The document discusses various business models in the music industry. It begins by defining a business model and outlining the key components of the business model canvas. It then summarizes several business models including record companies, piracy, iTunes, Spotify, and independent artists. Record companies focus on marketing and promoting artists to mass markets through retail and digital channels. Piracy relies on uploading and downloading music for free through peer-to-peer networks. iTunes revolutionized the industry with its seamless digital music experience on iPods and in the iTunes store. Spotify aggregates music from rightsholders and distributes it for free with ads or through subscriptions on mobile and online. Independent artists are increasingly turning to crowd-funding to finance their

1. Business
Models
in
the
Music
Industry
Eurosonic
Noorderslag
January
14th,
2011

2. Business
models
in
the
music
industry?

3. Value
creation?

4. Firms
that
record,
produce,
publish,
distribute,
and
market
music.

6. Fans
that
listen
to
(or
experience)
music.

8. How does the music
industry create,
deliver and capture
value?

9. What different
business models do
exist in the music
industry?

10. Business
Model?

12. Business
Models?

14. Definition_Business
Model
A
business
model
describes
the
rationale
of
how
an
organization
creates,
delivers
and
captures
value

15. Self
Published
www.businessmodelgeneration.com
14
translations
70.000
sold
copies

16. THE
BUSINESS
MODEL
CANVAS

17. 1.
CUSTOMER
SEGMENTS

18. 2.
VALUE
PROPOSITION

19. 3.
CHANNELS

20. 4.
CUSTOMER
RELATIONSHIPS

21. 5.
REVENUE
STREAMS

22. 6.
KEY
RESOURCES

23. 7.
KEY
ACTIVITIES

24. 8.
KEY
PARTNERS

25. 9.
COST
STRUCTURE

26. Key Value Client
Activities! Proposition! Relationship!
Key Client
Partners! segments!
Cost Revenue
Structure! Key Streams!
Resources! Channels!

27. PARTNER KEY OFFER CUSTOMER CUSTOMER
NETWORK ACTIVITIES RELATIONSHIPS SEGMENTS
KEY DISTRIBUTION
RESOURCES CHANNELS
COST STRUCTURE REVENUE STREAMS

28. The
The
Music
Industry
Industry

29. A
dynamic
market
a
global
industry
characterized
by
many
players
and
fierce
competition

30. A
product
or
service
with
a
mass-­‐market
potential

31. 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

32. A
global
industry

34. Something
for
everyone

36. The
creative
genius

40. Lots
of
good
advisors

42. Enough
players

44. Technology
advancements

47. Declining
sales

48. Global
music
sales
Global
music
sales
(physical
and
digital)
excluding
VAT
1997:
38
billion
USD
2009:
17
billion
USD

49. Business
models
in
the
music
industry

51. A
record
company

52. The
big
4

54. Independent
labels

56. 1
main
activity

58. The
business
model
of
a
record
company

59. 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

60. Piracy

61. The
dominating
phenomenon

66. The
big
discussion

69. The
business
model
of
piracy

70. 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

71. iTunes

74. “Rock
and
Roll
will
never
die.
It
is,
however,
being
reborn.”

75. A
new,
successful
business
model

77. Very
successful

78. 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

79. 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

80. The
business
model
of
iTunes

81. 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

82. Spotify

84. “We
are
going
to
provide
music
to
everyone
(any
time,
any
place)
for
free
in
a
legal
way”

86. “Our
dream
is
to
collect
all
the
world’s
music
and
make
it
accessible
to
everyone.”

87. 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.

88. The
business
model
of
Spotify

89. 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

90. The
artist

93. “I
just
want
to
sing
and
perform.”

96. Crowd-­‐funding
paves
the
way
for
the
independent
artist

97. €
40.000
11
days

98. €
24.000
promotion

100. The
business
model
of
Hind

101. 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

102. Looking
back
at
some
major
shifts
in
the
music
industry

103. A
fragmented
copyright
industry
made
it
impossible
to
set
up
legal,
sustainable
business
models.

104. The
gap
of
legitimate
business
models
for
customers
paved
the
way
for
the
rise
of
piracy.

105. The
unbundling
of
the
album
killed
significant
revenue
streams
impacting
the
whole
music
industry.

106. Looking
at
some
current
shifts
in
the
music
industry

107. Legislation
around
piracy

110. Music
distribution

113. Shift
from
ownership
to
access

116. Technology
capacity

119. Customer
in
charge

122. What
do
customers
want
(tomorrow)?

124. The
Big
Challenge
in
Business
Modeling

125. Who
is
my
customer?

126. What
does
he
or
she
wants?

127. What
is
he
or
she
willing
to
pay
for?

128. Different
needs

132. Market
split-­‐up

136. Multi-­‐party
scene
serving
customers
needs

139. More
questions?

140. www.businessmodelsinc.com

141. www.businessmodelgeneration.com