenues down by 4.8% </li></ul><ul><li>Global decline of 11% </li></ul>
  27. 27.
  28. 28. The new marketplace? UK album sales (2008)
  29. 29. The Long Tail (Anderson 2004)
  30. 30. The Long Tail (Anderson 2004) <ul><li>Power law distribution curve (aka Pareto curve) </li></ul>20% head 80% tail
  31. 31. 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><ul><ul><li>Value no longer in the hits but in the volume of content </li></ul></ul>80% tail 20% head
  32. 32. History
  33. 33. History <ul><li>1970s: home taping and organised crime </li></ul>
  34. 34. 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>
  35. 35. 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>
  36. 36. 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>
  37. 37. 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>
  38. 38. 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>
  39. 39. The blame game? <ul><li>Industry business model 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>
  40. 40. 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>
  41. 41. 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>
  42. 42. 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>
  43. 43. 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>
  44. 44. The Pirate Bay on trial (Feb 2009)
  45. 45. 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>
  46. 46. Sue your customers?
  47. 47. Digital Rights Management (DRM) <ul><li>Protected AAC audio format </li></ul><ul><li>Digital downloads = 15% of market (and growing) </li></ul><ul><li>iTunes = 9 billion+ sold </li></ul><ul><li>< 3% of music on average iPod is bought from iTunes </li></ul>
  48. 48. 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>
  49. 49. 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>
  50. 50. <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>
  51. 51. 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>
  52. 52. Image sources <ul><li>P1,2, 5, Automania, 2005, “Christmas Music”, http://www.flickr.com/photos/automania/74037479/ </li></ul><ul><li>P6, hc gilje, 2007, “EMI Electola”, http://www.flickr.com/photos/hcgilje/501769056/ </li></ul><ul><li>P7, 8, aus_chick, 2006, “EMI”, http://www.flickr.com/photos/hcgilje/501769056/ </li></ul><ul><li>P10, 25, 34, myuibe, 2008, “copyright and digital culture”, http://www.flickr.com/photos/myuibe/2132305949/ </li></ul><ul><li>P11, 12, 16, 17, _ambrown, 2006, “Music Millenium, Portland Oregon”, http://www.flickr.com/photos/dietpoison/195288442/ </li></ul><ul><li>P18, p_kirn, 2007, “Handmade Music 8/23/07 with Etsy Labs, CDM, and Make”, http://www.flickr.com/photos/p_kirn/1218971167/ </li></ul><ul><li>P31-3, karola riegler photography, 2009, “Vinyl kills the mp3 industry”, http://www.flickr.com/photos/karola/3639759076/ </li></ul><ul><li>P35, 37, Ferrari + caballos + fuerza = cerebro Humano, 2009, “Musica comprimida – Compressed Music”, http://www.flickr.com/photos/gallery-art/3497849677/ </li></ul><ul><li>P38, GabryPk, 2008, “Music Is My Drug pt. 2”, http://www.flickr.com/photos/gabrypk/3107000631/ </li></ul><ul><li>P47, Selma90, 2009, “Apple” http://www.flickr.com/photos/selma90/3675162262/ </li></ul>

×