1. Music Distribution:
Analysis of two Emerging Business Models
Tommaso De Benetti
University of Helsinki
Department of Communication
Faculty of Social Sciences
Master Thesis
October 2009
1

2. Index
Chapter 1: Introduction 4
1.1 The metamorphosis of distribution 4
1.2 Thesis overview 6
Chapter 2: The Dynamics of Music Industry: the Artist’s point of
View
8
2.1 Majors, indie labels, sales and the lost art of being modestly
profitable
8
2.2 From the garage to the stadium: becoming a rockstar 11
Chapter 3: Case Studies 14
3.1 Introducing the case studies 14
3.2 Defining Last.fm 15
3.2.1 Last.fm and rights 19
3.3 Defining NIN Ghosts I-IV 22
3.3.1 A digression: In Rainbow 23
3.3.2 The first sketch: The Inevitable Rise and Liberation of
NiggyTardust
24
3.3.3 Ghost I-IV, a step into the unknown 26
Chapter 4: Methodology and Theoretical Framework 28
4.1 Methodology 28
4.1.1 Methodology and coding frame on the Last.fm case study 29
4.1.2 Methodology and coding on the NIN Ghosts I-IV case study 32
4.1.3 Theme Analysis 33
4.2 Scope and limits of the research 35
4.3 Theoretical Framework and Literature Review 36
4.3.1 Media: Single and Continuous Creation Products 36
4.3.2 Why Media differ from other Products 37
4.3.3 The Case of Music 39
2

3. 4.3.4 Music Value Chains 40
4.3.5 Disintermediation 43
4.3.6 Organizational Changes on the Music Field 44
4.3.7 A New Perspective: the Emerging Distribution Model 48
Chapter 5: Analysis 54
5.1 Analysis: Findings and Discussion - Last.fm Case 54
5.1.1 Artist Royalty Program forum thread 58
5.1.2 Radio Subscriptions 63
5.1.3 Visual Radio 67
5.2 Analysis: Findings and Discussion - NIN Ghosts Case 69
5.2.1 Articles on chart positions and sales figures 70
5.2.2 Blog Reactions 73
5.2.3 Ghosts Film Festival 77
Chapter 6: Evolution of the Market 81
6.1 Last.fm competitors and new trends 81
6.2 NIN: after Ghosts I-IV 84
6.3 Two records influenced by Ghosts I-IV 85
6.4 Portishead in search of a Business Model 89
6.5 The Pirate Bay and The Pirate Party 90
6.6 A different opinion: Robert Smith from The Cure 93
Chapter 7: Conclusion 95
7.1 Final Words on the Last.fm Case 95
7.2 Final Words on the NIN Ghost Case 97
7.3 Relation of the cases to the Emerging Distribution Model 100
7.4 Further Research 101
7.5 Closing comments 102
Appendix: Bibliography 103
Appendix II: Original Quotations 111
3

4. Chapter 1 - Introduction
1.1 The metamorphosis of distribution
The introduction of media delivery through Internet represents for the media industry a
dramatic point of no return. All the practices taken for granted in the past decades seem
to apply only partially to the virtual environment, challenged also by new widespread
fruition styles, increasing attitude among users in sharing files and growing resentment
towards a market considered obsolete, greed and outpaced by technical possibilities.
This cultural shift is to ascribe both to the raise of a generation of tech-savvy users,
often committed in keeping Internet free, and to a negative backlash provoked by the
industry itself, due lack of coordination and entrepreneurial foreseeing.
Matt Mason, in his book The Pirate’s Dilemma: How hackers, punk capitalists and
graffiti millionaires are remixing our culture and changing the world, mentions an
enlightening 2003’s speech of John Perry Barlow, co-founder of Electronic Frontier
Foundation and former lyricist for the Grateful Dead:
“The enigma is this: if our property can be infinitely reproduced and
instantaneously distributed all over the planet without cost, without our
knowledge, without it’s even leaving our possession, how can we protect it?
How are we going to get paid for the work we do with our minds? And, if we
can’t get paid, what will assure the continued creation and distribution of such
work? Since we don’t have a solution to what is a profoundly new kind of
challenge, and are apparently unable to delay the galloping digitalization of
everything not obstinately physical, we are sailing into the future on a sinking
ship.” (Mason 2008)
In the recent years, to protect itself from the wind of change, the industry as a whole
seemed to build shelters instead of catching the opportunity to build windmills. This
situation is slowly changing, and after many false steps, it seems that successful
business models are emerging from the limbo of aborted attempts and scarce
understanding of digitalization and the audience represented by Internet users. The
4

5. necessity of rethinking the whole system is not upheld only by media concerns of plain
piracy issues: the truth is that copyright has not yet faced the mother of all troubles.
On October 2008, at the demo-scene Alternative Party taking place in the Cable Factory
of Ruoholahti (Helsinki), the company RepRap (http://reprap.org) had on display the
first working model of self-replicating 3D printer. A 3D printer is a machine that does
the same thing as any other printer do, but in 3D. To say it with other words, 3D printers
print objects.
fig. 1 - A working 3D printer prototype. The tag says: “3D PRINTER - Can print
various plastics. SELF REPLICATING - Just add nuts, bolts, electronics and assembly.
OPEN HARDWARE - People are working on printing circuits board and motors. A
REVOLUTION - Cost of objects will approach material costs, customization and new
product designs are trivial, anyone can afford an own tabletop factory.”
Companies are already using 3D printers to keep prototypes far from indiscreet eyes and
make the whole design process more efficient and responsive. The cheapest
configuration on the market costs around £15.000, but RepRap is promising models as
5

6. cheap as £300. Soon, producing an in-house prototype of an object will see the
production times shrinking from several months to one or two days.
An entire generation of users considers normal to get music, games and videos for free,
directly from the web. Contents are ripped from TV channels to end up on YouTube
within minutes from their broadcasting. People remix media contents 24/7 and share
them with friends on social networks as daily routine. What will happen when
downloading 3D blueprints of objects from the Internet will be as easy as downloading
a record, and 3D printers will be able to replicate virtually any material?
In this regard, the fate of the music industry, and the way the industry will be able to
relate to this new audience, will be a good indicator of the times to come. The priority
of every industry whose goods could be easily digitalized is now only one: give people
good reasons to keep buying originals, without forgetting that the notions of
“production” and “distribution” are changing their meaning at light speed 1.
1.2 Thesis overview
As we saw, the fields subject to dramatic changes due technology advancements are not
only media related: videos, music, games and texts are only the beginning, with
physical objects being next in line. However, all these categories have really specific
peculiarities and deserve a separate in-depth examination.
This thesis will focus only on music distribution: to use Mason’s words:
“If we learn to copy everything like we did with MP3 files, the fate of the music
industry may have been the canary in the coal mine, an omen for the end of
mass production as we know it.” (Mason 2008)
Every sign is telling us that the changes in the music field will play an important role in
the cultural match for future goods distribution: is the old paradigm falling apart? Why?
What kind of new models—empowered by never arresting technologies—are trying to
replace it to better suit the current situation?
6
1 See Appendix II - [1]

7. These are the issues this text will try to address.
Some background knowledge is needed to understand this work thoroughly. For this
reason Chapter 2 will recap how the normal cycle of production and distribution of
music worked until the moment the web started to offer new possibilities. Chapter 3 will
introduce the two study cases object of my analysis, while Chapter 4 is dedicated to
methodology, review of previous literature and the introduction of a new theoretical
model.
The analysis and discussion of the results appear in Chapter 5, while Chapter 6 covers
the most relevant happenings related to the study cases during the period 2008-2009.
Closing comments and suggestion for future research are eventually laid out in Chapter
7.
Many texts and articles concurred to the writing of this work. While the complete list
can be found in the Appendix I section, it is worth to mention some of them before
starting. The most relevant and inspiring research I have been using while writing this
thesis is Financial relationships between artist and record company by Arto Tuomola, a
work written in 2003 that, despite the six years passed, still represents a deep insight on
some of the most obscure music industry’s dynamics. Equally useful was the work of
Paola Dubini and Elena Raviola, especially for the value chain contribute of their
article.
As can be noticed, many of the sources are web-based and non-academic: the cases I
“dissected” and analyzed are extremely recent and almost no relevant research has been
published on them. The emerging business models discussed in this thesis are strongly
linked to the web, Internet users, discussion forums, anti-copyright communities and
social networks. As such, it felt perfectly natural and appropriate to heavily reference
Internet resources when more traditional source material was evidently unable to keep
up the pace with updates and the unfolding of the cases.
7

8. Chapter 2 - The Dynamics of Music Industry: the Artist’s Point of View
The term “music industry” groups the myriads of organizations, companies, musicians
and professional figures working in the field of music creation and delivery. This
industry constitutes a complicated network of entities whose analysis could easily fill
entire books. For this very reason and keeping in mind the purpose of this thesis, this
chapter focuses only on a specific aspect of the music industry, trying to address the
question how did the business of music work so far from the point of view of an artist?
Other aspects of it—such as value chains, collective societies and rights—are discussed
in Chapter 4, while the rest, not being strictly relevant in this context, has been left to
the reader’s interest.
2.1 Majors, indie labels, sales and the lost art of being modestly profitable
With the expression “music majors” people refers only to four companies: Universal
Music Group, Sony Music Entertainment, EMI and Warner Music Group. Every one of
these companies control smaller labels for differentiation purposes, trying to tap into
different audiences and markets.
Recording companies that are not under the control of the four major groups are
generally addressed as independent, or indie. The term is a bit controversial: some indie
labels are part of big and well financed corporations, while others are truly on their own.
Critics do not help in this linguistic quarrel, often labeling as indie everything that is not
strictly mainstream. According to Brunett the difference is that mid-sized companies:
“[...] gain their share of market by making production and distribution deals
with the majors, or with independent studios, presses and production and
distribution facilities.” (Brunett 1996)
8

