Innovation in the music industry: Impact of technology and changing consumer behavior

Prepared by: Daniela Bartos January 2016

Lecture structure

! New ecosystem !  Impact of technology !  Impact of changing consumer

behavior !  Innovation in the music business:

new digital music services/products ! Success strategies ! Conclusion

New ecosystem

for the music

industry

Ongoing Technological

innovation

More autonomous

artists/creators

Changing market forces

New start-ups and cross-

industry players

Changing consumer behavior

Impact of disruptive technologies on the music business

Technology innovation

Music business

innovation

Disruptive technologies have changed the music industry

! Digitisation !  Internet ! Advanced mobile communication

networks (3G, 4G) ! Self- publishing and distributing

software (Web 2.0) ! Multi-platforms & smart-digital devices ! Easy creation of a perfect copy

Impact of changing consumer behavior on the music business

New consumer behavior

Music business

innovation

Disruptive technologies

Technology drives innovation in the music sector in several ways

1

2

3

finding the right music "  the long tail allows everyone to access their

perfect niche

connecting with an artist "  through social networking sites and official

artist websites, fans feel more connected to artists than ever before

time and place "  music is more fluid, sharable and portable

than ever before

technology

4 access to tools of the business "  the internet allows artists to promote their

music, sell it, connect with fans, and collaborate

Evidence of this statement has been confirmed by the MTV Music Experience 2 Study (14-34 year olds), 2010

Music experience has evolved…

discovery

exploration

“owning it”

personalising

sharing

Based on a survey from the MTV (Music Experience 2 study,14-34 year olds, 2010)

Changing consumer behavior - expectations

!  24/7 !  Everything & everywhere !  Free !  On demand !  Access (not owning) !  Mobile !  Social media sharing !  Intuitive !  Value for the money

Changing consumer behavior – action !  Peer-to peer sharing !  Piracy !  Demanding consumer !  Impatient user !  Various behavioral tendencies (age, gender,

income, education, status, occupation, taste, technology use, geography, purchasing patterns, hobbies, etc)

Music business proposition as a ‘balancing act’ for changing consumer behavior

expectations

action

Resulting in innovation of their products and services

New wave of digital

music services

Technology innovation

Changing consumer behavior

New wave of digital music services

!  Licensed on-demand audio streaming services !  Licensed personalised radio services !  Music discovery !  Music identification !  Music recommendations !  Audio + visual on-demand streaming services !  Social media and UGC platforms !  Self- publishing and collaborative platforms !  Music as apps – “album as a service !  Location-based services !  And many more ‘musicpreneurship’

Demand for digital music content has increased

Digital music

Radio Broadcasters

Streaming Services

TV broadcasters

Advertisers

Film, Video and Games

Applications developers Online

publishers

Social media and UGC sites

Telcos and ISPs

Device manufacturers/

software houses/

Artists and Creatives

New digital music service providers have to harmonize expectations of several different ‘components’

Users

Market forces

Labels &

Artists

Many users/consumers are almost professionals

! Possibility of direct interaction between artists and their fans

! Music fans create their own content: Blogs, Playlists, Forum posts, etc.

!  Intermediaries become less important, the digital value chain is often much shorter

New digital music services have to find

sustainable business models

New business

models and management

practice

Consumer behavior

Technological innovation

Market forces

New players

New business models

!  ‘Freemium’ !  Subscription !  Triple-play !  Social commerce !  Mobile and tablet apps !  Multimedia services !  UGC aggregation !  Music discovery and identification !  Crowdfunding !  new models are been developed and

commercially tested as we speak

Different models appeal to different consumer needs

Survey: Main reasons for using legal services, average across all countries

Source: Ipsos MediaCT | The Digital Music Consumer – A Global Perspective (February 2013)

The formula of success for digital media players:

!  Collaborative partnerships (technology, artists, labels, users, etc)

!  Global expansion & localisation !  Free and pay content services in a right proportion !  The end-user: greater satisfaction and ease of use !  Personalised, targeted services !  Provide quality and variety of content with value-

added extras !  Multi-platforms and devices (mobile-first) !  But above all, an ability to monetise their offering

(value creation)

Combining value creation and value capture

Value creation

Value capture

A success formula for the music industry players

Creating value for a consumer: content, technology, commerce

Accessibility Choice and variety of content

Price

Targeted and Personalized

Package

Added features

Multi-devices

Quality

Technical interoperability

New business models within the music industry - relationship of ‘action’ and ‘impact’

New business models

Consumer satisfaction

Competitive advantage

Product/Service/Industry

Innovation

Securing revenues

CH

AN

GIN

G S

ITU

ATIO

N

New ecosystem (due to technological innovation and changing consumer behaviour)

RE

AC

TIO

N

New music business models and innovative entrepreneurial/ management practices

RE

SU

LT

Establishing sustainable future for the music industry

To conclude: Evolving transformation of the music industry leading into a prosperous future