New Music Markets - Digital Formats, Rights Management, Live Performances
IDATE, September 2008, Pages: 70
The various segments of the music market are evolving under the impact of the shift to digital formats. This study analyzes the various online
music distribution models and the associated pricing and business models using case studies. It describes the evolution in the music industry and establishes the conditions for a new economic equilibrium. Finally, a five-year market forecast is provided.
Key questions
- What are the major trends in the recorded music, publishing, and concert markets?
- Mid-tail, back catalogs, premium services: What are the new online services being offered and what are the pricing models?
- Recommendations, ticketing, merchandising: What role do community-based services play in online music distribution?
- Are there alternatives to record labels?
- Advertising: a shift toward direct financing by brands?
- What developments have been made in discovering artists and in production?
- From publishing to global licensing?
1. Introduction
2. The State of Affairs
2.1. Where Is the Recorded Music Market Today?
2.2. A Transition Phase
2.2.1. Singles over Albums
2.2.2. What Comes After iTunes?
3. The New Distributors
3.1. Generalists
3.2. Specialists in Promoting Back Catalogs
3.3. Mid-Tail Distributors
3.4. Free Content Distributors
3.5. Telcos
4. Marketing and Product Innovations
4.1. Marketing Innovations
4.1.1. Creating Value for New Releases
4.1.2. Using Community Networks: A Must in Music Promotion
4.1.3. Targeting the Fan Base Better
4.1.4. From DRM to CRM
4.2. Product Innovations
4.2.1. Improving Sound Quality
4.2.2. Distributing Music Legally via P2P Networks
4.2.3. Delinearizing Music
5. Is Direct Distribution Possible?
5.1. Innovating Physical Distribution
5.1.1. Starbucks Creates Synergy between its Customers and Music Distribution
5.1.2. Exclusivity Agreements with Major Distributors and Retail Stores
5.1.3. Covermounts in Newspapers
5.2. Circumventing Record Labels for Online Distribution
5.2.1. Directly from Artist to Listener
5.2.2. Turning to an Aggregator
5.2.3. Partnering with a Radio Station
6. Pricing Models
6.1. A-la-Carte Purchasing
6.2. Subscription Services
6.3. Paying for a Service
6.4. Free Music
7. Ad-Based Financing
7.1. Streaming and Downloads
7.1.1. Maximizing the Audience
7.1.2. Offering Targeted, Unobtrusive Advertising
7.1.3. Increasing Advertising Exposure
7.2. Offering Music Via Marketing Operations
7.2.1. Promoting a Service or Platform
7.2.2. Music to Attract Customers
7.3. Partnering with Brands to Finance Creation and Distribution
8. Upstream Impact: Pre-Production and Production
8.1. Spotting New Talent
8.1.1. Moving Away from Hard-Copy Demos
8.1.2. Recruiting Talent on Social Networks
8.2. The Democratization of Production
8.2.1. Self-Production for a Few Thousand Dollars
8.2.2. Community Production
9. Impact on Record Label Activities
9.1. The Change in Cost Structure Favors Record Labels (Impact on Recording)
9.2. New Sources of Revenue
9.2.1. Rights Management: From Publishing to Licensing
9.3. Reorganizing the Industry around Live Performances?
10. Global Music Market Forecast for 2011
11. Conclusion: Towards a New Musical Equilibrium
Index of Tables and Figures
Table 1 Internet music radio listening hours and advertising investments
Table 2 Album and single market share in digital music sales in 2006
Table 3 Sources and total amounts of royalties received by MCPS-PRS Alliance
Table 4 Download rates on fnacmusic
Table 5 Download rates on eMusic
Table 6 Napster's and Rhapsody's rates
Table 7 Monthly rates for mobile offerings
Table 8 Summary of pricing models
Table 9 Market forecast assumptions
Table 10 2007-2011 forecast for the end music market
Figure 1 The global music market - 2007
Figure 2 Global recorded music market (1997-2007)
Figure 3 Traffic on YouTube and MySpace
Figure 4 Digital and physical markets 2004-2007
Figure 5 iPod cumulative sales
Figure 6 Breakdown of the price of a CD
Figure 7 Breakdown of the price of a download
Figure 8 Breakdown of rights collected by Universal Music, by source
Figure 9 Market of the 100 biggest concerts in the U.S.
Figure 10 Portion of revenues from tours for the 10 artists with the highest performance earnings in 2006
Figure 11 The Live Nation strategy
Figure 12 Comparison of CD sales and online music revenues, world
Figure 13 Breakdown of the end global music market
New Music Markets
Digital formats, rights management, live performances
The various segments of the music market are evolving under the impact of the shift to digital formats. This study analyzes the various online music distribution models and the associated pricing and business models using case studies. It describes the evolution in the music industry, both upstream (creating and producing music) and downstream (distribution, tie-in merchandise, live performances), and establishes the conditions for a new economic equilibrium. Finally, a five-year market forecast is provided.
The decline of the CD market in the context of the global music market
The global music market represents 67 billion USD, divided into three segments: recorded music (33.5 billion USD), live performances (25.6 billion USD), and music publishing (8 billion USD).
Directly or indirectly, the shift to digital formats affects all of these segments:
- The partial shift from physical sales to digital music sales impacts the associated revenue from music publishing;
- The increase in the number of Internet distribution services implies an increase in corresponding publishing rights;
- The decline in the global recorded music market increases the importance concerts hold in the music economy.
New online music distribution structure
In addition to the pure players in music sales (iTunes, Amazon, Wal-Mart, etc.), the new distribution models include:
- specialists in managing back catalogs, which offer fewer titles, target a specific audience and unite smaller labels (eMusic);
- "mid-tail" distributors, whose catalogs are built on artists who have not signed with the major record labels (Airtist). However, these distributors try to include a few famous artists to increase the catalog’s leverage;
- distributors of free content (Jamendo), which are donation-based;
- telecom operators, which offer music as a loss leader for their Internet services;
- and finally, distribution directly from the artist without record label involvement seems to be reserved for artists whose fame is already well-established.
Growth of concerts in the music economy
The concert market is growing at an annual rate of over 10% in the U.S., as a result of:
- increased professionalism in organizing concerts, with the appearance of specialized companies (LiveNation);
- concert hall renovations;
- the increasingly important role played by sponsoring, which currently represents about 30% of the concert market;
- a hike in ticket prices.
- Live Nation is implementing a vertical integration strategy, signing global contracts (“360” deals with several major artists).
Rebalancing of the music market
- Our estimates the music market will grow 4% during the 2007-2011 period.
- The physical and online distribution markets will be equal in 2011.
- Together, these two segments will represent 41% of the music market, versus 50% in 2007.
- The concert market (including sponsoring) will represent 48% of the market (versus 38% in 2007).
Case studies
- Airtist
- eMusic
- Facebook
- Jamendo
- MusicMakesFriend
- Musinaut
- Myspace
- Napster
- Orange
- Qtrax
- Rhapsody
- Sellaband
- SFR
- TuneCore
- We7
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