Mac281 Producers, Profit, Pirates & Peers

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Updated slides based on the problems the music industry faced in lieu of the Internet. Updated annually


<p>Producers, Profit, Pirates &amp; Peers</p> <p>*Producers, Profit, Pirates &amp; </p> <p>*Context</p> <p>*2</p> <p>*</p> <p>*Vivendi-Universal$12.5 billion loss in the first 3 financial quarters of 2002 (Economist, 16 Jan 2003)</p> <p>EMI54.4 million loss in the first 2 quarter of 2001 (138.4 million profit over same period in 2002) (Economist, 18 Jan 2003)</p> <p>*E.M.I. R.I.P?2002EMI sack MariahCost = $28 million2004EMI sack 1,500 staff2007Axe boss, Alain LevyProfits -10% on 0650 million loss</p> <p>*E.M.I. R.I.P?2007Terra Firma pay 4.2 billion for EMICitigroup provides loan of 2.6 billion</p> <p>EMI today?2009412 million net lossGlobal economic crisisProblems restructuring debt</p> <p>20101.56 billion net lossForced to write down the value of its catalogue 1.04 billion impairment chargeDebt of 2.6 billion*</p> <p>EMI today?Recorded musicBack catalogue Music publishingImproving top-line operating profits from 56m to 163mOverall profits: ~300 millionSource: Pratley, 2010</p> <p>*</p> <p>EMI today?Nov 2011 - RIPBusiness broken upEMI + Universal = 38% of recorded music sales globally*</p> <p>*CausesThe InternetPeer-2-Peer (P2P) transferDigitisation of music as filesBroadband growth/penetration (up 23% since 2006: IFPI, 2008: 5)2002: 1 billion illegal files (Sanghera)2007: ratio of illegal-legal tracks: 20-1 (IFPI, 2008)</p> <p>*Industry voicesRIAA (Recording Industry Association of America) (International Federation of the Phonographic Industry) (British Phonographic Industry) Music </p> <p>*Singles market1970s until 1999:annual UK singles sales = 70 millionSince 1999, this has more than halved.(BPI, 2005: p8)2008: growth of 33%115 million + sales(BPI, 2009) </p> <p>Album marketDown 3.2% in 2008Digital albums = 10 million sales65% increase on 2007 (= 7.7% of market)</p> <p>Optimism?UK Grammy success (Radiohead, Coldplay)New digital services?*</p> <p>*</p> <p>*</p> <p>*</p> <p>*</p> <p>UK music market 1997-2011 (millions)*BPI</p> <p>UK music market 1997-2011 (millions)*BPI</p> <p>Chart1</p> <p>77.8109.493.6</p> <p>73.8121.597.65</p> <p>71121.596.25</p> <p>55.7134.395</p> <p>51.2144.998.05</p> <p>43.9149.296.55</p> <p>30.9159.395.1</p> <p>32.3163.497.85</p> <p>47.9159103.45</p> <p>67154.7110.85</p> <p>86.6138.1112.35</p> <p>115.1133.6124.35</p> <p>152.7128.9140.8</p> <p>161.8119.9140.85</p> <p>177.9113.2145.55</p> <p>Singles</p> <p>Albums</p> <p>Average</p> <p>Sheet1</p> <p>SinglesAlbumsAverage</p> <p>199777.8109.493.6</p> <p>199873.8121.597.65</p> <p>199971121.596.25</p> <p>200055.7134.395</p> <p>200151.2144.998.05</p> <p>200243.9149.296.55</p> <p>200330.9159.395.1</p> <p>200432.3163.497.85</p> <p>200547.9159103.45</p> <p>200667154.7110.85</p> <p>200786.6138.1112.35</p> <p>2008115.1133.6124.35</p> <p>2009152.7128.9140.8</p> <p>2010161.8119.9140.85</p> <p>2011177.9113.2145.55</p> <p>Yet*BPI</p> <p>Digital music to save the industry?*</p> <p>Digital music to save the industry?*Source: BPI</p> <p>Chart1</p> <p>21</p> <p>98.5</p> <p>Sales</p> <p>UK album sales in millions (2010)</p> <p>Sheet1</p> <p>Sales</p> <p>Digital21</p> <p>CD98.5</p> <p>To update the chart, enter data into this table. The data is automatically saved in the chart.</p> <p>Digital music to save the industry?