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Business Models in the Music Industry

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Business models in the music industry. A dynamic market, a global industry, characterized by many players and fierce competition. How does the music industry create, deliver and capture value? What different business models exist in the music industry?

Business models in the music industry. A dynamic market, a global industry, characterized by many players and fierce competition. How does the music industry create, deliver and capture value? What different business models exist in the music industry?

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Business Models in the Music Industry

  1. 1. Business  Models  in  the  Music  Industry   Eurosonic  Noorderslag   January  14th,  2011  
  2. 2. Business  models  in  the   music  industry?  
  3. 3. Value  creation?  
  4. 4. Firms  that  record,   produce,  publish,   distribute,  and  market   music.  
  5. 5. Fans  that  listen  to  (or   experience)  music.  
  6. 6. How does the music industry create, deliver and capture value?  
  7. 7. What different business models do exist in the music industry?  
  8. 8. Business     Model?  
  9. 9. Business     Models?  
  10. 10. Definition_Business  Model   A  business  model  describes     the  rationale  of  how  an   organization  creates,  delivers     and  captures  value  
  11. 11. Self  Published   www.businessmodelgeneration.com 14  translations   70.000  sold  copies  
  12. 12. THE   BUSINESS  MODEL     CANVAS  
  13. 13. 1.  CUSTOMER  SEGMENTS  
  14. 14. 2.  VALUE  PROPOSITION  
  15. 15. 3.  CHANNELS  
  16. 16. 4.  CUSTOMER  RELATIONSHIPS  
  17. 17. 5.  REVENUE  STREAMS  
  18. 18. 6.  KEY  RESOURCES  
  19. 19. 7.  KEY  ACTIVITIES  
  20. 20. 8.  KEY  PARTNERS  
  21. 21. 9.  COST  STRUCTURE  
  22. 22. Key Value Client Activities! Proposition! Relationship! Key Client Partners! segments! Cost Revenue Structure! Key Streams! Resources! Channels!
  23. 23. PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS KEY DISTRIBUTION RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMS
  24. 24. The   The   Music   Industry     Industry
  25. 25. A  dynamic  market   a  global  industry     characterized  by   many  players  and   fierce  competition  
  26. 26. A  product  or  service   with  a  mass-­‐market   potential  
  27. 27. The  role  of  music  in  peoples’  lives   “Music is something most people love, that no one dislikes and that touches everyone throughout their lives” BrandAmp  study,  Millward  Brown,  2007  
  28. 28. A  global  industry  
  29. 29. Something  for   everyone  
  30. 30. The  creative  genius  
  31. 31. Lots  of  good  advisors  
  32. 32. Enough  players  
  33. 33. Technology   advancements  
  34. 34. Declining  sales  
  35. 35. Global  music  sales   Global  music  sales     (physical  and  digital)   excluding  VAT   1997:  38  billion  USD   2009:  17  billion  USD  
  36. 36. Business  models  in  the   music  industry  
  37. 37. A  record  company  
  38. 38. The  big  4  
  39. 39. Independent  labels  
  40. 40. 1  main  activity  
  41. 41. The  business  model  of   a  record  company  
  42. 42. PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS Marke:ng  &   promo:on   Distribu:on   channels   Detec:ng  &   Mass  market   building  talent   Hits  and   wannabee  hits   KEY DISTRIBUTION RESOURCES CHANNELS Manufacturers   Por@olio  of  star   TV   Retailers   ar:sts   Copyrighted   Radio   Digital   content   COST STRUCTURE REVENUE STREAMS Marke:ng  &   Royalty   Tours  and   Merchandising   promo:on   Subsidizing   payments   concerts   Huge  sales   unsuccessful   from  a  few   ar:sts   ar:sts’  albums  
  43. 43. Piracy  
  44. 44. The  dominating   phenomenon  
  45. 45. The  big  discussion  
  46. 46. The  business  model  of   piracy  
  47. 47. PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS Upload   Peer-­‐to-­‐peer   Developers  of   illegal   Download   All  the  worlds   applica:ons   and  soGware   music   Mass  market   KEY DISTRIBUTION RESOURCES CHANNELS A  network  of   commiLed   users   User  skills,   interest  and   Digital   commitment   COST STRUCTURE REVENUE STREAMS
  48. 48. iTunes  
  49. 49. “Rock  and  Roll  will   never  die.  It  is,   however,  being   reborn.”  
  50. 50. A  new,  successful   business  model  
  51. 51. Very  successful  
