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BEHIND the MUSIC. Profiting from Sound: a Systems Approach to The STEP REPORT 04-2003 TITLE STEP - Centre for BEHIND THE MUSIC Innovation Research Profiting from Sound: A Systems Approach to the Dynamics of Address/Location: the Nordic Music Industry Hammersborg torg 3, NO-0179 Oslo, Norway Phone: +47 22 86 80 10 Fax: +47 22 86 80 49 AUTHOR(S) Enterprise No.: NO 948 007 029 MVA Dominc Power (ed) CLIENT(S) Nordic Industrial Fund REPORT NO. CLASSIFICATION CLIENTS REF. STF38A03803 CLASS. THIS PAGE ISBN PROJECT NO. NO. OF PAGES/APPENDICES 82-14-03196-6 148 ELECTRONIC FILE CODE PROJECT MANAGER (NAME, SIGN.) CHECKED BY (NAME, SIGN.) Document2 Markus Bugge Markus Bugge FILE CODE DATE APPROVED BY (NAME, POSITION, SIGN.) 2003-06-13 Svend Otto Remøe, Director ABSTRACT This report summarizes the Nordic research project behind the music - Profiting from Sound: A Systems Approach to the Dynamics of Nordic Music Industry. The project was funded by The Nordic Industrial Fund (Center for Innovation and Commercial Development) which is an institution under the Nordic Council of Ministers. This report has been written and compiled from materials and inputs provided by the researchers involved in the project and by the industry reference group. KEYWORDS ENGLISH NORWEGIAN GROUP 1 Music Musikk GROUP 2 Innovation Innovasjon SELECTED BY AUTHOR BEHIND THE MUSIC Profiting from Sound: A Systems Approach to the Dynamics of the Nordic Music Industry Final Report March 2003 Edited by Dominic Power www.step.no/music/ www.nordicinnovation.net/ [email protected] Preface This report summarizes the Nordic research project behind the music - Profiting from Sound: A Systems Approach to the Dynamics of Nordic Music Industry. The project was funded by The Nordic Industrial Fund (Center for Innovation and Commercial Development) which is an institution under the Nordic Council of Ministers. The Fund initiates and finances research and development into the Nordic innovation system. Projects financed by the Nordic Industrial Fund aim to contribute to increasing the competitiveness of Nordic trade and industry, strengthening Nordic business culture whilst also contributing to sustainable societal development. This report has been written and compiled by Dominic Power from materials and inputs provided by the researchers involved in the project and by the industry reference group. Dominic Power, March 2003. 2 List of participants Researchers: Daniel Hallencreutz (Intersecta Consultancy, Sweden) Dominic Power (Uppsala University, Sweden) Gylfi Dalmann Adalsteinsson (University of Iceland) Hanna Virtanen (ETLA, Finland) Helga Bjorg Ragnarsdottir (University of Iceland) Johan Hauknes (STEP – Centre for Innovation Research; SINTEF Industrial Management, Norway) Lars Frederiksen (Copenhagen Business School, Denmark) Mark Lorenzen (Copenhagen Business School, Denmark) Markus M. Bugge (STEP – Centre for Innovation Research; SINTEF Industrial Management, Norway) Per Lundequist (Intersecta Consultancy, Sweden) Rita Asplund (ETLA, Finland) Industry representative group: Ahti Vänttinen (President of the Finnish Musicians Union/editor Musician Magazine, Finland) Anders Engström (Picnic Publishing/Warner Chappel and MNW Publishing, Sweden) Asbjørn Slettemark (Editor of FaroJournalen, Norway) Jesper Bay (Musicmatters, Denmark) Steinar Berg Isleifsson (Music industry representative Iceland) Project Coordinator: Markus M. Bugge 3 Contents Preface 2 List of participants 3 Contents 4 Executive Summary: Main Findings and Policy Challenges 5 Sammendrag: Hovedfunn og politikkutfordringer 8 Policy challenges to improve the competitiveness of the Nordic popular music industry 11 Introduction 17 Mapping the National Industries: Overview and Key Findings 21 Denmark 26 Finland 39 Iceland 49 Norway 59 Sweden 69 Introduction to the Case Studies 82 The organization of Product Innovation in Danish Record Companies: The role of Project Coordinators, Majors and Indies 87 Here, There, but Not Everywhere: Networks, Clustering, and Policies in the Danish Music Industry 92 Digital Delivery of Popular Music: The Case of Finland 98 Technological and economic competence within the Icelandic music industry: The Icelandic music industry 107 Independent Dependency & the Resonance of Buzz: Creation & Coordination of Competencies in the Norwegian Pop Music Industry 115 When the Market Takes Over: global commodity chains, and foreign musical products on US music market 123 Are they only in it for the money? – Subsidiary strategy and impact on local clusters in the recorded music industry: the case of Sweden 131 The emergence of a post-industrial music economy? Music and ICT synergies in Stockholm, Sweden 135 References 141 4 Executive Summary: Main Findings and Policy Challenges THE MUSIC INDUSTRY IN A PERIOD OF