9. while independent labels operate:
“[...] through a network of independent, often short-term contacts and
contracts [and] place their emphasis on cheapness of production and often
have localized networks of production and distribution.” (Brunett 1996)
What are the reasons behind the will of majors to distribute labels they do not own?
First of all, for risk reduction purposes: when the totality of music production and
distribution is in their hands, no alternative for efficient and capillary coverage of the
market is left. Secondly, these services come for a fee and the middle market (budget
CDs, compilations) represents always a steady flow of cash. Eventually, majors are
interested in using the indie market as “playground” for its ability to deal with sudden
changes in trends and its potential for further monetization.
Data released by RIAA (Recording Industry Association of America) for 2007-2008
picture a market progressively switching from physical distribution to digital
downloads, with commercial results more positive than suggested by RIAA’s own
claims of unbearable damages provoked by illegal downloads. While physical supports
lost a total of -24,9% in units and -27% in value, legal digital downloads gained
respectively +28,1% and +30,1%, meaning that the market as a whole increased the
units distributed by +3,2% and its total value by +3,1% .
9

10. fig. 1 - Statistics for the digital music market in the USA, 2007-2008 (RIAA 2008)
fig. 2 - Statistics for the physical music market in the USA, 2007-2008 (RIAA 2008)
If the market is not going as bad as estimated, why new models are emerging? The main
issue with the classic model to produce, distribute and promote a record, is that the only
way to recoup the money invested is to aim for spectacular sales, a goal achieved,
10

11. according to Music & Copyright, by less than 3% of the records. Tuomola describes the
logic behind it as a “high risk - high profit” field of business. As a matter of fact,
producing and promoting an album is an expensive process, often carried out with no
certainty of success. According to the issue of Music & Copyright dated 13 March
2002, a mainstream album only becomes profitable for a major record company when it
sells over 500.000 units2, while in the beginning of the 1970s there was still some sense
of normal production costs, normal sales, normal profits. In Britain, for example, the
break-even sales for LPs was usually about 23.000 units (Tuomola 2003).
2.2 From the garage to the stadium: becoming a rockstar
In a famous—and foul-mouthed— article originally appeared in Maximum Rock’n’Roll
Magazine during the 90’s, Steve Albini, the legendary producer of In Utero by Nirvana,
decided to discuss with abundance of details what was the problem tainting the industry.
To summarize his long and sharp invective, Albini so describes the path every artist has
to go through before and after getting a contract:
The first person to get in touch with the band is generally somebody from A&R (Artists
& Repertoire). He or she is usually a young person, with a background similar to the
one of the artists, limited experience in the record business and hired solely to instill
trust. His or her duties are to assure the band that nobody will interfere with their
creative process and present the band with a letter of intent, or "deal memo," which
loosely states some terms, and affirms that the band will sign with the label once a
contract has been agreed on. This memo is, for all legal purposes, a binding document:
once the band signs it, they are under obligation to conclude a deal with the label. If the
label presents them with a contract that the band doesn’t want to sign, all the label has
to do is to exercise its position of strength: there are a hundred other bands willing to
sign the exact same contract. These letters never have any terms of expiration, so the
band remains bound by the deal memo until a contract is signed, no matter how long
that takes. The band cannot sign to another laborer or even put out its own material
unless they are released from their agreement, which, according to Albini, almost never
happens (Albini 1993).
11
2 My note: this number might be exaggerated: other sources suggest a common break even point
around 250.000 copies.

12. A typical contract states that a band will get 13% royalties (minus 10% packaging
deductions). The band will be signed for four years, with options on each year, and the
first’s year advance alone will be $250.000. Some other advance payments can be
included from merchandising companies. The contract will look good...until the band
gets to know the real numbers.
In the same article Albini makes a detailed example of band costs based on a real
situation:
“These figures are representative of amounts that appear in record contracts
daily. There's no need to skew the figures to make the scenario look bad, since
real-life examples more than abound.” (Albini 1993)3
The numbers, it is important to remember, might be outdated by today’s standards;
however, they do describe well why many artists feel frustrated with their label and try
to find alternative ways to distribute their music.
The balance sheet: how much each player got paid at the end of the game4:
Record Company US$ 710.000
Producer US$ 90.000
Manager US$ 51.000
Studio US$ 52.000
Previous Label US$ 50.000
Agent US$ 7.500
Lawyer US$ 12.000
Band Member (net income each) US$ 4.031
12
3 The articles does not state it clearly, but my feeling is that Albini is talking about Nirvana, a
band he knew very well.
4 See Appendix II - [2] for the complete breakdown.

13. Albini concludes:
“The band is now 1/4 of the way through its contract, has made the music
industry more than 3 million dollars richer, but is in the hole $14,000 on
royalties. The band members have each earned about 1/3 as much as they
would working at a 7-11, but they got to ride in a tour bus for a month. The
next album will be about the same [...]” (Albini 1993)
Core of this model is the fact that the record company writes off the risk only
temporarily, because until the break even point is reached (if it is reached), the artist is
the one to bear the production costs. These money are not spent directly by the artist,
but rather withhold from him: as a matter of fact, no sales royalties are paid until the
record starts making profits.
Even if the album breaks even covering all its costs, the copyright of the record do not
pass from the record company to the artist, as the record company can always release a
“Best of” without the artist’s consent (and often, knowledge), independently by the fact
that the contract between the two is still in place or concluded (Tuomola 2003).
All these practices, and others described later, are enough for some artists to look
elsewhere for an alternative way to produce and spread their music. Some tried to come
up with a different vision of how the market should be approached: Trent Reznor (with
his band Nine Inch Nails) is without doubts one of the leaders of this schism, and his
work with Ghosts I-IV has been selected as one of the case studies of this thesis.
Moreover, many companies see in the web a possible alternative to this mechanism: the
second case study regards Last.fm, a social network focused on music serving millions
of listeners and artists worldwide.
More details on both of them in Chapter 3: Case Studies.
13

14. Chapter 3 - Case Studies
The two case studies chosen to illustrate significant new models of music distribution
have been selected due to the relevant impact they have had on the western music
world. I will refer to them as a) the Last.fm Case and b) the NIN Ghost I-IV Case.
They consist respectively in a) a virtual showcase offering a new range of promotional
tools for major and minor bands and in b) a finely tuned attempt to create an innovative
way to convince a restive generation of listeners to pay for music.
3.1 Introducing the case studies
The first case study is focusing on the business model promoted by the website http://
www.last.fm, a European music-based community allowing users to share their own
playlists, get in touch with people with similar music tastes, discuss in forums and find
out about new acts with the help of highly efficient self-learning profiles.
For the purpose of this study, though, Last.fm will be mainly analyzed from the point of
view of the market: how the service and the tools it provides make it affordable for
major and minor artists to reach the appropriate target and how this can bring economic
advantages to the artists despite Last.fm being (also) a free service.
The second case is focused on Ghost I-IV, a recent release of the American electro-
industrial band Nine Inch Nails (http://www.nin.com), led by the charismatic singer and
mastermind Trent Reznor. The band is by far one of the most known and discussed
industrial American acts of the last two decades, and especially in recent years it has
been committed to creative marketing or attempts to aggressively modify some market
rules. Ghost I-IV is a collection of 36 instrumental songs released by the band without
14

15. the support of any label, under Creative Commons license5, and available in a number
of formats tackling every possible niche of fans. Ghost I-IV is worth analyzing both for
being one of the first serious attempts coming from an established band to cut out
producers and distributors from the value chain (Tuomola 2003), and also for the
unbelievable success the release experienced, showing that the time has come to
redesign the market and consider new music distribution models as concrete alternatives
to the classic procedures.
3.2 Defining Last.fm
Last.fm is a service that keeps track of what music a user listen to, and uses the data to
tackle user’s needs: finding out about artists sounding alike, becoming friend with
listeners with the same music taste, being informed of relevant gigs in a specific area,
and much more.
Artists and labels are invited to upload their music because Last.fm is promoting itself
as a powerful platform on which they can offer their music to the people that matters:
interested users. Artists and labels can then target their offer to people liking specific
artists or styles of music within the massive global community of the social network,
and access other features such as detailed statistics and use a range of tools to help
spread their music.
The core concept of Last.fm is building on music identity. It is a widely accepted fact
that some people, especially younger generations, like to show their own music identity
hanging out with people with similar tastes and reflecting their music preferences also
in their dressing code, the hobbies they have, their favorite clubs, books, movies and
15
5 From the Creative Commons FAQ: “Creative Commons licenses give you the ability to dictate
how others may exercise your copyright rights—such as the right of others to copy your work,
make derivative works or adaptations of your work, to distribute your work and/or make money
from your work. They do not give you the ability to restrict anything that is otherwise permitted
by exceptions or limitations to copyright—including, importantly, fair use or fair dealing—nor
do they give you the ability to control anything that is not protected by copyright law, such as
facts and ideas.
Creative Commons licenses attach to the work and authorize everyone who comes in contact
with the work to use it consistent with the license.” (Creative Commons 2008)

