Music 2.

Category / Sector
 Agenda

• Overview
• Business Model
• Web 2.0 Component
• Competition
• Global Scenario
• Legal Issues
• Indian Scenario
• Future Outlook
 Stakeholders

 Artist
 Professional Musician
 Labels
 Recording Studios
 Event Managers
 Consumer
 Regulators

3
 Overview

 In 2008 the digital music business

internationally saw a sixth year of
expansion, growing by an estimated 25
% to US$3.7 billion in trade value
 Partnerships with technology
companies are integral to the changing
business model
 Digital platforms now account for
around 20 % of recorded music sales,
up from 15%in 2007
Digital Music Revenues
 Reasons for Variations

 Different levels of mobile and broadband adoption in

the different markets
 Variations in the use and ownership of technology
 Piracy levels, credit card penetration and payment
methods available to consumers
 Marketing efforts by digital services in different
countries
 Consumer trust in online buying
 Business Model(1/3)

 Pre-Internet Era
 Business Model(2/3)

 Present Model
 Business Model(3/3)

 Growth of Commerce around “Music Access”

 Partnership with technological companies is critical for
new business model
 Licensing arrangements with social networking sites

Elio Leoni Sceti, chief executive of EMI Music, says –Our

role is not to put physical discs on a shelf but to reach
consumers wherever they are
 Web 2.0 Characteristics

 Communities
 References
 Blogs
 Reviews
 Ratings
 Guidance
Tools & Applications
 Web 2.0 Communication

 RSS feeds
 News letter
 Podcasts
 Mobile
 Web 2.0 Technology

 Linux: Operating system

 Apache: Web server
 My SQL: DBMS
 AJAX: Chatting, blogging
enabler
 RSS: Frequent content updater
Porter’s Analysis
REACTIONS DOWN THE MEMORY
LANE
Disruptive technologies & copyright
Technology Innovations
And
parodies…
 Copyright for the masses

1906 2008
 The Enforcers

MPAA

USA Canada Australia

UK International India

Entertainment Industry associations around the world

 Creative Commons
 “The commons” — the body
of work that is available to
the public for free and legal
sharing, use, repurposing,
and remixing.
 Standardized way to grant
copyright permissions to
their creative work.
 “All rights reserved” to
“Some rights reserved.”
 What Creative Commons Offers to Music
business?
 Promotion to the artist and his records
 Allows artists to reach larger audience
 Build upon reputation
 Foster interaction between music members
 Encourage artistic and future exchange
 Freedom from economic pressure of big companies in
releasing any kind of work
 Bypassing traditional distributors and publishers
THE GLOBAL SCENE

Technology as the enabler

Online Music Stores

Major license
revenue for
labels
Music Streaming
 Portability

New
Media

New
Devices
 Online Radio

Major opportunity to
recommend & guide
users to purchase
channels
 Apple

iTunes continues to be the leading player in the online download

•

market

It announced in January 2009 that it had sold six billion downloads

•

since launch and it now has a presence in 22 countries worldwide

•
The online store carries more than eight million DRM free
•licensed music tracks, as well as 20,000 TV episodes and more than

2,000 films

You’ll find millions of high-quality, DRM-free songs on the iTunes

•

Store all for just 69¢, 99¢, or $1.29

Some numbers – iTunes Store Sales
 Amazon

Amazon, one of the biggest brand names in online retail, launched its
•

Amazon MP3 DRM-free download service in the US back in 2007

AmazonMP3 offers more than six million DRM-free MP3 tracks from
•

all the major labels and thousands of independents

•
Amazon has a stronger bias to male users (64%) than iTunes (44%) and
is weaker among the teen audience (3%) than iTunes (18%) in part due
to iTunes gift voucher payment system
 Top Players-Traffic Rank

Company Apple Amazon Last fm

World Traffic 69521 20 313
Ranking as on
19/11/2009
Source:Alexa
 Network Demographics-Sample

Specific to itunes Source:Alexa

 Revenue Model

 Itunes
 Fixed- 30$ per month
 As Per song-In January 2009 the store announced it was
introducing flexible pricing for its eight million DRM-
free tracks at 69 cents, 99 centsandS$1.29
 Amazon
 Subscription- 3$ per month
 Revenue Model

 Last fm
 99 cents per song
 Free for first three uses
 Who Have issues & Why?

