American businesses lose $250 billion annually and over 750,000 jobs due to intellectual property theft, according to reports. The music industry in particular has struggled with billions in losses each year attributed largely to online piracy through peer-to-peer file sharing networks and digital theft of copyrighted content. While the industry has pursued legal action against uploaders and downloaders, these efforts have proven mostly ineffective as new piracy platforms continually emerge. The adoption of digital rights management also failed to curb piracy and alienated customers. The industry now seeks new business models to adapt to the digital marketplace.

1. 1

2. 2

3. “American businesses lose $250 billion
every year, and we have lost more than
750,000 jobs because of intellectual
property theft.”
-Introduce Intellectual Property Rights Enforcement
Legislation, 24/7/2008
3

4. “According to the Institute for Policy Innovation,
more than $58 billion is lost to the U.S. economy
annually due to content theft, including more
than 373,000 lost American jobs, $16 billion in
lost employees earnings, plus $3 billion in badly
needed federal, state and local governments’ tax
revenue.”
- 16/12/2011
4

5. “Of the total $6.1 billion in annual losses LEK
estimated to MPAA studios, the amount
attributable to online piracy by users in the
United States was $446 million”
- Cato Liberty, 3/1/2012
5

6. 6

7. 7

8. 8
Context

9. 92

10. 10

11. 11
 Vivendi-Universal
 $12.5 billion loss in the first 3 financial
quarters of 2002
(Economist, 16 Jan 2003)
 EMI
 £54.4 million loss in the first 2 quarter of
2001 (£138.4 million profit over same
period in 2002)
(Economist, 18 Jan 2003)

12. 12
E.M.I. R.I.P?
 2002
EMI sack Mariah
Cost = $28 million
 2004
EMI sack 1,500 staff
 2007
Axe boss, Alain Levy
Profits -10% on ‘06
£50 million loss

13. 13
E.M.I. R.I.P?
 2007
 Terra Firma pay £4.2
billion for EMI
 Citigroup provides
loan of £2.6 billion

14. EMI’s death throws
2009
 £412 million net loss
 Global economic crisis
 Problems restructuring
debt
2010
 £1.56 billion net loss
 Forced to write down the
value of its catalogue
 £1.04 billion impairment
charge
 Debt of £2.6 billion
14

15. EMI today?
Recorded music
 Back catalogue
Music publishing
 Improving top-line
operating profits
 from £56m to £163m
 Overall profits: ~£300
million
 Source: Pratley, 2010
15

16. EMI reborn?
2011-12
 Business broken up
 EMI + Universal = 36%
of recorded music sales
globally
16

17. Percentage of total global music
revenues
17

18. 18
Causes?
 The Internet
 Peer-2-Peer (P2P) transfer
 Digitisation of music as files
 Broadband growth/penetration (up 23% since
2006: IFPI, 2008: 5)
 2002: 1 billion illegal files (Sanghera)
 2007: ratio of illegal-legal tracks: 20-1 (IFPI,
2008)

19. 19
Industry voices
 RIAA (Recording Industry
Association of America)
 http://www.riaa.com/
 IFPI (International Federation of the
Phonographic Industry)
 http://www.ifpi.org/
 BPI (British Phonographic Industry)
 http://www.bpi.co.uk/
 UK Music
 http://www.ukmusic.org/

20. 20

21. 21
About IMPALA
IMPALA was established in April 2000 to represent
independent music companies. 99% of Europe’s music
companies are small or medium sized enterprises (SMEs).
Known as the “independents”, they are world leaders in
terms of innovation and discovering new music and artists -
they produce more than 80% of all new releases.
The independents also produce 80% of the sector’s jobs.