  52. 52. 1  billion  songs  sold:  February  23,  2006   1.5  billion  songs  sold:  September  12,  2006   2  billion  songs  sold:  January  10,  2007   2.5  billion  songs  sold:  April  9,  2007   3  billion  songs  sold:  July  31,  2007  
  53. 53. Steve  Jobs  announced  in  his     "It's  Showtime"  keynote     that  Apple  had     88%  of  the  legal     U.S.  music  download  market     on  September  12,  2006  
  54. 54. The  business  model  of   iTunes  
  55. 55. PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS Hardware/ soGware   Lovemark   Record  labels   design   Seamless  music   Marke:ng  &   Supply  chain   experience  and   Mass  market   Sales   management   Switching  costs   great  design   (music  and   hardware)   KEY DISTRIBUTION OEMs   RESOURCES CHANNELS iTunes   iPod   iTunes   Apple   soGware   hardware   store   stores   Content  &   agreements   Talented   Retail   stores   apple.com   Apple  brand   people   (designers)   COST STRUCTURE REVENUE STREAMS People,  design   Marke:ng  &   &  development   Sales   High-­‐volume   High-­‐margin   content   hardware   Hardware   Music  royal:es   revenue   revenue   manufacturing  
  56. 56. Spotify  
  57. 57. “We  are  going  to     provide  music  to  everyone     (any  time,  any  place)   for  free   in  a  legal  way”  
  58. 58. “Our  dream  is  to  collect  all  the   world’s  music  and  make  it   accessible  to  everyone.”  
  59. 59. Spotify  aggregates  content   from  right  holders,  distributes  it   to  consumers  through  the   technical  platform  and   monetizes  both  through  a  free,   ad  funded  service,  and  a   subscription  service.  
  60. 60. The  business  model  of   Spotify  
  61. 61. The  Business  Model  of  Spotify   PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS Pla@orm   Automated   development   online   and   rela:onship   Adver:sing   Adver:sers   maintenance   Rightholders   3rd  party  APIs   Communi:es   (labels  and   publishers)   KEY Access  to   DISTRIBUTION RESOURCES music  via   CHANNELS streaming  and   Global  music   Licensing   download   Internet  +     fans   agreements   services   PC   SoGware  and   Internet  +   Pla@orm  and   network   mobile   brand   engineers   COST STRUCTURE REVENUE STREAMS Subscrip:on   Royal:es  to   Bandwith  costs   Ad  fees   fees  PC  +   rightholders   Subscrip:on   mobile   Salaries   fees  PC  
  62. 62. The  artist  
  63. 63. “I  just  want  to  sing  and   perform.”  
  64. 64. Crowd-­‐funding  paves   the  way  for  the   independent  artist    
  65. 65. €  40.000   11  days  
  66. 66. €  24.000   promotion  
  67. 67. The  business  model  of   Hind  
  68. 68. PARTNER KEY OFFER CUSTOMER CUSTOMER NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS Musicians  &   Singing  &   Songwriters   Songwri:ng   performing   (Social)  media   Producers   Music   CD  produc:on   Promo:on   &  distribu:on   Music  fans   Videos   Artwork  &   KEY (performance)   DISTRIBUTION Studios   RESOURCES CHANNELS Management   Concerts   Online   The  Brand  Hind   Radio/TV   pla@orms   Tech  &  tour   team   Brand   Hind.com   Music  archive   Events   Band   experience   COST STRUCTURE REVENUE STREAMS Investment   IT,  website  and   concerts,   Concerts   Merchandising   marke:ng   transporta:on   Salaries   Music  sales  
  69. 69. Looking  back  at  some   major  shifts  in  the   music  industry  
  70. 70. A  fragmented   copyright  industry   made  it  impossible  to   set  up  legal,   sustainable  business   models.  
  71. 71. The  gap  of  legitimate   business  models  for   customers  paved  the   way  for  the  rise  of   piracy.    
  72. 72. The  unbundling  of  the   album  killed  significant   revenue  streams   impacting  the  whole   music  industry.  
  73. 73. Looking  at  some   current  shifts  in  the   music  industry  
  74. 74. Legislation  around   piracy  
  75. 75. Music  distribution  
  76. 76. Shift  from  ownership   to  access  
  77. 77. Technology  capacity  
  78. 78. Customer  in  charge  
  79. 79. What  do  customers   want  (tomorrow)?  
  80. 80. The  Big  Challenge  in   Business  Modeling  
  81. 81. Who  is  my  customer?  
  82. 82. What  does  he  or  she  wants?  
  83. 83. What  is  he  or  she  willing  to  pay  for?  
  84. 84. Different  needs  
  85. 85. Market  split-­‐up  
  86. 86. Multi-­‐party  scene   serving  customers   needs  
  87. 87. More  questions?  
  88. 88. www.businessmodelsinc.com  
  89. 89. www.businessmodelgeneration.com  

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