 RIAA: Recording Industry Association of America

 The “BIG 4”
 EMI
 Sony-BMG
 Universal Music
 Warner
 MPAA: Motion Picture Association of America
 Reasons

 Copyright infringement by p2p networks

 Copyright infringement by individual clients
 Lack of royalty payments
 Reactions

 Lawsuits against centralized networks

 September 2003 RIAA files lawsuits against individual
clients
 Lobbying for right to outlaw p2p networks
 Lobbying for rights to break into personal computers,
if there is a suspicion of illegal activity
 Is filesharing illegal?

 No, sharing files is not illegal, if a person has received

permission from the files’ creator(s)
 Filesharing in theory is based on the fundamental idea
of sharing, but it has received a lot of bad publicity due
to filesharing network “misuse” by individuals
The birth of online music stores
 One person’s misery is another person’s
success
 After Napster, “downloading” became a
household term
 The profile of the downloader has evolved into
distinct categories
 Apple was one of the first larger companies to
back this idea and revolutionize the music
industry as we know it
 By cutting deals with the artists themselves, Steve Jobs
revamped the digital music scene
Why buy music if you can get it
for free?
 Factors

Security issues
 Consumers are not interested in spyware, pop ads, or
viruses
 Trusted brands have evolved in this domain
guaranteeing consumers protection

Ease-of-use
 The publicity showered on p2p networks arguably
raised awareness as to how easy it can be to search and
download songs off the Internet
 What is the impact of filesharing on the
music industry?
 RIAA claims that album sales have gone down
 Recent research has shown that filesharing is not a true
threat to album sales
 Clients that are sharing music online are not the target
group of album marketing
 Contradicting research: who is right?
THE INDIAN SCENARIO

Technology followers?
 Music Streaming

Revenue from licensing

 Music Streaming

Revenue from licensing

Amateur Publishing

•
Crowdsourcing
•
Commons
• Social Networking

• Prosumer friendly
 Personalization Services

Multiple revenue sources: License, service charges, partnership

Mobile Downloads
 Mobile Music Exchange

 Growing demand for music content on mobiles

 Indian Music Industry (IMI) launched Music Mobile Exchange
(MMX)
 MMX a 7-member body comprising SaReGaMa, Aditya Music,
Tips, Venus, EMI, Sony and Universal
 MMX license - mobile stores/shopkeepers can legally sell
music without violating the Copyright Act
 MX licence - for a period of one to three years, at a minimal
cost of Rs 1500- 5,000 per month per computer
THE VALUE CHAIN

Evolution over the years

Past
Present/Future
 SaReGaMa on iTunes Store

License revenue
 Hamaracd

Personalise Video
d Audio CD Catalogue
 rajshri.com

Some
Partners
 Key Observations

Copyright infringements still a major worry

Key revenue streams online
 Advertisements
 Licensing
 Value added services

Free models quite popular
 A large user base is the best asset online

Long Tail can be manipulated
 Fattening
 Recommendations
Do P2P users buy more music?
UK Study Studies conducted by
CRIA & in UK indicate
that people who
download music illegally
from the internet spend
more on music
purchases than or
equivalent to those who
do not

Caveat: Survey relies on

consumer recall &
accuracy of information
CRIA
Study

Can it be
extended to
India?
 Music from the clouds
Alternate pricing
strategies:
SaReGaMa Online • Pay what you like
Service • Demand based ~

airline tickets

Special terminals at
outlets to customise Price:
service as per customer’s Rs 10-15 per
needs track (PPP$)
Medium of customer’s Subscription
choice: USB, CD, DVD services
etc
Promos:
• Reward points

• Discounts

Individual
Corporate Consumer
Partners