RESTRUCTURING Findings • The Nordic music industry is clearly growing in terms of employment rates and sales. • An increasing share of value creation within the music industry stems from related industries. Activities such as digital distribution, music videos, song-writing and software comprise a growing share of the industry’s activities. • There is an emerging division of labour between independent and major record companies and labels. • Boundaries between various activity types are getting blurred. In particular, boundaries between record companies, publishers, management and promotion companies are increasingly unclear as many of these tend to be involved in the same activities. Key policies • Policies towards the music industry should take into account the role and the extent of related music services, and the intersection of music and other related services such the media and ICT. There are mutual benefits and new products to be gained from mixing music with other industries. • There is a need for the collection of more accurate industrial statistics and benchmarks on the music industry. Better figures are needed in order to identify problems and benchmark developments. • A supportive local market is crucial to the industry. Decreased sales taxes or value added taxes on musical products would act as a considerable stimulant to domestic demand. The sales taxes applied to both recorded and live music should be brought into line with the substantially lower rates of sales tax applied to other cultural products. A KNOWLEDGE DRIVEN INDUSTRY Findings • The music industry consists of a wide variety of different activities and these require specialised skills and competencies. Whilst high levels of musical and artistic skills exist in all five countries, musical skills are often not matched by business skills. There is a clear lack of skills and knowledge coordination in the industry. • The music industry is split between highly concentrated and powerful multinational corporations (the ‘majors’) and numerous, relatively small scale, independent firms. This division can serve to create a competitive and dynamic business environments that is essential for creativity and for the serving of the different types of markets and customers the music industry serves. Equally the 5 fragmentation and splitting of the industry in this way can be an obstacle to firms’ competitiveness and ability to innovate, individuals’ experiences and life-long learning, and the industries’ visibility at national and governmental levels. Key policies • Public sector cultural policies have inadequate integration with business development policies. There is a need for a better coordination and integration between cultural and business policy towards the music industry. • There is a need for better coordination of existing strengths and competencies in the industry. To this end action should be taken to: • Encourage the development of Nordic music industry gatherings or events in order to support information exchange, diffusion of best practice, better networking amongst Nordic firms and actors, and cross national marketing. • Support joint ventures and local cluster initiatives in order to improve knowledge diffusion and networking between the different sets of actors and competencies in the music industry. Small and independent music and music-services firms are especially vulnerable, and whose joint ventures, business networks, and new independent industry associations should be supported. • Support the development of third-level educational programmes focusing on the music industry, since there has been an increased need for people with more formalised educations in parallel with the increased internationalisation and professionalization of the industry. Action should also be taken to: • Provide seminar series focusing on export market characteristics; trends and workings; new technologies; business skills such as management, marketing and administration. • Initiate mentoring programs and informal networks targeted at increasing the participation and career development of women in the industry. • Firms, music organisations and educational authorities should monitor national and international best practice in music education and competence development. • Support the establishment of national umbrella organisations that link various organisations representing the music industry. There is a need for a national organisation that represents the music industry with a single voice – both nationally and internationally – in all questions of common interest and that has the power to lobby on the industry’s behalf. AN EXPORT ORIENTED INDUSTRY Findings • The Nordic countries have relatively small domestic music markets and very outward looking business cultures. This means
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