16. interests. On a general level, the more somebody dip into a particular genre, the more
they will tend to conform to certain social conventions. This is an old and well known
phenomena that past generations are accustomed to: movements like the Flower
Children, the Woodstock legacy, 80’s groupies, the punk movement or Elvis’ fans
constitute a sufficient example.
The difference nowadays is that physical distance, networking and access to certain
records is not representing an issue anymore: the community of listeners shifted from
local to global.
The Last.fm team got a glimpse of the potential of a virtual community based on
passion and dedication in sharing music knowledge, and it started to build on the idea a
consistent and innovative system of distribution.
From the point of view of the user, Last.fm is a really efficient way to a) keep track of,
and proudly show your tastes and b) discover new bands and discuss them with people
who might have the same tastes.
After registering, the user is asked to create a profile and install a little application that
works together with programs like iTunes or Windows Media Player. From that
moment, every song the user is playing on the computer or portable player (if
compatible) gets “scrobbled,” which means “recorded” in the Last.fm database6. In this
way the aforementioned profile starts to evolve: day after day the total number of songs
played increases and personal charts take shape (Recently Listened Tracks, Library, Top
Artists, Top Tracks).
16
6 From the Last.fm FAQ: “Scrobbling a song means that when you listen to it, the name of the
song is sent to Last.fm and added to your music profile. Once you've signed up and downloaded
Last.fm, you can scrobble songs you listen to on your computer or iPod automatically. Start
scrobbling yourself, and see what artists you really listen to the most. Songs you listen to will
also appear on your Last.fm profile page for others to see.
Millions of songs are scrobbled every day. This data helps Last.fm to organize and recommend
music to people; we use it to create personalized radio stations, and a lot more
besides.” (Last.fm 2008a)

17. These data are then elaborated and employed for additional targeted services: finding
“Neighbors” (people with similar tastes the user might want to contact or check out),
recommend new bands through personalized radio channels7 (Your Recommendations,
Your Neighborhood, Your Library, Your Loved Tracks...) and updating the Home page,
which is the summary page where the user can see what friends are listening to, what
song or video he or she should check out and what kind of events are happening in
town.
One of the basic tool of Last.fm is the “tag system” allowing users to “tag” songs or
bands with labels and adjectives that should help other users to understand what kind of
music they can expect from them.
The activity of a Last.fm user is not limited only within the Last.fm community. Thanks
to some free applications or codes you can download and freely use, your Last.fm
profile can be “exported” to a number of other web communities to show what are you
listening to at the moment. There are the so-called widgets to embed part of Last.fm
elsewhere, or applications studied to display your tastes on Facebook, MySpace and
other social networks. The final goal of all these tools is clear: making users proud of
being Last.fm members, promoting their music taste (and respective bands) and
increasing the likelihood that other non-users will join the community, pushed by
curiosity or chitchat.
The other side of Last.fm is dedicated to artists and labels. As a label, you can open an
account for free, decide the name, logo and features of your label, and then start
uploading your catalogue. This can be composed by any combination of albums, EPs,
and single audio tracks you consider appropriate. For every song or release you can edit
17
7 From 22 April 2009 the Last.fm Radio is not free anymore. The official announcement (http://
blog.last.fm/2009/04/22/radio-subscriptions) enraged an enormous amount of users. In the
comments under the blog post, most of them are threatening to leave the community and migrate
to alternative social networks. This policy change has a serious impact on the outcome of the
research since it is related to the Artist Royalty Program, and it marks the shift from “free” to
“premium” for one of the Last.fm core function. To reflect its importance, reactions to it and
following initiatives will be analyzed in Chapter 5 - Analysis. Full description of the research
material will instead be presented in Chapter 4.

18. details, add cover art and decide if you wish it to be freely downloadable, have just a 30
seconds preview or be wholly streamable online. It its possible then to connect your
catalogue to online shops (such as iTunes Store, 7digital or Amazon) or promote it
through radio powerplays8. The prices are as low and affordable as €330.00 for 2.000
radio impressions to target users9. In the early months of 2008, Last.fm signed a deal
with major labels called Free On-Demand consisting in the possibility of playing online
all the immense catalogue of Last.fm at no cost. At the time of writing, the deal is
working only in specified countries like UK, Germany and United States.
Last.fm gives to artists the possibility to edit the details of their band page, highlight all
their releases and tune every setting to market their band in the most efficient way.
Bands can then define “how they sound like” (especially useful for minor acts in need to
attract listeners liking major names), which songs to put as a sample, broadcast their
videos and, last but not least, be directly in touch with the feelings of the fan base10.
Both bands and labels have access to detailed statistics useful to decide “what to do
next.”
18
8 Powerplays are targeted plays in the Last.fm radio for people likely to enjoy a certain music
style.
9 August 2009 price list.
10 Differently from the MySpace situation, bands seldom use the Last.fm profile as their official
web page.

19. fig. 1 - Example of statistics for labels. From this page, the label manager can access
detailed breakdowns of every band in his or her catalogue.
As this overview shows, Last.fm configured itself as an interesting platform able to
promote and distribute music in a radically new way. Given the success that the website
has experienced11 and the deals its team can close, Last.fm looks as a viable channel for
users, labels and artists to listen and promote music.
My analysis will concentrate on community’s reactions and interactions with the team
regarding the Artist Royalty Program and consequent commercial changes to the
website. The Artist Royalty Program is an initiative announced in early 2008 which
aims at granting direct money rewards to artists for every “scrobbling” of their tracks on
the Last.fm radio.
3.2.1 Last.fm and rights
To better understand the users feedbacks, it is important to define at this stage how
Last.fm is answering to some central questions: (1) “What are music rights?” (2) “Who
19
11 21 millions monthly users plus 19 millions casual users according to February 2008 claims
(Kiss 2008)

20. owns the copyright in music?” (3) “What rights has a copyright owner?” and (4) “What
about music publishing rights?” The answers, according to the official walkthrough
issued by Last.fm on the Artist Royalties Program, are:
(1) When we talk about “rights” in music, we are talking about copyright.
A music track is made up of a number of copyright elements, such as the music (also
known as the “musical composition”), the lyrics and the sound recording of the
performance of the musical composition and the lyrics.
The music and lyrics are often referred to as the “music publishing” rights. The sound
recording is often referred to as the “recording” right. Each separate element of a track
is protected by copyright.
(2) The first person to create content is usually the first owner of the copyright in it.
Where there is more than one creator, copyright may be owned jointly or to someone
else.
For sound recordings, the first owner is the person who undertakes the necessary
arrangements for the making of the recording. This is usually the producer. The rights in
the sound recording are usually assigned by the producer to a record company. The
record company may be the first owner of copyright in those sound recordings if the
record company is the producer, as often happens.
The first owners of copyright in the music and lyrics will be the composer who
composed the music and the person who wrote the lyrics. Publishing rights are often
assigned to a music publisher, whose job is to exploit the rights in the musical
compositions.
Artists have a right to control the exploitation of their performances. However, artists
usually assign any rights they have in their performances to a record label, if they are
under contract (see Chapter 2 for more details).
In a music video, a producer and a director own the first copyright.
20

21. Generally, record companies take an assignment or ‘buy out’ of all additional rights in a
music video.
(3) A copyright owner has the right to control certain acts of exploitation such as to
copy the music; issue, lend or rent copies to the public; perform, show or play the music
in public and/or communicate the music to the public (via TV, radio, online etc.)
(4) In order to be paid any royalties for the use of any musical compositions (other than
free downloads), artists using Last.fm should join their local collection society and
register their tracks with them (Last.fm 2008c).
The Artist Royalty Program (ARP in short) is a system allowing artists to collect direct
royalties both from Last.fm radio playing and on-demand downloads. Bands are eligible
for the Artist Royalty Program only if:
“…[they] own all of the rights in the music and/or videos [they] plan to
upload, and have not assigned or licensed [their] rights to a collection society
(such as SoundExchange in the US or PPL in the UK) or a record label to
collect royalties on [their] behalf.” (Last.fm 2008c, Last.fm 2008b)
Summarizing, we can then say that the terms imply that what Last.fm does is paying
royalties to a band only when they own the recording rights on a global level. If the
band does not own the global recording rights of their content, there is still the
possibility that their record label (or collecting society of which they are members) have
a direct royalty agreement with Last.fm, under which it collects royalties on the band’s
behalf. The agreement does not cover music publishing, therefore Last.fm will pay
royalties for the use of any musical compositions (except where downloads or podcasts
are made available free of charge on the Last.fm service) directly to collection societies
administering music publishing rights (for example MCPS/PRS in the UK).
21

22. For details on how royalties are accrued and payed back to artists12, see the Last.fm
rates and conditions in Appendix II - [3].
3.3 Defining NIN Ghosts I-IV
Ghost I-IV is a collection of 36 instrumental tracks released by Nine Inch Nails without
previous warning on 2 March 2008. In the words of Hunter M. Daniels, music journalist
at http://www.collider.com:
“Ghosts grasps at soundscapes, acid jazz and improvisational music. Mostly
however, it feels like the worlds most melodic Noize record. Noize is about as
far underground as one can get. It’s the musical equivalent of Dada. It is anti-
music. It is bizarre, dealing primarily with the textures of sounds and the
physical feeling of a bass turned way up so as to vibrate one’s chest. It’s
generally violent, abrasive, and deceptively complex genre.” (Hunter 2008)
Using a definition that Reznor himself gave, Ghosts I-IV is a “collection of music
[which] is the result of working from a very visual perspective—dressing imagined
locations and scenarios with sound and texture; a soundtrack for daydreams (Reznor
2008)”. It is a production trying to arouse feelings and stimulate imagination depicting
audio landscapes with the help of various electronic, electric and acoustic instruments.
The idea behind the project started to develop after the partial commercial failure of the
record The Inevitable Rise and Liberation of NiggyTardust by Saul Williams, a record
that Reznor produced and helped bankroll inspired by the shift in the business model
that UK’s-based band Radiohead decided to take to promote their record In Rainbow. To
fully understand the development of Ghosts I-IV, it is necessary to take a step back and
start from the beginning.
22
12 Note that the FAQ hasn’t been modified after the introduction of the compulsory payment to
use the Radio service, even though there is no more such thing as “free radio service” outside
USA, UK and Germany.