22. 22
UK Singles market
1970s until 1999:
 annual UK singles sales = 70 million
 Since 1999, this has more than halved.
 (BPI, 2005: p8)
2008: growth of 33%
 115 million + sales
 (BPI, 2009)

23. Album market
Down 3.2% in 2008
Digital albums = 10 million sales
 65% increase on 2007 (= 7.7% of market)
Optimism?
 UK Grammy success (Radiohead, Coldplay)
 New digital services?
23

24. UK music market 1997-2013 (millions)
24
BPI
0
20
40
60
80
100
120
140
160
180
200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Singles
Albums

25. UK music market 1997-2013 (millions)
25
BPI
0
20
40
60
80
100
120
140
160
180
200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Singles
Albums
Average

26. UK music market 1997-2013 (millions)
26
BPI
0
1000
2000
3000
4000
5000
6000
7000
8000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Singles
Albums
Streaming

27. Yet…
27
BPI

28. Digitalmusictosavethe
industry?
28
source

29. 29

30. 30

31. 31

32. 32

33. 33

34. 34

35. 35

36. 36

37. 37

38. 38

39. 39

40. 40

41. UK music industry growing!
 Revenues up by 4.7%
41

42. UK music industry growing again!
 Revenues up by 5%
42

43. UK music industry levelling out?
 Revenues down by 4.8%
 Global decline of 11%
43

44. The new marketplace?
UK album sales (2008)
44

45. The Long Tail (Anderson 2004)
45

46. The Long Tail (Anderson 2004)
Power law distribution curve (aka Pareto
curve)
20%
head
80%
tail 46

47. The Long Tail (Anderson 2004)
Selling more of the ‘tail’ may be the
future for the music industry business
model
 Value no longer in the hits but in the
volume of content
 Spreading revenue even thinner?
80%
tail
20%
head 47

48. 48
HistoryHistory

49. 49
HistoryHistory
 1970s: home taping and organised crime

50. 50
HistoryHistory
 Early IRCs 1990-94
 Evolved into the P2P
networks
Napster
Gnutella
Morpheus
Kazaa
Grokster
 Leyshon et al (2005:
180-1) a ‘musical gift
economy’

51. 51
Business model
To ‘find, fund, record, promote and
market music. Record companies fund
that process by retaining the rights in the
artist’s sound recordings’
 (BPI, 2005: 27)
stop piracy, increase profitability?

52. 52
What changed?
 ‘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’
 (Leyshon et al, 2005: 181)

53. 53
Scale of music industry
 ‘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 %
 (Leyshon, 2005: 187)
 How does this fit against sales/profits?

54. 54
Attitude shiftsAttitude shifts
1. Recent developments within the music
industry
 Context (clubs; festivals; merchandise)
1. Synergetic marketing of music
 Cross platform tie-ins (X-Factor, Pop Idol)
1. The inability to sustain consumer attention
 Competition for income (games, DVDs, mobiles,
Internet subscriptions)

55. 55
The blame game?
 Industry business model has been in trouble at
least since the 1980s.
 Temporary delay via CD back catalogues
 (Breen, 1995)
 It is easier to blame an external process
(piracy) than to admit the industry itself
made a series of errors

56. 56
Responses
 ‘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.’
 (Rojek, 2005: 359)

57. Metallica vs Napster (April 2000)
57
 Name and shame users
 Maximum fine of $150,000 per mp3 downloaded
 2007: OiNK.cd and TVLinks closed down
 2011: Mega Upload taken offline

58. 58
One down, another appears
 May 2003 Kazaa: 230.3 million downloads
 New user uptake of 13 million a month
(Teather, 2003)

59. BitTorrent protocol
1 in 3 broadband users are pirates?
 Torrentfreak, 3 Feb 2009
uTorrent user base: 28 million monthly
users
 Torrentfreak, 25 Dec 2008
59

60. 60
Busted?
 RIAA PR own-goal: prosecution of 12 year old Brianna
LaHara (BBC, 10/9/2003)
 Illinois Senator Dick Durbin:
 ‘Are you headed to junior high schools to round up the
usual suspects?’

