Master Thesis the Changes in the Dutch Dance Music Industry Value

Master thesis The changes in the Dutch dance music industry value chain due to the digitalization of the music industry University of Groningen, faculty of Management & Organization Msc in Business Administration: Strategy & Innovation Author: Meike Biesma Student number: 1677756 Supervisor: Iván Orosa Paleo Date: 11 May 2009 Abstract During this research, the Dutch dance music industry was investigated. Because of the changes in the music industry, that are caused by the internet, the Dutch dance music industry has changed accordingly. By means of a qualitative research design, a literature study was done as well as personal interviews were performed in order to investigate what changes occurred in the Dutch dance music industry value chain. Where the Dutch dance music industry used to be a physical oriented industry, the digital music format has replaced the physical product. This has had major implications for actors in the industry, because the digital sales have not compensated the losses that were caused by the decrease in physical sales. The main trigger is music piracy. Digital music is difficult to protect, and it was found that almost 99% of all music available on the internet was illegal. Because of the decline in music sales revenues, actors in the industry have had to change their strategies to remain profitable. New actors have emerged, like digital music retailers and digital music distributors. Also, record companies have changed their business model by vertically integrating other tasks within the dance music industry value chain to be able to stay profitable. It was concluded that the value chain of the Dutch dance music industry has changed drastically because of the digitalization of the industry. In this report it is explained what has caused these changes and what exactly the changes are. Table of contents 1. Introduction ................................................................................................................... 6 1.1 Research topic ....................................................................................................................................... 6 1.2 Research questions ............................................................................................................................... 6 1.3 Reading guide ....................................................................................................................................... 7 2. Research methodology .................................................................................................. 8 2.1 Research design .................................................................................................................................... 8 2.2 Data collection ...................................................................................................................................... 9 3. Facts and figures .......................................................................................................... 11 3.1 The music industry .............................................................................................................................. 11 3.1.1 Worldwide and Dutch music distribution ...................................................................................................... 12 3.1.2 Digitalization of the music industry ................................................................................................................ 13 3.1.3 Types of digital music sales .............................................................................................................................. 14 3.2 The dance music industry ................................................................................................................... 15 3.2.1 Historical overview of the dance music industry ........................................................................................... 15 3.2.2 Characteristics of the dance music industry ................................................................................................... 16 3.3 The Dutch dance music industry ....................................................................................................... 18 3.3.1 Digitalization in the Netherlands ..................................................................................................................... 19 3.4 Music piracy ........................................................................................................................................ 20 3.4.1 How to fight piracy ............................................................................................................................................ 22 4. Theoretical framework: value appropriation .................................................................. 24 4.1 Capturing value ................................................................................................................................... 24 4.1.1 Selection system theory ..................................................................................................................................... 25 4.1.2 The long-tail theory ........................................................................................................................................... 25 4.2 Value protection .................................................................................................................................. 27 4.2.1 Intellectual property right (IPR) ............................................................................................................................ 28 4.2.2 MP3 and IPR ........................................................................................................................................................... 28 4.2.3 Creative Commons ................................................................................................................................................. 29 5. The Dutch dance music industry market structure .................................................... 32 5.1 The Dutch dance music industry actors ............................................................................................ 32 5.1.1 Producers ............................................................................................................................................................ 32 5.1.2 Record labels ...................................................................................................................................................... 33 5.1.3 Distributors ......................................................................................................................................................... 33 5.1.4 Record stores (online and physical) ................................................................................................................. 33 5.1.5 Dj’s and vj’s ........................................................................................................................................................ 35 5.1.6 Booking agencies, promoters and agents ....................................................................................................... 35 5.1.7 Publishers ............................................................................................................................................................ 35 5.1.8 Buma/Stemra ..................................................................................................................................................... 36 5.1.8.1 Buma/Stemra initiatives .......................................................................................................................... 36 5.1.9 Online communities .......................................................................................................................................... 38 5.1.10 Dance event organizers ................................................................................................................................ 38 5.1.11 BVD (Belangen Vereniging Dance / branch society dance) .................................................................. 39 5.2 Industrial frameworks ......................................................................................................................... 39 5.2.1 Interest groups ................................................................................................................................................... 39 5.2.2 Live events industry actors ............................................................................................................................... 40 5.2.3 Recorded music industry actors ....................................................................................................................... 41 6. Changes in the Dutch dance music industry: from recorded to digital music ....... 44 6.1 Selection system .................................................................................................................................. 44 6.2 The long-tail ........................................................................................................................................ 45 6.3 A changed dance music industry value chain .................................................................................... 46 6.3.1 Changes for producers ...................................................................................................................................... 47 6.3.2 Changes

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