23. 3.3.1 A digression: In Rainbow
On 10 October 2007 Radiohead’s In Rainbow became available on the web for a price
defined by the user. It was possible to go on the website http://www.inrainbows.com
and, after compiling a form, go to the checkout and pay the amount of money the user
felt like paying for the new songs. The purchase of a deluxe edition was also possible,
and it included the immediate MP3 download of the record, the physical support, two
vinyls and some extra material. The price of this “deluxe box” was about £40, and it
started to ship only on 3 December 2007, meaning that there was a gap of almost two
months before the downloadable version and the deluxe physical one.
The initiative had incredible resonance on media, and undoubtedly scored many points
with the fans of the band, but by the end of December the downloadable version was
shut down and a standard version of the album started to be distributed as usual in retail
stores through an independent label. The reasons for this change of strategy are unclear,
as the band is not disclosing the sales data and the manager of the band is stating “This
was a solution to a number of issues, I doubt it will work the same way ever
again.” (Sandoval 2007)
Perplexity aroused also among music journalists, a position well summarized by Greg
Sandoval from CNET, who recognized concrete signs of less than spectacular revenues.
Sandoval for example wonders why would Radiohead kill the promotion and go back to
a traditional sales model if cash were rolling in: taking for granted that the shrinking but
lucrative CD market and the pay-what-you-want initiative were tapping two separate
23

24. audiences, why stopping the latter after few weeks if it was granting profits?(Sandoval
2007)13
Regardless of the success of the initiative, it is important to notice that at that point
“[...] Radiohead began a discussion. There’s plenty still to be
debated.” (Sandoval 2007)
3.3.2 The first sketch: The Inevitable Rise and Liberation of NiggyTardust
On 1 November 2007, Saul Williams published on his website the album The Inevitable
Rise and Liberation of NiggyTardust, produced by Reznor. The economic formula of the
release was inspired to some degree by In Rainbows, but some twists were added to
encourage people to pay for better quality: on the release day it was possible to
download the whole album for free at an inferior audio quality, or to pay $5 to get a
superior version with a much better audio quality.
Two months later, the revenues were not as expected. Reznor and Williams have a very
different take on the statistics: on the first week of January 2008 Reznor reported on his
blog that “154,449 people had downloaded NiggyTardust and 28,322 of them paid the
$5 as of January 2.” He also suggested that he was “disheartened” by the results
(Sandoval 2008).
24
13 The further promotional moves related to In Rainbows were likewise interesting. Analysis will
not be included in this thesis due space restrictions but they are certainly worth mentioning.
First the band offered to fans the possibility to buy on iTunes single “stems” (instrument tracks)
of the song “Nude,” encouraging users’remixes. Then, on 25 September 2008, they sent a
newsletter update claiming that the song “Reckoner” was as well available on iTunes as
“stems” format. Trying to prevent slanders about the performance of such initiative, and taking
revenge on the much maligned selling performance of In Rainbow, Radiohead also disclosed
impressing traffic data: “[...] After the insane response we got from the Nude remix stems and
the site that was dedicated to your remixes...Unique visitors: 6,193,776, Page Views:
29,090,134, Hits: 58,340,512, Bandwidth: 10,666 Terabytes, Number of mixes: 2,252, Number
of votes: 461,090, Number of track listens: 1,745,304 [...]” (Radiohead 2008)

25. Answering to the questions of Sandoval, Reznor ponders about the motivations of this
“failure” unconsciously laying the foundation of Ghosts I-IV14. He first lists his
perceived reasons why people feel entitled to download a record instead of buying it:
DRM, the time-wasting ceremony of going to the shop with no certainty of finding the
product, the fact that the record is already on file sharing networks but not in shops until
the official release date, or the will to boycott greedy labels. Then, he explains how he
tried to overcome all this problems with the NiggyTardust business model: a high
quality record, available immediately for an “insulting low price,” which he considers
$5 to be, enabling fans to directly support the artist.
Despite the disappointing sales, he adds, “music should be considered basically as free”
because “the toothpaste is out of the tube.” (Sandoval 2008)
Reznor felt that sharing the results of this experiment (unlike Radiohead with their In
Rainbows figures) could be useful for other artists considering to take the alternative
business model path.
Anticipating what he will do few months later, he added:
“If I could redo everything and start again, I think having a physical product is
a good thing. [...] I think if we could wave a magic wand and do it again I think
being able to offer an inexpensive version in addition to a premium physical
product that could be shipped out afterward. [...] If I had a record to put out
today, I would do something very similar to what we just did cause I don't think
there is a better option. I would include a physical piece as I just said and all
of the components I would make sure had value.” (Sandoval 2008)
It is clear from his words that at this stage he already realized that the basic idea was
right, but it needed to be fine tuned in search of the perfect formula for his kind of
audience. His opinion about leak-related issues is also strengthening this theory: leaks
happens once a record leaves the mastering and goes into manufacturing; if it has not by
then, then it certainly does at that point. The only way to stop this perverse mechanism,
he concludes, is to make sure that the physical release goes to manufacturing after the
25
14 Full quotations in Appendix II - [4]

26. music is already in the hands of people, possibly thanks to controlled official
distribution by the artist (Sandoval 2008).
Saul Williams had a different point of view on the whole issue: an interesting take
especially because it is giving a clear idea of the potential of this new business model 15.
To start with, Williams clarifies that what Reznor really wanted to say (in his own
manner) was that numbers could be much better, but the mere fact that they were able to
talk about numbers put their experiment on a more useful level than Radiohead’s In
Rainbow. Moreover, having his music in “more iPods then ever before” was a turning
point in his career: these listeners are now all potential fans attending the live gigs.
Williams concludes saying that his problem with labels was that they were expecting
him to produce, being a black male, just standard hip-hop. The sense of liberation of not
having to compromise with white collars barely interested in his art was for him the real
opportunity of this experiment (Sandoval 2008).
3.3.3 Ghosts I-IV, a step into the unknown
What Trent Reznor decided to do in the following weeks planning Ghosts I-IV was
simply translate into practice the reflections accrued during the NiggyTardust
experience to test the waters from a different starting point.
Ghosts I-IV was announced on 2 March 2008 in five different solutions: a free
download of the first 9 DRM-free songs including also the complete PDF of the
artworks; a $5 dollars download of all the 36 tracks including the complete PDF; a
2xCD Set in physical digipack format including a 16 pages booklet and the immediate
MP3 download (shipped from April 2008); a $75 Deluxe Edition composed by a
hardcover fabric slipcase containing 2 audio CDs, 1 data DVD with all the 36 tracks in
multitrack format, a blu-ray disc with Ghost I-IV in high quality audio format, a 48
pages book with all the photographs and the immediate download of the MP3s; and, for
collectors, a $300 Ultra-Deluxe Limited Edition Package containing the same items of
the Deluxe Edition plus two exclusive prints to frame, 4 Ghosts I-IV vinyls and the
26
15 Full quotation in Appendix II - [5]

27. autograph of Trent Reznor. The last two editions mentioned were shipped between the 1
and the 15 of May 2008.
fig. 2 - Summary of the various Ghosts I-IV versions (Drewcifer3000 et al. 2009)
My goal has been to dissect the business model of the Ghosts I-IV case and observe the
reactions of users, musicians and the industry to this new approach. I then tried to
quantify its practical effectiveness, its weak points and its pioneering importance for the
future developments of the music distribution market.
27

28. Chapter 4 - Methodology, Theoretical Framework and Literature
Review
This chapter will cover issues related to methodology, coding frames for my two cases,
scope and limits of the research, and, before suggesting a new model to describe the
emerging business models in the field of music, it will cover existing literature on the
topic.
4.1 Methodology
Before approaching the next paragraphs, I present here a summary of the starting points
and goals of this research.
My claims are:
1. The traditional business model of the music industry is outdated and unfit for the
paradigm shift in music fruition. Moreover, it does not represent a fair retribution
system for artists, nor a very attractive option for users;
2. A series of alternative business models are being tested by the industry, artists
themselves or new players, such as social networks and internet communities:
results vary considerably according to the specifics of the business model we
consider.
From these hypothesis I formulated my research questions:
1. Are the two business models of my study cases a valid substitute to the traditional
one, both for artists and final users, and why?
2. Are they successful from an economic point of view and from the user satisfaction
perspective? How could they be improved?
The two specific study cases have been chosen because of the following reasons:
1. Last.fm is one of the biggest music community on the Internet. Many artists and
labels are using it to promote their products. Last.fm is experimenting with new
distribution and retribution methods.
28

29. 2. The NIN Ghost case is one of the most inspiring case of alternative business model
seen in recent years. It rewrites some rules of music distribution, challenging
copyright status quo and modifying drastically the position of music labels in the
industry.
4.1.1 Methodology and coding frame for the Last.fm case study
The research on Last.fm will be qualitative. I mainly tackled the reactions to the
introduction of the Artist Royalty Program (ARP, in short), trying to understand how
good the business model used by Last.fm is, and if it represents a viable alternative to
the traditional distribution-retribution process as explained by Arto Tuomola (Tuomola
2003). Also, I dedicated some space to the problems arising from the constituent
elements of copyright, namely music publishing and recording rights, trying to
determine if their nature is implicitly slowing down a switch to new market practices or
blocking promotion possibilities.
To gather the information I needed, I was following these steps:
• Follow the development and implementation of the Artist Royalty Program, scanning
the relevant topic on the Artists & Labels forum (http://www.last.fm/forum/6666/_/
371604) and collecting impressions and issues connected with it in a time span
covering posts from the announcement day (23 January 2008) to the 9 of October
2008, three months after the service was effectively launched.
• Theme Analysis (see paragraph 4.1.3 of this Chapter) has been used to break down the
discussion into categories relevant for my hypothesis. The posts before July 2008
have been analyzed to detect all the issues raised by musicians that Last.fm had face
before launching the program. The posts added after the launch date have been used to
identify practical problems, non-covered situations and legal loopholes in the Last.fm
policy having direct reference to copyright regulation.
29