*Source: BPI</p> <p>Chart1</p> <p>26.6</p> <p>86.2</p> <p>0.337</p> <p>Sales</p> <p>UK album sales in millions (2011)</p> <p>Sheet1</p> <p>Sales</p> <p>Digital26.6</p> <p>CD86.2</p> <p>Vinyl0.337</p> <p>To update the chart, enter data into this table. The data is automatically saved in the chart.</p> <p>UK music industry growing!Revenues up by 4.7%</p> <p>*</p> <p>UK music industry levelling out?Revenues down by 4.8%Global decline of 11%</p> <p>*</p> <p>*</p> <p>The new marketplace?UK album sales (2008)*</p> <p>Chart1</p> <p>8.4</p> <p>91.6</p> <p>Total Album sales</p> <p>Sheet1</p> <p>Total Album sales</p> <p>Top 10 sellers: 11 m8.4</p> <p>The rest: 133.6 m91.6</p> <p>To resize chart data range, drag lower right corner of range.</p> <p>The Long Tail (Anderson 2004)*</p> <p>The Long Tail (Anderson 2004)Power law distribution curve (aka Pareto curve)20%head80% tail*</p> <p>The Long Tail (Anderson 2004)Selling more of the tail may be the future for the music industry business modelValue no longer in the hits but in the volume of content80% tail20%head*</p> <p>*History</p> <p>*History1970s: home taping and organised crime</p> <p>*HistoryEarly IRCs 1990-94Evolved into the P2P networksNapster Gnutella Morpheus KazaaGroksterLeyshon et al (2005: 180-1) a musical gift economy</p> <p>*Business modelTo find, fund, record, promote and market music. Record companies fund that process by retaining the rights in the artists sound recordings(BPI, 2005: 27)</p> <p>stop piracy, increase profitability?</p> <p>*Scale of music industryno more than 10 percent of records actually recoup the money the record industry invests in its production with some companies stating that the real figure is closer to 3 % (Leyshon, 2005: 187)How does this fit against sales?</p> <p>*What changed?a set of broader cultural forces have changed the role of music within society, and relegated its immediacy and importance among many of its consumers (Leyshon et al, 2005: 181)</p> <p>*Attitude shiftsRecent developments within the music industryContext (clubs; festivals; merchandise)Synergetic marketing of musicCross platform tie-ins (X-Factor, Pop Idol)The inability to sustain consumer attentionCompetition for income (games, DVDs, mobiles, Internet subscriptions)</p> <p>*The blame game?Industry business model has been in trouble at least since the 1980s. Temporary delay via CD back catalogues(Breen, 1995)</p> <p>It is easier to blame an external process (Internet) than to admit the industry itself made a series of errors</p> <p>*ResponsesInstead of exploring P2P exchange as a business opportunity, they defined it as a piratical threat. In doing so, they inadvertently implied that they had the right to determine how people apply after-sales use of intellectual property by re-asserting commercial copyright in a set of relations that were effectively deregulated.(Rojek, 2005: 359)</p> <p>Metallica vs Napster (April 2000)*Name and shame usersMaximum fine of $150,000 per mp3 downloaded</p> <p>2007: and TVLinks closed down</p> <p>*One down, another appearsMay 2003 Kazaa: 230.3 million downloadsNew user uptake of 13 million a month(Teather, 2003)</p> <p>BitTorrent protocol1 in 3 broadband users are pirates?Torrentfreak, 3 Feb 2009uTorrent user base: 28 million monthly usersTorrentfreak, 25 Dec 2008*</p> <p>The Pirate Bay on trial (Feb 2009)*</p> <p>*Busted?RIAA PR own-goal: prosecution of 12 year old Brianna LaHara (BBC, 10/9/2003)</p> <p>Illinois Senator Dick Durbin:Are you headed to junior high schools to round up the usual suspects?</p> <p>Sue your customers?