New Music Markets

SUMMARY

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?

TABLE OF CONTENTS

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