The Music Industry in the Internet Age

Josep ValorIESE Business School, Spain

What a good idea the iPod was!

… and the iPhone is not behind!

What is the price of music?

From limited selection to hyper-abundance

Scarcity Abundance

From limited selection to hyper-abundance

Scarcity Abundance

How people listen to music today

*Base: US online adults who listen to audio at least weekly (multiple responses accepted)

Source: Forrester Research, 2008Source: North American Technographics® Media And Marketing Online Survey, Q3 2007

Where is music in the iPod coming from?

*Base: US online adults who listen to audio at least weekly (multiple responses accepted)

Source: North American Technographics® Media And Marketing Online Survey, Q3 2007

A history of format replacement

USA market: Albums & music videos 2000 – 2008

Source: RIAA, 2009

Physical Media

USA market: Total Sales

Source: RIAA, 2009

Sales forecasts are looking grim(although data is somewhat inconsistent)

Source: eMarketer, 2007-08

And channel switch

Broadband and Downloading: Chicken and Egg?

“The battle over online music is just an opening skirmish. The recording industry as we know it is history.”

Kevin Kelly, The New York Times Magazine, March 2002

Some data on music sharing

An estimated 15 million tracks “change” hands every day

35 million people in the US download music

27 million allow other to download from their computers

2/3 of those downloading say they do not care whether the music is copyrighted or not

Some data indicate that people that download the most are those still buying more CDs

6 billion songs were sold by iTunes up to January 2009

Sources: Author, RIAA, Pew Internet Project. Financial Times. Billboard, 2009

USA FIRST HALF 2009

14% music sold

25% music sold

Do law suits work?

Some artists launch their new releases online

Cost Components of a CD (circa 2000)

US $Making the disc 0.60Making the cover 0.15Distribution and sales 1.40Marketing and promotion 2.15Corporate marketing and discounts 0.86Artist management (search, etc.) 1.08Royalties to artists 1.29Royalties to composer 0.70General and Admon 1.94Label's profit 0.59Price to distributor 10.76

Personnel 1.36Distribution costs 1.36Rents in malls, etc. 2.55Distributor's profit 0.97Sales price 17.00

X

1.99 go to the “artists”

Digital distribution?

8.66

XX

X

X

XXXX

What do artists say?

Radiohead: pay what you want

How much did they in fact pay?

By 31-12-07 Radiohead stopped the “offer”, but the concept is alive

Because the business is somewhere else

160 BP en 2006

85 BP en 2001

15 BP en 1987

What’s coming next?

Cost Components of a CD

US $Making the disc 0.60Making the cover 0.15Distribution and sales 1.40Marketing and promotion 2.15Corporate marketing and discounts 0.86Artist management (search, etc.) 1.08Royalties to artists 1.29Royalties to composer 0.70General and Admon 1.94Label's profit 0.59Price to distributor 10.76

Personnel 1.36Distribution costs 1.36Rents in malls, etc. 2.55Distributor's profit 0.97Sales price 17.00

X

1.99 go to the “artists”

Digital distribution?

8.66

XX

XX

XXXX

Would you like to be part of the discovering process of a new artist?

Would you fund an emerging artist?

Now, you can! www.slicethepie.com

Launched 18 June 2007

Slicethepie: Results so far

Success so far?

Over 7,000 artists have signed up

Over 400,000 independent reviews have been carried out by users ‘scouting’

Trading in Contracts in the albums of The Alps, The Skies, Miranda Barber, Scars on 45, Katrina Bello, Tommy Ludgate and John Tayles is currently live

Has raised £150.000 for 9 artists to produce their first album

Plan for 2008. Securing financing for over 30 artists.

This is more UK artists than EMI, Sony BMG or Warner Music achieved last year.

The Problem Is Being “Unbundled”

Adding value doing something and capturing it some other way can be very dangerous

Advising versus brokerage

Finding and promoting talent versus selling plastic

Providing searches versus advertising?

thank you very much for your attention