*</p> <p>*Digital Rights Management (DRM)Protected AAC audio formatDigital downloads = 15% of market (and growing)iTunes = 9 billion+ sold&lt; 3% of music on average iPod is bought from iTunes</p> <p>*Apples CEODRMs havent worked to halt music piracy In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on the CDs by the music companies So if [they] are selling over 90 percent of the music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system?Steve Jobs, 2007</p> <p>*ConclusionThe traditional music industry business model is under threat and forcing the industry to react:prosecute major uploadersprosecute downloaders randomlydevelop anti-piracy measures, such as DRM pressurise ISPs (3 strikes?)new innovations?</p> <p>*The industry has been partially responsible for its problems:it didnt adapt to change quickly enough multinational business interests are split into smaller divisions which are partially responsible for the encouragement of consumer banditry hardware/software advances destabilise the traditional role of the industry</p> <p>*Selected sourcesBBC, 10/9/2003, Music firms target 12 year old at BBC, 21/02/2006, Broadband growth speeds forward available at, 2005, Illegal Filesharing Fact SheetBPI, 2009, UK reports resilient music sales in 2008 press release M. Breen, 1995, The End of the World as We Know it: Popular Musics Cultural Mobility in Cultural Studies9 (3): 486-504.Lights! Camera! No profits!,Economist, 00130613, 1/18/2003, Vol. 366, Issue 8307How to manage a dream factory,Economist, 00130613, 1/18/2003, Vol. 366, Issue 8307Malcolm Gladwell, 2000, The Tipping Point: How Little Things Can Make a Big Difference, AbacusIFPI, 2007, Digital Music Report available from, 2008, Digital Music Report available from Steve Jobs, 6/2/2007, Thoughts on music available at Andrew Leyshon, 2003, Scary Monsters? Software formats, peer-to-peer networks, and the spectre of the gift in Environment and Planning D: Soceity and Space, 21 (5): 533-58.H. Parker et al, 1998, Illegal Leisure: the normalization of adolescent recreational drug use, London: Routledge.H. Parker et al, 2002, The normalisation of sensible recreational drug use: further evidence from the North-West England Longitudinal Study in Sociology, 36 (4): 941-64.Chris Rojek, 2005, P2P Leisure exchange - net banditry and the policing of intellectual property, in Leisure Studies, 24: 4, 357-367.Sathnam Sanghera, 2002, Rock n Roll Suicide: How Napster, TV-created Pop and a Dearth of Talent are Killing the Record Industry, Financial Times, 15 November, p19.David Teather 23/7/2003, Music firms on pirates tails in The Guardian, available at,,1004030,00.htmlSarah Thornton, 1995, Club Cultures, Cambridge: Polity.Griffin Mead Woodworth, 2004, Hackers, Users and Suits: Napster and Representations of Identity in Popular Music and Society, 27: 2, 161-184.Richard Wray, 13/01/2007, EMI sacks music boss as profits drop in The Guardian, available at,,1989490,00.html </p> <p>Image sourcesP1,2, 5, Automania, 2005, Christmas Music,, hc gilje, 2007, EMI Electola, P7, 8, aus_chick, 2006, EMI, P10, 25, 34, myuibe, 2008, copyright and digital culture, P11, 12, 16, 17, _ambrown, 2006, Music Millenium, Portland Oregon, P18, p_kirn, 2007, Handmade Music 8/23/07 with Etsy Labs, CDM, and Make, P31-3, karola riegler photography, 2009, Vinyl kills the mp3 industry, P35, 37, Ferrari + caballos + fuerza = cerebro Humano, 2009, Musica comprimida Compressed Music, P38, GabryPk, 2008, Music Is My Drug pt. 2, P47, Selma90, 2009, Apple </p> <p>*</p> <p>***************************</p>