61. Sue your customers?
61
File-Sharers Buy 30% More Music Than Non-P2P Peers
Source: American Assembly, via Torrentfreak, Oct 2012

62. 62
Digital Rights Management (DRM)

63. 63
Apple’s CEO
 “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?”
 Steve Jobs, 2007

64. 64

65. 65

66. 66

67. 67
Conclusion
 The traditional music industry business model
is under threat and forcing the industry to
react:
 prosecute major uploaders
 prosecute downloaders randomly
 develop anti-piracy measures, such as DRM
 pressurise ISPs (3 strikes?)
 new innovations?

68. 68
 The industry has been partially responsible for
its problems:
 it didn’t adapt to change quickly enough
 multinational business interests are split into
smaller divisions which are partially responsible for
the encouragement of consumer banditry
 hardware/software advances destabilise the
traditional role of the industry

69. 69
Selected sources
 BBC, 10/9/2003, ‘Music firms target 12 year old’ at http://news.bbc.co.uk/1/hi/entertainment/music/3096340.stm
 BBC, 21/02/2006, ‘Broadband growth speeds forward’ available at http://news.bbc.co.uk/1/hi/technology/4736526.stm
 BPI, 2005, Illegal Filesharing Fact Sheet
 BPI, 2009, ‘UK reports resilient music sales in 2008’ press release http://www.ifpi.org/content/library/full-year-2008.pdf
 M. Breen, 1995, ‘The End of the World as We Know it: Popular Music’s Cultural Mobility’ in Cultural Studies¸ 9 (3): 486-504.
 ‘Lights! Camera! No profits!’, Economist, 00130613, 1/18/2003, Vol. 366, Issue 8307
 ‘How to manage a dream factory’, Economist, 00130613, 1/18/2003, Vol. 366, Issue 8307
 Malcolm Gladwell, 2000, The Tipping Point: How Little Things Can Make a Big Difference, Abacus
 IFPI, 2007, ‘Digital Music Report’ available from http://www.ifpi.org/content/section_resources/index.html
 IFPI, 2008, ‘Digital Music Report’ available from http://www.ifpi.org/content/library/DMR2008-summary.pdf
 Steve Jobs, 6/2/2007, ‘Thoughts on music’ available at http://www.apple.com/hotnews/thoughtsonmusic/
 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.
 H. Parker et al, 1998, Illegal Leisure: the normalization of adolescent recreational drug use, London: Routledge.
 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.
 Chris Rojek, 2005, ‘P2P Leisure exchange - net banditry and the policing of intellectual property’, in Leisure Studies, 24: 4, 357-367.
 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.
 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
 Sarah Thornton, 1995, Club Cultures, Cambridge: Polity.
 Griffin Mead Woodworth, 2004, ‘Hackers, Users and Suits: Napster and Representations of Identity’ in Popular Music and Society,
27: 2, 161-184.
 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

70. Image sources
 P1,2, 5, Automania, 2005, “Christmas Music”, http://www.flickr.com/photos/automania/74037479/
 P6, hc gilje, 2007, “EMI Electola”, http://www.flickr.com/photos/hcgilje/501769056/
 P7, 8, aus_chick, 2006, “EMI”, http://www.flickr.com/photos/hcgilje/501769056/
 P10, 25, 34, myuibe, 2008, “copyright and digital culture”, http://www.flickr.com/photos/myuibe/2132305949/
 P11, 12, 16, 17, _ambrown, 2006, “Music Millenium, Portland Oregon”,
http://www.flickr.com/photos/dietpoison/195288442/
 P18, p_kirn, 2007, “Handmade Music 8/23/07 with Etsy Labs, CDM, and Make”,
http://www.flickr.com/photos/p_kirn/1218971167/
 P31-3, karola riegler photography, 2009, “Vinyl kills the mp3 industry”,
http://www.flickr.com/photos/karola/3639759076/
 P35, 37, Ferrari + caballos + fuerza = cerebro Humano, 2009, “Musica comprimida – Compressed Music”,
http://www.flickr.com/photos/gallery-art/3497849677/
 P38, GabryPk, 2008, “Music Is My Drug pt. 2”, http://www.flickr.com/photos/gabrypk/3107000631/
 P47, Selma90, 2009, “Apple” http://www.flickr.com/photos/selma90/3675162262/
70