30. These are the categories set for the coding frame of the thread:
Before 9 July 2008
• Payments
• Eligibility
• Aggregators16 and collecting agencies
• Changes required to the website after the ARP will be in place
• Comments
• Secondary topics
After 9 July 2008 (Artist Royalty Program launched)
• Payments
• Aggregators and collecting agencies
• General Clarifications of Terms
• Secondary Topics
The list of the core points covered by each category is reported and discussed in Chapter
5.
• Additionally, I covered the first 50 reactions to the announcement of the change of
policy for radio subscriptions on 22 April 2009 (http://blog.last.fm/2009/04/22/radio-
subscriptions), and the first 50 reactions to the announcement of the Last.fm Visual
Radio on 6 May 2009 (http://blog.last.fm/2009/05/06/lastfm-visual-radio). Both
initiatives have strong bonds with the Artist Royalty Program—contributing both on
the commercial relevance of the ARP and on the overall “mood” of the community—
30
16 Media aggregators: “[...] refer[s] to applications, client software or Web based, which
maintain subscriptions to feeds that contain audio or video media enclosures. They can be used
to automatically download media, playback the media within the application interface, or
synchronize media content with a portable media player.” (Wikipedia 2008)
Websites like CD Baby (http://cdbaby.com) sell independent music directly and act as
aggregators in the sense that artists signed with them get their music distributed also on other
services such as Apple iTunes, Rhapsody, Napster and Amazon MP3.

31. and are highly descriptive of the direction Last.fm intends to pursue in its imminent
future.
The reaction of the community is therefore a good marker to quantify the success of
Last.fm’s business model, at least from the point of view of the image the network is
projecting on the market. Further research will be necessary to confirm the results
from an economical point of view: at this stage findings can only be based on
emotional reactions and users’ opinions. As for the main forum post, also these
reactions have been framed into categories, specifically:
Radio Subscriptions
• Warning Timing / PR issues communicating the change
• Users weight
• Discrimination based on nation of residence / price
• Leaving the community
• Issues with payments
• Sub-presence of Indie labels
• New trial system
• Last.fm Market reality
• Competitors on the market
• Gift subscriptions
Visual Radio
• Comments on the new features
• Improvements and suggestions
• Technical Problems
• Updated Last.fm desktop player
The list of the core points covered by each category is reported and discussed in Chapter
5.
31

32. 4.1.2 Methodology and coding frame for the NIN Ghosts I-IV case study
The research on Ghosts I-IV has also been qualitative. To understand the success
enjoyed by this model and how could it work for other artists, I collected information
from selected sources in the time span included between the release of the record (2
March 2008) and 19 April 2009 (day of access for the Ghost Film Festival statistics).
During these fourteen months the band experimented again with the release of a new
album (The Slip), has been touring extensively over North America to promote the last
two works and has released for free an impressive amount of live footage for the fans to
freely edit. Most importantly for this research, during these months the influence of
Ghosts I-IV has been internalized by other musicians, spawning new initiatives that will
be covered in Chapter 6: Evolution of the Market.
The analysis was conducted in this way:
• The chart results and available sales figures have been analyzed to understand if the
record was a critical and commercial success. Specifically, 5 web articles from
influential sources about the Amazon’s 2008 music sales results have been scrutinized.
Amazon is one of the most important online music reseller and 2008 year sales results
have proved to be extremely surprising for Nine Inch Nails.
• 3 main blog entries about the weak and strong points of the model and potential
applicability for other artists have been analyzed and will be discussed.
• The users response to the various interactive activities connected with Ghosts I-IV has
been monitored especially in the regards of the Ghost Film Festival. The remixing
activity on the official channels is worth mentioning but it will not be covered because
it involves a much wider spectrum of songs not related to the case. Even if not directly
subject to Theme Analysis (see paragraph 4.1.3 of this Chapter), video (and audio)
contributions of the fans (due to the Creative Common license under which Ghosts I-
IV was released) are important to understand how much a business model of this kind
can involve fans into indirect promotion.
32

33. These are the categories set for the coding frame of the case:
Web Articles & Sales Figures
• Sales Figures & Charts Position
• File Sharing
• Fan base
• Labels
• Other Bands
Blog Reactions
• Analysis of NIN model
• Weak Points
• New Artists
Ghosts Film Festival
• Statistics
• Context usage
4.1.3 Theme Analysis
The method I used to extract data from my sources is Theme Analysis, a discursive
branch of Content Analysis. As Deacon et al. point out the term Content Analysis is:
“...used inconsistently within the literature. On the one hand, it is used
generically to cover any method that involves analyzing content. On the other,
it is used to describe a specific analytical approach [...] The purpose of content
analysis is to quantify salient and manifest features of a large number of texts,
and the statistics are used to make broader inferences about the processes and
politics of representation.” (Deacon et al. 2007)
33

34. For this reason and keeping in mind that my central hypothesis is that the traditional
business model of music distribution and artists retribution is outdated and unable to
deal with the new paradigm of music fruition, I decided that pure Content Analysis was
“too mechanic” to frame the core issues relevant to my cases, as the practice of words
count would be substantially pointless.
There are many other methods to approach a text: one is the semiotic approach
(“Semiotics helps us to think analytically about how such texts work and the
implications they have for the broader culture in which they are produced and
disseminated.” (Deacon et al. 2007)); another is Discourse Analysis, more focused on
texts produced within a certain cultural tradition (“[...] Competence in language use
involves more than just linguistic competence per se. Such competence requires not only
the syntactical mastery of sentence construction and combination but also mastery of
the circumstances and settings in which particular forms of utterance and
communication are appropriate” (Deacon et al. 2007)). Unfortunately, they are
inappropriate to extract the information needed for my research.
Differently, Theme Analysis gives me the opportunity to break the discussions
contained in my samples into the concrete categories listed is paragraphs 4.1.1 and 4.1.2
of this Chapter. These categories will be commented analytically in Chapter 5. As
Beardsworth claims:
“Theme Analysis...does not rely on the use of specific words as basic contents
elements, but relies upon the coder to recognize certain themes or ideas in the
text, and then to allocate these to predetermined categories.” (Beardsworth
1980)
All the data are fetched in a natural way, through observation of already ongoing
discussions. Non-intervention and the choice of not making direct interviews are due to
both methodological and practical reasons: in the Last.fm case, choosing a sample
would have been hard, considered that the context varies greatly for bands playing
mainstream music and acts used to play for a niche audience, while for the NIN case the
34

35. artist is simply impossible to contact without having access to high-level music press
channels.
Moreover, in the first case, getting a reasonable and fairly distributed quantity of
interviews proved in practice to be much harder then expected, as the Artist Royalty
Program is still a relatively new initiative and many musicians do not have a sharp
opinion about it yet. As well, despite the possibility of joining the program from
everywhere in the world, only in few selected countries (at the moment of writing:
Germany, United Kingdom and United States) users are given access to the on-demand
streaming service related to the earnings of the Artist Royalty Program17.
4.2 Scope and limits of the research
The analysis of these two cases spawned questions whose answers cannot be entirely
covered in this research. Is the “enhanced” value chain of the music industry proposed
by Arto Tuomola just few years ago (Tuomola 2003) already outdated? What are the
new business models the industry is developing? Some aspects of these questions will
be tackled later in the discussion Chapter 6: Evolution of the Market.
The research I conducted has, like all research, some intrinsic limits that must be kept in
mind while reading through it.
To begin with, the Last.fm case shows just one model of promoting music on the web,
not necessarily the smartest one. Other websites like http://www.myspace.com, http://
www.seeqpod.com, http://www.we7.com or http://www.spotity.com, offer different
options and represent credible alternatives to the Last.fm model. Therefore, the results
of the forum analysis cannot be taken as the definitive word on the validity of their
approach, but rather as an “indicator of satisfaction” based on one of the most important
music community on the net.
35
17 “When you opt-in the Artist Royalty Program, your entire catalog becomes available on-
demand in the US, UK and Germany and on Free and Subscription radio worldwide. Users in
these countries will be able to listen to full streams of all your songs on-demand and you’ll
accrue royalties whenever they do. Your Full-Length Preview settings still control your catalog
in the rest of the world.” (Last.fm 2008)

36. The NIN Ghosts I-IV case is even more subtle, because its weak spot can be identified
with the time relevance of my results. In this specific historical moment the market is
fermenting with new ideas and people willing to take the existing distribution model to
an end. Therefore, by the time this paper will be completed there might be already a
new paradigm under development. To partially address this issue, Chapter 6 is dedicated
at the progresses of the market meanwhile this research was carried out.
4.3 Theoretical Framework and Literature Review
For the peculiar nature of this research, I believe that it is not possible to talk about the
theoretical framework that has been used to fetch and interpret the results without
talking about the relevant literature I have been referring to.
Both the analysis of the cases and the following discussion are framed among
foundations laid by researcher such as R. G. Picard, P. Dubini, E. Rivola and P.
Wilkström. Their studies, that we could wrap under the label “applied media
economics,” provide background tools representing the current media market situation
pragmatically, hence avoiding me unnecessary abstractions or the use of pure theoretical
approaches with scarce resemblance to the reality of the market.
4.3.1 Media: Single and Continuous Creation Products
In his paper Unique Characteristics and Business Dynamics of Media Products, Robert
Picard points out that in the discussion over media products there is a tendency of taking
for granted the fact that media share the same economic and business characteristics
with any other media, independently from their true nature.
Moreover, it is often assumed that media do not significantly differ from other products
and services on the market. This assumption proves wrong, both because media do
differ among themselves and because rarely other products are subject to the same kind
of business dynamics. Picard divides then media products into two major categories:
single creation products and continuos creation products.
36

