The Music Business

Ankita Chitlangia, Dawei Li, Diaz Baseitov, Hasifah Tengah Jean-Luc Sequeira, Luke McDermott, Rahul Dhoka, Varun Venta

OutlineOutline

Introduction: The Music Business

Background

Issues

New Business Models

Future

Conclusion

The Record Industry

Four major labels dominate: Sony Music Entertainment Universal Music Group Warner Music Group EMI

Issues: Trend: Decrease in Sales $21.1b (2005) to $15b (2007) Due to rise of digital music:A. Legal, i.e. iTunesB. illegal, i.e. LimeWire

Year

2003 2004 2005 2006

Decrease in Sales Volume (UK)

Sony BMG

Universal

Warner

EMI

Other Labels

Major Players

CD Units Sold/

Million

Year

Music downloaded over the internet for a fee - convenient

Major players: Apple&eMusic Trend: Increase in sales

2008 – 42% increaseIssues:• Sales not enough to recover

lost business from CD sales• Decline in physical revenue is

bigger than the digital uptake • 95% of downloads are still

illegal

The Digital Industry

Increase in Sales (UK)

Year

Sales/$ billion

Rise of illegal downloads

Napster - started in 1999 and was shut down in 2001Paved the way for new file sharing software, such as Kazaa, BitTorrentCreates image that recorded music is now a free commodity, it no longer has monetary value

Attempts To Stop Piracy?

The industry has tried to stop piracy in vain for many years nowCase in point has been the inability to shutdown Pirate Bay and the various clones of NapsterSony BMG’s root kit debacle was the most infamous antipiracy botch upCompanies have started using such DRM technology but are no where near controlling piracy

DRM

Strengths & Weaknesses

Overall trend in the business….

RecordDecline of the

record industry

DigitalRise of Digital Music.

However, still insufficient to cover loss by the record industry

Need for a new

Business Model?

Online PiracyRise of illegal downloads

with failed attempts to stop it

2001 2002 2003 2004 2005 2006 2007 2008

“The recording business as we all know is dying, but

why is the music business exploding?”

So, where is the $$$ coming from? Why is Robbie

Williams rich?

Free Music

Music License

Subscription

Mobile

Touring & Merchandise

Pay Per Song/Track

The Record industr

y

Direct Sales

Subscription Services

What is it?Pay a certain amount per month in exchange for songsUsually different price for a certain amount of bandwidthExamples include Spotify, RhapsodyNow Napster and Kazaa

Pros & Cons

Access to all songs, anywhereOn laptop, mobileDifferent countriesUse of log-ins

One-off payment per monthRhapsody - $10 per month

Readiness of people to ‘rent’ their music?

Ubiquity of internet access?

Multiple sharing of log-in codes?

Benefits Issues

Concerts: Tour & Merchandise

If people refuse to pay for the music, give them something extra to pay forMajor players include Live Nation, AEG and Academy Music GroupYou cannot download the experience of seeing your favourite band live2009 – UK Sales of music DVDs rose from 16.1% to £33.1.

Live NationMajor artists make 75% of their earnings from touringLive Nation is the world’s largest promoterOne-stop shop: making albums, selling merchandise, operating tours, running the website, producing videos and creating new products, such as Guitar HeroMadonna, Jay-Z, U2

Increase in number of people attending concerts, current trends & forecast

E.g. Iron MaidenCustomised their own plane for world tour, enabling them fit in countries that were previously too difficult to visitGenerated plenty of media coverageReleased a documentary film following the tourDVD went straight to number 1 in music DVD charts in 22 countries

Strengths & Weaknesses

Future thoughts?

There are still people willing to pay for hard copies of music, but they are becoming a minorityWhich effective new strategy gona work better? ArgueOpportunities to make record business better? Make the CD more special?Does illegal downloading really hit the industry that hard? Might it be good?People will never buy as much music as is available online, therefore subscription services like Spotify are a good idea for the future.People take it because it is free. Might not pay for it otherwise.Legislation + Govt policies – towards piracy

Conclusion

Any questions?