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Digital MediaResearch Centre
Changing value creation models in the music
economy
@pwikstrom @qutdmrc
Digital MediaResearch Centre
Patrik Wikström
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Digital MediaResearch Centre
Patrik WikströmAssociate ProfessorPrincipal Research FellowQUT Digital Media Research Centre
Digital creative economy (Music)Computational social scienceTime
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Digital MediaResearch Centre
QUT Digital Media Research Centre
Journalism, Public Communication &
Democracy
Industries,Policies &Economies
DigitalMethod
Innovation
Technologies &Practices
in Everyday Life
DIGITAL MEDIA
QUT DMRC conducts world-leading research that helps society understand and adapt to the social, cultural and economic
transformations associated with digital media technologies.
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Digital MediaResearch Centre
Three shiftsChanging value creation
models in the music economy
T O D A Y
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Digital MediaResearch Centre
but first…
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Digital MediaResearch Centre
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Digital MediaResearch Centre
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Digital MediaResearch Centre
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Digital MediaResearch Centre
rival
rous
non-
rival
rous
excludable non-excludable
Common good
(fish stocks)
Common good
(fish stocks)
Private good
(food)
Private good
(food)
Public good
(free-to-air television)
Public good
(free-to-air television)
Club good
(theatre performance)
Club good
(theatre performance)
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Digital MediaResearch Centre
live licensing recorded
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digitaldisruption
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Digital MediaResearch Centre
Integrated circuitFairchild Camera and Instrument Company 1961
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Digital MediaResearch Centre
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The New York Clipper, November 3, 1906
loss of control
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loss of control
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Digital MediaResearch Centre
rival
rous
non-
rival
rous
excludable non-excludable
Common good
(fish stocks)
Common good
(fish stocks)
Private good
(food)
Private good
(food)
Public good
(free-to-air television)
Public good
(free-to-air television)
Club good
(theatre performance)
Club good
(theatre performance)
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Digital MediaResearch Centre
Three shiftsChanging value creation
models in the music economy
T O D A Y
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Digital MediaResearch Centre
industry sectors
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Digital MediaResearch Centre
licensing recordedlive
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live recorded
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live licensing recorded
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live licensing recorded
Music licensing revenues have more than doubled during the
past two decades
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The revival of the music publisher
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Shift #1: From recorded music to music licensing and live performance.
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social and creative fans
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Shift #2: From finished products to platforms for co-creative fan-artist relationships.
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tools,building blocks &
rewards
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Digital MediaResearch Centre
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Digital MediaResearch Centre
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Digital MediaResearch Centre
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Shift #2: From finished products to platforms for co-creative fan-artist relationships.
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ownership v access
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Shift #3: From a product-based to an access-based logic.
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Digital MediaResearch Centre
Loyalty, passion, ownership, products
& brands.
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Digital MediaResearch Centre
Loyalty, passion, ownership, products
& brands.
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Digital MediaResearch Centre
Loyalty, passion, ownership, products
& brands.
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Products. Ownership. Brands.
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Digital MediaResearch Centre
Products. Ownership. Brands.
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Digital MediaResearch Centre
service
product
rival
rous
non-
rival
rous
excludable non-excludable
Common good
(fish stocks)
Private good
(food)
Public good
(free-to-air television)
Club good
(theat re performance)
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Digital MediaResearch Centre
a product-based music economy cannot compete
with “free”
rival
rous
non-
rival
rous
excludable non-excludable
Common good
(fish stocks)
Private good
(food)
Public good
(free-to-air television)
Club good
(theat re performance)
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Digital MediaResearch Centre
service
product
rival
rous
non-
rival
rous
excludable non-excludable
Common good
(fish stocks)
Private good
(food)
Public good
(free-to-air television)
Club good
(theat re performance)
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Digital MediaResearch Centre
Access-based music services
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…have returned many music
markets to growth
Access-based music services
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…the dominating revenue model
in a growing number of music markets
Access-based music services
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…remain very controversial
Access-based music services
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Are access-based musicservices “fair” to creators?
“Bad for music”“Ridiculous payouts”
“Unfair to small artists”“It’s a scam!”
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Incumbents’ response to technology-based disruption
DenialCombat
ResignationAcceptance
cf. Kübler‐Ross 1969
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What is the controversy about?
Access-based music services
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165
access
ownership
Revenue streams
(1) Do streaming music services generate “enough” revenues?
per track
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
105
110
115
120
125
130
135
140
145
150
155
160
165
access ‐ accum
ownership ‐ accum
(1) Do streaming music services generate “enough” revenues?
per track
Accumulated revenues
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• 2 x 12 new tracks per year• $0.7 x 24 = $17 per year
• 30 min per day (excl. radio)• 10+ tracks per day• ≈3500 tracks per year• $0.005 x 3500 = $17.5 per year
Ownership Access
(1) Do streaming music services generate “enough” revenues?
per user
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(2) Are labels fair?
Depends on the deal
Performance or sales?
Breakage?
Shareholder dividends?
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Governmental intervention
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Shift #3: From a product-based to an access-based logic.
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Let’s take this reasoning just a little bit further…
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what is the impact on audience behaviour?
Access-based music services
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Impact on audience behaviour?
E.g. Local music repertoire
%
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Can access-based music services really reduce piracy?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Before you used Spotify
After you started using Spotify
How often do you use filesharing services, such as PirateBay?
Never Seldom Sometimes Often
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Time spent listening to music
Time spent searching for music
I play my digital downloads
I discover new music
I share music I listen to with my friends
Amount of money I spend on music
Listen to illegally downloaded music
More Don't know/won't say Less
Impact on audience behaviour?
Practices
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Impact on audience behaviour?
Practices E.g.• I listen less to illegally downloaded music: 70%• I discover more new music: 80%• I spend less time searching for music: 70%
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Access-based music services shiftthe focus from the collection…
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…to the real-time listening experience
https://www.spotify.com/au/arts/serendipity/
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how do access-based music
services compete?
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May 2007…
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today:more or less
identical catalogues
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“access” is about to become
commoditized
(commoditization / commodification)
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access-based music services look for new
ways to compete
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A. Audiences focused on a real-time listening experience
B. Service providers look for new points of differentiation
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Playlists galore
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Successful music data analytics start-ups have been acquired…
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…in the search for the ultimate algorithmically curated playlist
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What happens when algorithms make our music
listening decisions?
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music is an experience product
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peers
brands
awards
experts
mediaexposure
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If algorithms take over the listening decisions, audiences no longer need a relationship with artists…
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…they only needa relationship with Spotify!
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How is this different from other cultural sectors?
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What about live music?
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Shift #3*: From music celebrities to algorithmically curated music experiences.
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Changing value creation models in the music economy
#1: From recorded music to music licensing and live performance.
#2: From finished products to platforms for co-creative fan-artist relationships.
#3: From a product-based to an access-based logic.
#3*: From music celebrities to algorithmically curated music experiences.
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thank [email protected]
@pwikstrom www.linkedin.com/in/patrikwikstrom
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