37. Single creation products are products driven by creative ideas, such as books, movies,
audio recordings and videogames: their main characteristic is being project oriented. To
gain the necessary consumers awareness, companies have to expend significant amount
of money on marketing and sales costs for each one of this products. In brief, they are
risky projects experiencing a high rate of failures.
On the other hand, continuous creation media products are driven by on-going creation:
these are for example newspapers, television series and magazines. The core
competence of companies working with continuos creation products is selection,
processing and packaging of content, not content creation per se (Picard 2005).
According to their affiliation, the underlying business logic of media firms is also
changing. The ones producing single creation products focus on managing failure: for
example, when only one artist out of ten is profitable, his gain is usually supposed to
cover the costs of the other nine failures; firms devoted to continuos creation products
tend instead to build upon the success already achieved improving their offer, creating
for example a new season for a successful television series.
4.3.2 Why Media differ from other Products
The differences highlighted by the comparison of media and other products can be
better understood if approached from two different angles: supply side and demand side.
On the supply side it must be said that media companies tend to face less direct
competition than other types of companies both for a different size of the saturable
market compared to other business and for the relevant investments needed to develop
commercial media products. Moreover, many decisions in media industries are based on
non-economic criteria and rely upon public service, artistic and cultural factors. It is
common, for example, to see people create contents without compensation, pushed only
by artistic or ideologic motives.
From a logistic angle, the process of production is non-linear, but either depends from
the final product or from the methods and aims of the people involved in its
development: many media products have for example non-physical properties and can
37

38. be broadcasted, distributed, transmitted and shared, being de-facto “immaterial,” or are
vulnerable to piracy in a way other products are not (Picard 2005).
On the demand side, it must be said that the success of a media product is highly
unpredictable. Precautionary market research and adherence to established trends can
help, but when innovation is necessary, a high element of risk must be taken into
account, because the market is flooded with a large oversupply of content from which
consumers can choose. As a result, much of the economic value of media products
results from a small number of products/services.
To balance this risk, even mildly successful media products can be repacked and reused
in other formats (e.g. movies shown in the cinema can be placed again in the market as
DVDs), sometime even with surprising results.
Media products tend to be consumed more often than other products, with consumers
usually acquiring large quantities of content that is not consumed (e.g. newspaper or
television subscriptions). Also, it must be remembered that demand is influenced not
only by the audience but also (and in some cases especially) by the advertisers (Picard
2005).
Standard economic models tell us that a firm must have revenue streams to survive and
grow. The primary source can be consumers, advertisers, e-commerce activities, or a
parent company that operates the media as an extension of existing products or services.
The explosive proliferation of new media is now dramatically fragmenting audiences
and changing the scenario. For this precise reason, their supply side faces a variety of
challenges in finding revenues, controlling costs, and developing sustainable business
models in a way that traditional media never experienced (Picard 2003).
As Picard claims:
“The most revolutionary aspects are new economies of scope and integration
that are changing the economics of production and distribution. These factors
play significant roles in the choices of audiences and consumers regarding new
media access and use.” (Picard 2003)
38

39. The reasons why a new paradigmatic business model for media (and especially for the
topic of this research, music) is hard to find, is that even industry gurus often tend to
forget what the final consumer is looking for. Many business plans (or business
development plans) are generally written with an assumption of universal interest (and
therefore, universal adoption) of new products and services, without answering
adequately to questions such as “What will customers get that they cannot have now?”,
“How this technology will modify their habits?”, and especially “Why they should pay
for this?” (Picard 2003)
If it is true that digitalization do not change the laws of economics removing the need of
capital, management or financing, it is equally true that it deeply modifies consuming
habits and the perception of media.
4.3.3 The Case of Music
As pointed out by Patrik Wikström, the link between the music industry and the media
industries has always been strong. From the point of view of the music industry, the role
of media has been crucial because they have always acted as distributors and promoters
of music products.
The introduction of new media, on one hand, expanded the possibilities of promotion
and distribution; on the other hand, though, with the introduction of broadband
connections and sharing programs, Internet has become a puzzling issue both for the
industry and the artists. Potentially a mean of cost reduction, time saving and capillary
dissemination, it also quickly became a threat to the market status quo18.
One of the goals of this research is to determine if the emerging music business models
(and, in particular, the two analyzed) can stand up with the challenges put forward by
this new scenario.
39
18 Steve O’Hear summarizes the situation brilliantly in the passage quoted in Appendix II - [6].

40. 4.3.4 Music Value Chains
With the books Competitive Advantage: Creating and Sustaining Superior Performance
(Porter 1985) Michel Porter introduced the concept of value chain. The term is
nowadays widely used in economic literature and business analysis to signify a chain of
activities through which products pass to gain cumulative value. Hence, we could say
that a value chain categorizes the value-adding activities of an organization. In time, the
concept has been extended beyond individual organizations to include supply chains
and distributions networks.
In his 2003 research Arto Tuomola analyzed different value chain models applied to the
distribution of cultural goods, with a focus on sound recordings. Since his findings lay
down really interesting foundations from where my discussion of the cases can start, it
is appropriate to briefly present them here.
Introducing his value chains chapter, Arto underlines the specificity of his work,
covering only “those companies which in a direct and participating manner raise the
value of the product or service deliver to the customer.” This, naturally, leaves out from
his analysis support, delivery and maintenance activities, which are part of every
company’s internal value chain (Tuomola 2003):
The first of these value chains, put forward by F&L Management (F&L Management
1998) refers to tangible music delivery and goes like this:
With the word “tangible” it is intended a physical object containing a fixed music
performance. Used predominantly in juridical environments, the term explicitly refers to
analogue formats such as LPs, MCs and digital formats like CDs and Mini Discs. As a
consequence, the word “intangible” is mostly used referring to computer files.
The F&L value chain is a very basic model not focusing on any particular aspects of the
process.
40

41. However, the second model presented, elaborated by Bernd Wirtz (Wirtz 2002) is a
value chain for intangible media. The approach is, as Tuomola notes, from the consumer
end, and it lacks completely the marketing phase, focusing more on the distribution part:
The Content / Service Aggregation phase refers to the moment when content gets
selected, organized and packed.
The Value Added Services phase includes services such as billing, credit card handling,
customer service, support and content hosting in data banks in the case the product is
delivered directly to the consumer as a downloadable file.
The Access / Connecting phase contains the data transmission and infrastructure and
hence refers primarily to ISPs (Internet Service Providers), while the Navigation /
Interfacing phase involves interfacing softwares such as internet browsers or programs
like iTunes.
Another model proposed by Picard (Picard 2002) stems from the printed media industry
and focus on the separate steps inside the value chain of the producer:
41

42. It is worth noticing that this model takes into account the fact that the Producer can
create the content but also acquire it from an external source.
As Tuomola underlines, the step “processing” in the second phase of the Producer’s
Value Chain refers to the creation of the master, from which all the subsequent versions
of a record come from.
Since we are speaking about “intangible” media, the caption “manufacturing” in the
third phase of the Producer’s Value Chain may seem a bit odd. However, it is necessary
to remember that files cannot be put on the Internet in a “pure” form, but they must be
formatted according to rules specific to each channel that will be used in their
distribution.
In Picard’s model the marketing part is handled exclusively by the distributor, but in the
music business efforts are usually equally conducted by the distributor, the producer and
the retailer, since the retailer is at the same time an “accomplice” and a client of the
distributor and the producer.
The last model of Value Chain proposed by Tuomola is his own version of it, which he
refers to as Enhanced Value Chain. It can be represented this way:
42

43. The peculiarity of this value chain is a ghost phase, the one of marketing. As Tuomola
puts it:
“[...] marketing is conducted at several stages of the product value chain, by a
number of actors involved, and directed at various customers, and therefore it
rather should be seeing as a moving, “phantom” component, appearing at
various stages.” (Tuomola 2003)
Tuomola underlines also, in step two and three, what could be wrapped up with the
expression “content aggregation,” detailing the process in a better way than in the
previous value chains.
4.3.5 Disintermediation
Disintermediation is a term used to refer to the removal of intermediaries in a supply
chain, for example when companies can deal directly with customers cutting out
distributors, wholesalers and agents. It is an extremely relevant concept for the study
cases examined, since both of them try to pursue disintermediation in different ways.
There are however some practical limits to disintermediation:
“[...] It should be noted that a completely direct link is purely theoretical, since
the artist must include at least an Internet Service Provider (ISP) into his
product value chain.” (Tuomola 2003)
43

44. One stage of disintermediation is the so called e-commerce, where for example an artist
can get in touch with a customer directly but still ship to him a tangible product such as
a CD recording. This is the case of some of the purchasing options available for the NIN
Ghosts case described in Chapter 3.
It is clear from the comparison of the value chains of F&L and Wirtz that immaterial
distribution do not diminish the number of steps of the value chain, changing instead the
participants, especially in the distribution half.
4.3.6 Organizational Changes in the Music Field
Approaching the matter from a different perspective, the research of Paola Dubini and
Elena Raviola is focused on the ongoing reorganization of the music field. Their main
claim is that the concept of industry is an “a-priori construct,” because boundaries are
unclear: who is part of the industry? Who is competing against whom?
Areas of interest become then the erosion of traditional sources of competitive
advantage of existing competitors, the changes in bargaining power among actors, how
easy it is to become one of this actor, and what strategies are effective in the process
(Dubini & Raviola 2007).
For the researchers, cultural industries are undergoing reconfiguration, partially as a
reaction to the emergence of a variety of technological innovations associated with the
production, distribution and transmission of content in digital form. These exogenous
changes are associated with three drivers: technology, consumer behavior and
legislation, the latter two partially driven by the first one.
Technology has drastically reduced the cost of accessing information and caused the
proliferation of distribution channels. Moreover, changes in demographics and social
habits make some genres and some products more popular than others for specific
categories of users.
44

