Some of the industry players

Digital Player manufacturers iPOD (Apple) Archos Creative Labs Dell Tunes@Tuck: iRiver MPIO RCA Fresh Tracks for the Music Industry Rio (Sonicblue) Samsung ( player) February 4, 2004 Sony

On- stores The music industry has undergone a mas- BuyMusic.com sive change in recent years, but many iTunes (Apple) Musicnow (Full Audio Corp) chapters of the book are yet to be written. Microsoft (in 2004) The internet and supporting digital tech- Music Match nologies have driven radical changes in Musicnow Rhapsody (Real Networks) the value chain for music, impacting eve- Napster 2.0 (Roxio) rything from the production of music to Sony (in 2004) its distribution and how it is enjoyed by Viacom—MTV (in 2004) Wal-Mart the consumer.

Record Labels This Tech@Tuck will provide us a glimpse Vivendi Universal Sony Music at the components of this changing indus- EMI try and a look at the future business mod- AOL - Time Warner els. Bertelsmann

Peer to Peer Software Blubster Direct Connect eMule Center for Digital Strategies TECH@TUCK Grokster Tuck School of Business at Dartmouth 100 Tuck Hall Limewire Hanover, NH 03755-9000 Phone: +1 (603) 646-0899 Fax: +1 (603) 646-9086 Email: [email protected] Incumbent Music Industry File-sharing Tunes@Tuck • Worldwide music sales account for $33 • File-sharing in Europe has, with less billion annually. publicity than in the U.S., taken a big bite Panelists • Five companies have taken over vertical out of the world's second-largest music and horizontal control over almost every as- market, which accounted for $11 billion, • Victoria Bassetti, VP, EMI pect of the industry. or 34%, of global sales in 2002. • Peter Fader, Professor, Wharton School Vivendi Universal 24% • A survey of Internet users shows sharp • Wayne Rosso, CEO, Optisoft/Blubster Sony Music 15% drops in usage of music file-sharing soft- (former CEO Grokster) EMI 13% ware, another encouraging sign for the • Tim Schaaff, VP, Apple AOL-Time Warner 12% recording industry as it battles the online Bertelsmann 10% swapping of pirated music. Moderated by: Jimmy Guterman, • US CD sales are down 15% since 2000. • The percentage of people saying they Ziff Davis Media Consumers’ embrace of file-sharing technol- download music from the Internet ogy like Kazaa and the encouraging start of through file-sharing programs fell to 14% paid services like Apple’s iTunes beg the late last year from 29%. Those who con- Digital Music Overview question: Will music delivery on CDs become tinue to download music through file- obsolete? sharing programs such as Kazaa, Grokster

and BearShare also say they are doing it The IFPI Online Music Report 2004 report Market Overview less frequently. shows paid online music taking off inter- nationally in 2004, following on the suc- On-line Music Stores cess of services such as Apple iTunes, • 49% of 12- to 22-year-olds downloaded

Napster and Rhapsody in the USA. An- music last month. • By the end of 2003, iTunes had sold nouncements of services outside the USA • Half of downloaders say they now buy more than 30 million songs at 99 cents are expected by those players in the first fewer CDs. each. Similar services, such as the re- half of 2004. In Europe, some half a million • 31% of consumers download music and vamped Napster, BuyMusic.com, Mu- people are already signed up to more than burn CDs sicmatch, Rhapsody and Wal-mart follow 30 different legal sites. This figure is ex- • These frequent digital music users buy with strong sales numbers. pected to rise sharply in 2004 as record 36% of all CDs. • Some reports estimate that by 2007, companies continue license their catalogue • File sharing has lopped $700 MM of sales. downloads will generate $2.1 billion, or for legitimate distribution online. • CD sales will be down 30% from their 1999 peak. 17% of the music business.