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'Music Industry in the Digital Era: a Pendulum Swinging Between Department: Management Course: Markets, Regulations and Law ‘Music Industry in the Digital Era: a pendulum swinging between dematerialization and new shapes’ Supervisor: Luca Arnaudo Candidate: Leopoldo Lanzoni N°713261 Co-supervisor: Giuseppe Colangelo ACADEMIC YEAR: 2019-2020 1 INTRODUCTION ................................................................................................................................... 5 CHAPTER 1 ......................................................................................................................................... 11 THE INDUSTRY ................................................................................................................................... 11 1.1 Brief history of Music Industry .................................................................................................... 11 1.2 Recording Industry and its Architecture ..................................................................................... 15 1.2.1 Majors .................................................................................................................................................. 16 1.2.2 Independents ....................................................................................................................................... 20 1.3 Distribution ................................................................................................................................. 23 1.4 Booking ....................................................................................................................................... 24 1.5 Publishing Companies ................................................................................................................ 25 CHAPTER 2 ......................................................................................................................................... 28 DIGITAL ERA: THE INDUSTRY REVOLUTION ........................................................................................ 28 2.1 1999: Napster Detonates a New Revolution .............................................................................. 28 2.2 A New Business Model for the Industry ...................................................................................... 31 2.3 iTunes: a First Experiment in the Legality of Online Music ......................................................... 34 2.4 Music File-Sharing and its Consequences ................................................................................... 35 2.4.1 Global Data from the Digital Revolution .............................................................................................. 36 2.4.2 Global Industry Data and its State of the Art ....................................................................................... 40 2.5 Data on Italian Music Industry ................................................................................................... 43 2.6 Recent Data from US Music Industry .......................................................................................... 48 CASE STUDY A: A Rebirth for the Vinyl Market ................................................................................. 54 CHAPTER 3 ......................................................................................................................................... 59 ASSESSMENT OF COPYRIGHT LEGISLATION ........................................................................................ 59 3.1 Società Italiana degli Autori ed Editori (SIAE) ............................................................................. 61 3.1.1 Subjects Entitled to Claim .................................................................................................................... 62 3.1.2 Different Music Licenses ...................................................................................................................... 64 3.2 Barnier Directive 2014/26/EU .................................................................................................... 66 3.2.1 Key Points of the Directive .................................................................................................................. 67 3.3 Directive on Copyright in the Digital Single Market 2019/790 ................................................... 69 CASE STUDY B: Soundreef, a new alternative to Siae. Additional insights through an in-depth interview with Davide d’Atri, CEO of Soundreef. .............................................................................. 71 CHAPTER 4 ......................................................................................................................................... 77 MUSIC STREAMING MARKET ............................................................................................................. 77 4.1 Music as a Data Container in the «Post-Record Industry» ......................................................... 77 4.2 Streaming Market: Industry Profile ............................................................................................ 80 4.2.1 Five-Forces Analysis ............................................................................................................................. 83 4.3 Spotify: Birth of a new Colossus ................................................................................................. 84 4.3.1 Data and Statistics ............................................................................................................................... 86 4.3.2 Spotify’s Offer ...................................................................................................................................... 89 4.3.3 How Spotify Has Changed the Industry ............................................................................................... 90 4.3.4 The Importance of Being on a Playlist ................................................................................................ 93 4.3.5 Spotify Data in Italy ........................................................................................................................... 100 CASE STUDY C: Indie Music Explodes in Italy .................................................................................. 101 C.1 The Indie phenomenon ........................................................................................................................ 101 C.2 ‘Il sorprendente album d’esordio dei Cani’ .......................................................................................... 102 C.3 Calcutta and Thegiornalisti: Paving the Way to Mainstream ............................................................... 103 4.4 Royalties Computation ............................................................................................................. 107 4.4.1 Revenues from Digital Service Providers (DSP) ................................................................................. 109 4.5 The ‘Value Gap Question’ ......................................................................................................... 111 4.6 Insights on the Impact of Covid-19 on Music Consumption ..................................................... 114 2 CONCLUSIONS .................................................................................................................................. 121 BIBLIOGRAPHY ................................................................................................................................. 125 SITOGRAPHY .................................................................................................................................... 129 APPENDIX ......................................................................................................................................... 131 SUMMARY ........................................................................................................................................ 133 3 4 INTRODUCTION 1999, a specter is haunting the music industry. The beginning of the 21st century brings the gradual but decisive entry of digitisation and Internet into our lives. Any sector, be it economic or otherwise, is overwhelmed by this new technology, which has revolutionized both times and spaces in society. The following thesis focuses on the pros and cons of the relationship between music industry and the nascent digital age through data collection and analysis, from the initial war against Internet by the leading players, to the industry's inevitable (late) adaptation to the new way music is enjoyed and conceived. The beginning of the 'end' dates back to 1999, when a programme called Napster appeared online: it was the first illegal service available to download rights- protected music files. Since then, we witness to a progressive collapse of an economy - historically supported by 'physical' revenues from CDs, vinyl and cassettes - that sees its main source of income 'dematerialised'. Hence, music appears as an additional victim of the digital progress that is sweeping the world: the paradox is that it has a new form, even though it can no longer be traced back to something concrete and tangible. Napster inaugurates a whole series of 'clones' that offer music free of charge to any user, all favoured by Google's negligence, which passively carries online searches in this direction: the inexorable crash of the industry begins. As a musician, in recent years, I managed to contact important professionals in the sector, whom I have interviewed
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