45. From the point of view of consumer behavior, tastes and habits in Western societies
have become more sophisticated and complex, as time and income available for
symbolic products and immaterial services has increased.
These changes have challenged the existing regulatory framework and made the
industry attractive for a variety of actors coming from outside (or inside, in the case of
“do-it-yourself” artists) the organizational field.
As Dubini and Raviola claim:
“[...] it is important to stress that [the industry has] viewed these changes as
reinforcements of existing problems, not as challenges to the status quo, calling
for a redefinitions of business models and relations among actors. File sharing
has therefore been viewed by the major companies as leading to increased
piracy [...] not as a gateway for new market opportunities.” (Dubini & Raviola
2007)
When the industry lacks the wisdom of changing its procedures, new actors, like the
NIN Ghosts and Last.fm cases show, try to fill the gap experimenting in their own way.
To represent these changes, Dubini and Raviola first expose their version of the
Traditional Music Industry Chain:
45

46. This diagram depicts the key activities characterizing the traditional production and
distribution of records: dotted lines represent transfer of production factors (products or
services), while straight lines describe money transfers (to simplify, they represent
money transfers only in case they are not associated to factors transfer).
Different actors participate in these key processes: artists and lyrics writers are
responsible for the content creation, whose copyright is transferred to the music
publisher. The creation of the master copy takes place in specialized studios under the
responsibility of the music companies which are in charge of scouting the artistic
talents, promoting the piece/artist and producing the physical product (CDs and LPs).
The CDs and LPs are then disseminated by distributors through their physical chain
before reaching the final consumer.
In the findings of Dubini and Raviola, according to the Traditional Music Industry
Chain, the central actors in the music field network are the music companies.
After appropriate investigation in the field, the two researchers came up with a second
diagram representing all the actors in the field and their net of relationships:
46

47. As in the previous diagram dotted lines describe the transfer of production factors and
straight lines describe money transfers. The thick-dotted lines are instead representing
the influence relationships qualifying the field from an institutional point of view.
This diagram clearly shows that the strong mediation of the network of relationships
between consumers and music companies is keeping the ends and centre of the system
afar. The norms regulating the system have been designed by its central actors, thus
impeding direct contact with other actors and any other operative logic. Saying it with
other words, consumers and music companies are in an asymmetric relationship (Dubini
& Raviola 2007).
Dubini and Raviola’s research includes also a second relationships diagram
incorporating the exogenous changes in the field, that they collectively ascribe to the
“new kids on the block.” This expanded diagram is very complex and bad designed
from a readability point of view, so I will report here only the main considerations that
have driven its structure.
47

48. According to them, the changes in the relationship diagram reflect the changes in the
music industry in these last years and are imputable to several reasons, such as an
increasing number and variety of the devices to access the content (and, as a
consequence, an augmented relevance of device producers), the increasing variety of
distribution channels for devices and physical music products, the development of new
distribution channels for digital music content, the emergence of new actors specialized
in new business models, and the development of software to manage all these new
possibilities.
The magnitude of these changes is terribly high and has shaken the industry to a level
never achieved before. As they conclude, these new actors:
“do not start business in a vacuum, but their norms, behavior and practices
overlap with the norms, behavior and practices of an existing field where
established organizations and relationships are challenged by the
new.” (Dubini & Raviola 2007)
Therefore, the reshuffling of the music field can be interpreted as a consequence of the
emergence of new networks within the established ones: just another way to say that
this reconfiguration depends from the emerging of new business models and
opportunities from the old barren model.
4.3.7 A New Perspective: the Emerging Distribution Model
To conclude this chapter, I will suggest the diagram of the model encompassing the
logic behind my two study cases. For convenience, I will refer to it as the Emerging
Distribution Model and divide it in two figures to enhance graphic clarity (fig. 1 model
A, and fig. 2 model B). These two figures represent the two aspects of it and are meant
to be virtually overlapped in a unique, all-including, figure.
The Emerging Distribution Model approaches the whole problem of distribution
offering new angles and new actors, leaving the content creation part, the manufacturing
process and the live aspect of music out of the equation, since the therein exposed
models are covering those sides deeply enough.
48

49. fig. 1 - Emerging Distribution Model A, focus on economic and commercial relations
The focus of this model is on artists’ possibilities: while Artist A decides to publish and
distribute its own music following a traditional process through a label, Artist B has a
broader spectrum of alternatives to get his or her music to the Audience. This range
includes publishing through a label, distributing the product through a Distribution
System enforced by some kind of Software Provider and manufacturing limited editions
or special packages in-house or in independent premises. Artist C has been added
because even more experimental business models are being tested at the time of writing,
and they do not necessarily follow the commercial path described for Artist B. An
overview for some these models will be done in Chapter 6: Evolution of the Market.
Audience 1 and Audience 2 differ for the kind of channels pointing to them (represented
by the straight lines): while Audience 1 is used to buy physical products, listen to genres
connected with the backlist catalogue of a label or is, so to say, “technologically
impermeable,” Audience 2 represent all the customers that are aware of the technical
possibilities available to retrieve music. It is important to underline that ignoring or
disregarding the difference between these two audiences has converted many of the
49

50. technologically savvy to resort to several form of audio piracy. This is to say that what
the piracy phenomena is underlying, is not an increased tendency to criminal behavior
by the youngsters (how it has often been put), but rather a dramatic failing of the
industry in understanding an emerging potential market and the shift in how the fruition
of music and media is now perceived by young generations.
The difference between these two kind of Audiences is becoming even more evident
when we think that the money consumers spend for their purchases end up in entirely
different hands (links represented by thick dotted lines): Audience 1, through the
retailers, pay most of its money back to the Labels. At that point, Labels reward the
artists according to the contracts stipulated, but usually not before the break even point
of the record has been reached (Tuomola 2003).
The behavior of Audience 2, instead, fall back into one of the following alternatives:
• Similar to Audience 1 when Artist B has a record published by a Label, therefore
purchasing a physical product in a shop or through a web retailer;
• If Artist B is selling without intermediaries, Audience 2 can directly pay him or her
back thanks to one of several payment systems (free donation, full price PayPal
payment, full price credit card payment…);
• Pay the Distribution System — only if a fee is required to access the artist’s music
(e.g. Magnatune19). In this case, the artist gets his or her share from the Distribution
System according to an agreed payment system that changes according to the service.
The Authority block represent an institution, like for example the European Union,
whose priority is to be fair and protect all the parties and segmentations of the market
involved. To do so, an Authority usually legislates according to principles ideally agreed
50
19 http://www.magnatune.com. Magnatune gives unlimited access to all its catalogue of artists
for a small subscription fee.

51. with the parties (industry, consumer associations, artists) and delegate part of the
practical enforcing duties to subjects such as the Collecting Societies20.
fig. 2 - Emerging Distribution Model B, focus on the role of collecting societies and
authorities
Collecting Societies are a side actor whose role is to scrutinize and relate to all the other
actors enforcing copyright laws concerning— in our case—the broadcast of music
pieces. The role of Collecting Societies is to grant the authorizations for the use of
copyrighted material, obtain the compensations for its use and redistribute the proceeds
to the artists.
Details on the rights covered by the protection of Collecting Societies unfortunately
vary from country to country, since a global agreement has so far not been reached.
51
20 One of the problem of this practice is that authorities are often subject to lobbying practices
coming from the stronger actors in the market, which as a consequence lead to a legislation that
can be easily defined “unfair” for the other actors, to say the less. This topic is discussed more
extensively in Chapter 2.

52. However, their activities regard the same subject areas and can be divided into two main
groups: “moral rights” and “utilization rights.”
“Moral rights” usually include:
• The right of paternity, or the possibility for an author to claim his authorship on a
piece;
• The right of integrity, or the possibility for the author to oppose modification of the
piece;
• The publishing right, meaning that the author can decide if a piece has to be published
or not;
“Utilization rights” usually include:
• The reproduction right, or the possibility for an author to make copies of a piece;
• The right of communication to the public, or the possibility for the author to show the
piece in public in various forms;
• The right of distribution, or the right to broadcast and commercialize the piece
through radio, television, satellite, cable, internet;
• The right of modification, or the right to change the original piece according to
necessity.
Collecting societies can be created by private agreement or copyright law, and usually
they manage the rights of a piece for a span of time fixed (in the European Union) to 70
years after the death of the author.
Discussion on Copyright laws has been left out from this thesis for several reasons: first
of all, because it is relevant to the selected study cases only on the regards of Collection
Societies and, partially, on the subject of Creative Commons, which are both covered in
this Chapter and, with more specific details, in Chapter 3 and 5; secondly, because
American and European (to let alone Asian or Australian) copyright regulations do not
agree: differences are marked, and, in the case of Europe, fragmented in different
52

53. declinations (often one for each member state). Therefore, their analysis would go
beyond the scope of this thesis and would require more focused studies.
However, it is hard to refuse that looking at the global picture, future developments in
copyright regulations will determine the success and feasibility of new distribution (and
retribution) methods involving all kind of media, and further research in this field is a
necessity for the marketplace to prosper.
53

54. Chapter 5 - Analysis
This chapter analyses the findings for the two study cases. Relevant quotations have
been moved to Appendix II for readability reasons.
5.1 Analysis: Findings and Discussion - Last.fm Case
This paragraph takes into exam the findings on the Last.fm case. At this stage it is
convenient to expand the discussion and explain the meaning of the different categories
under which the research items have been filed. In the following sub-paragraphs each
category will be supported by relevant quotations from the research material (see
Appendix II for the original quotations) and the results will be commented. The number
of quotations have been trimmed due space reasons and do not represent 100% of the
relevant ones, rather trying to describe the general mood of such category.
In some cases, these quotations are relevant to more than one category at the same time:
for readability reasons and space limitations their content has been filed under the most
relevant category without repetition; the reader is therefore invited to be aware of the
fact and note “implicit categories” independently.
Artist Royalty Program (ARP) forum thread - Before 9 July 2008
Category Including the following topics
Payments Payment quotas; which kind of tracks get payed; retroactivity
of payments; disincentives to free downloads given by the
payments system; what is possible to do with the royalties
accrued; who will collect the payments in a band and how to
change that if “the manager” does not want to take
responsibility for it; count of plays coming from external
embedded playlists, what is the average earnings for 1000
plays considering the different rates of “free on-demand,”
“subscription on-demand,” “free radio” and “subscription
radio.”
54

55. Category Including the following topics
Eligibility Who is eligible for the ARP; what if an artist is using samples
composed by others and what if you cannot get explicit
permission to use them.
Aggregators and
collecting agencies
What happens if the band is signed with an aggregator; labels
owning only the right to copy; what if there is no agreement
between Last.fm and a specific collecting agency; what if the
band is signed with an aggregator but songwriters with a
collecting society, or not all the members are signed with a
collecting society; what is the list of agreements Last.fm has
in place.
Changes required to
the website after the
ARP will be in place
Better statistics needed; how to avoid BOTs from cheating.
Comments General comments on the initiative and criticisms.
Secondary topics Meaning of file-sharing, Last.fm as a file-sharers heaven,
closing legal loopholes typical of web 2.0.
Artist Royalty Program forum thread - After 9 July 2008 (Artist Royalty Program
Launched)
Category Including the following topics
Payments Is the streaming played in the Last.fm application for
iPhone and iPod touch counting to accrue credits;
clarifications about which settings are economically more
convenient under the ARP to distribute music to the end
user from the perspective of an artist.
55

56. Category Including the following topics
Aggregators and
collecting agencies
How the royalties collected by a specific society affect the
ones collected by Last.fm; updated list of deals in place;
clarifications on specific cases about what a collection
society does and what it does not.
General
Clarifications of
Terms
Clarifications about the contract that has to be accepted to
participate in the ARP; updates from users about the
position of certain collecting societies; discussions on
specific countries and European copyrights laws;
clarification of terminology used in the contract; what if the
same songs are also available from other web services.
Secondary topics Users discussing about who has the competence to answer
technical questions about the terms.
Radio Subscriptions
Category Including the following topics
Warning Timing / PR
issues
communicating the
change
Complaints on the timing of the announce, or scarce visibility
of it; bad communication skills from the network.
User weight Last.fm is not taking user suggestions into proper account.
Discrimination based
on nation of
residence / price
The need to pay is enforced in every country except USA,
UK and Germany; users outside these countries feel
discriminated.
Leaving the
community
Messages of people leaving the community as form of
protest.
56

57. Category Including the following topics
Issues with payments Country-related difficulties with payments methods (Eastern
countries especially).
Sub-presence of indie
labels
Complaints for a supposed change in representativeness of
indie labels compared to major labels.
New trial system Complaints about the new trial system, which provides you
with 30 free tracks before asking you to pay a 3€/month fee
for a proper subscription.
Last.fm market
reality
Defense for the choice of the network and pointing out
economical “facts.”
Competitors on the
market
Mentions to competitors of Last.fm offering a better or
comparable service.
Gift subscription Comments on the possibility for one user to give away the
subscription as a gift.
Visual Radio
Category Including the following topics
Comments on the
new features
Users comments on the new functionalities of the Visual
Radio.
Improvements and
suggestions
Users suggestions on missing features from older versions or
improvements needed for the player.
Technical Problems Users having troubles with the new Radio.
Updated Last.fm
desktop player
Questions on updates for the desktop player.
57

58. 5.1.1 Artist Royalty Program forum thread
The findings from the forum thread dedicated to the Artist Royalty Program (Last.fm
2009) have been divided respectively in 7 categories for the posts submitted before 9
July 2008 and 4 categories for the posts submitted after 9 July 2008. For more details on
this division, consult Chapter 4 and the previous paragraph. Every entry will be
introduced by a code to ease references discussion.
Before 9 July 2008
Payments (PMT)
The payment issue is one of the most popular throughout the whole forum thread,
swinging the users’ mood from enthusiastic, to perplexed, to deluded. Many had issues
trying to calculate an average retribution, and most of them were not happy once the
numbers did not match expectations. If it is true that rates are extremely low (turning
into something significant only for bands with millions of fans), it is somehow odd to
hear complaints from people that until the announcement of the ARP did not get any
money for the music they freely chosen to share.
In this aspect Last.fm seems to have failed the evaluation of user reaction and their
understanding of the payment mechanism. At least one of the user taking part in the
discussion deleted his account after some months: the reason behind the act is not clear,
but from the analysis of this and other threads presented later, we can infer that many
users have felt unfairly treated by the network, and Last.fm has some serious problems
in handling the relationship with its users21.
Eligibility (ELG)
The Eligibility category includes messages from people unsure of what is their legal
position as rights holders. The borders of this category sometime fade into the ones of
the “Aggregators and collecting agencies” category, even though the focus is slightly
different.
58
21 See all PMT entries in Appendix II - [7]

59. Questions such as ELG2 show the intricacy of a retribution system based on rights
royalties: on ELG3, a member of the Last.fm staff implies that asking legal advice could
be a good option. Therefore, the questions arising are: is it a good business model if it
gets so complicated for the parties involved? Is the actual rights-system a barrier to new
developments? Does the problem lies in a foul-conceived retribution mechanism from
the Last.fm side?
What is certain is that the user in ELG2 has no convenience in adopting the ARP, since
he would need legal advice and the money gained through the ARP would likely not
repay him back. A second problem arises for those artists using samples of other songs,
a widespread practice especially among DJs and hip hop artists (ELG4): apparently
Last.fm does not pay royalties in those cases if a written permission from the original
artist is not available, even though these same DJs and hip hop artists could for example
get royalties from broadcasting the same material through other channels. Getting these
written permissions can prove extremely difficult: the original right holder might be
hard to track down, deceased or, for example, unwilling to collaborate if the “target
song” is a parody of the original22.
Aggregators and collecting agencies (AGG)
The first thing worth noticing from this category of posts is that Last.fm was not doing a
good job in communicating the list of aggregators and collecting agency the network
was dealing with.
The complaint on AGG1 is one of many asking to see a proper summary of what are the
deals in place. As far as my knowledge goes, the question is still open. Confusion arises
between aggregators and collecting agencies both in the question AGG2 and in the
answer AGG3, to such a degree that the member of Last.fm’s staff has to underline that
the two things are distinct, reinforcing the concept once again on AGG5. AGG4 regards
59
22 See all ELG entries in Appendix II - [8]

60. a problem went unsolved, while AGG6 and AGG7 describe very well the (common)
situation when the artist himself does not know who is taking care of his or her music23.
Changes required for the website after the ARP will be in place (CNG)
This collection of posts exemplifies users concerns about tracking with precision how
streaming, scrobbling and downloads are performing, both to be able to pay the
interested parts without mistake and to keep an eye on the system to make sure it works
properly.
On CNG4 and CNG5 the staff is reassuring users on the “works in progress.” As a
matter of fact, at the moment of writing most of these concerns have been addressed.
Interestingly enough, there is no mention anywhere at how the problems pointed out by
users in CNG2 and CNG3 have been solved (if so): the issues are not irrelevant, as with
little technical gimmicks (e.g. a BOTs—little artificial intelligences— programmed to
listen over and over to the same track) they could represent a potential loophole in the
Last.fm payment system. It is reasonable to assume that after users “suggestions” some
security system has been put in place by Last.fm engineers to avoid such occurrences24.
Comments (CMM)
Comments on the initiative start enthusiastically (CMM1, CMM3) and soon change
tone. The main concerns are the low payment rates (covered in a stand-alone category)
and who is really going to benefit from the program (CMM2, CMM4). CMM3 is seeing
in the ARP a pioneering initiative forever changing the way music get shared and payed
for: so far such prediction appears to be unnecessarily optimistic, with online services
still trying to find a standard business model to settle with. On the other hand, CMM4 is
envisioning a dramatic drop of plays for independent artists. Such an event non only did
not happen, but it had no reasons to happen, since the payment of royalties does not
influence the range of artists a users can listen on Last.fm. CMM5, instead, summarizes
quite well what is the real goal of ARP: testing the waters about retribution for online
60
23 See all AGG entries in Appendix II - [9]
24 See all CNG entries in Appendix II - [10]

61. plays, not making anyone rich overnight. In this regard Last.fm hasn’t been very
successful in communicating what is the ARP goal and what a user can realistically
expect from it25.
Secondary topics (SEC)
Under Secondary topics are filed posts somehow deviating from the main topic of the
discussion: from people asking the wrong question in the wrong place (SEC1), to
comparison to other online services (SEC2), to an interesting—but out of topic—
discussion about what kind of music Last.fm users are scrobbling from their computers,
legitimate purchases or illegally downloaded files (SEC3, 4, 5 and 6)26.
After 9 July 2008
The discussion after July 9 is very limited because of a the small amount of posts from
users. ARP reports have been delivered every three months from the beginning of the
program but unexpectedly there is a shortage of new posts on the thread. The reason
behind this shortage of comments can be found in the splintering of the discussion
related to ARP on a range of other topics regarding specific issues (e.g. issues with
reports, problems with statistics, etc.). Further research is needed to track down all the
problems the program has faced after one year from its birth.
Payments (PMT_AFTER)
There is just one complaint about payments after 9 of July. However, Last.fm staff
reassures the complaining user that he is talking about known issues27.
61
25 See all CMM entries in Appendix II - [11]
26 See all SEC entries in Appendix II - [12]
27 See the PMT_AFTER entry in Appendix II - [13]