Filozofická fakulta Univerzity Palackého Katedra anglistiky a amerikanistiky Marketing in the Music Industry (Bakalářská práce) Autor: Jan Kašpír Studijní obor: Angličtina se zaměřením na aplikovanou ekonomii Vedoucí práce: Joseph James Ference Dr. Olomouc 2012 I declare that I elaborated this paper independently and that I mentioned the absolute list of works cited In Olomouc on the day I hereby express my deepest gratitude towards Dr. Joseph Ference for his constant guidance, advice and patience in the development of this bachelor thesis. List of Abbreviations Used in the Thesis A&R – artist and repertoire ARC – American Record Corporation BBC – British Broadcasting Company BMG – Bertelsmann Music Group CBS – Columbia Broadcasting System CD – compact disc CD-R – recordable compact disc CD-ROM – Compact Disc Read-only memory – preprinted CD containing data readable by a computer CEO – chief executive officer DAT – Digital Audio Tape DMCA – Digital Millennium Copyright Act DNS – Domain Name System DRM – Digital Rights Management EMI – Electrical and Musical Industries e-tailer – electronic (internet) retailer GE – General Electric IFPI – International Federation of the Phonographic Industry IP – internet protocol ISP – internet service provider LP – long play record M. C. – music cassette MCA – Music Corporation of America mp3 – MPEG2 Audio Layer III – audio compression format P2P – peer-to-peer: computer internet network allowing users to share files PIPA - PROTECT IP Act - Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011 R&B – Rhythm and Blues SME – Sony Music Entertainment SOPA – Stop Online Piracy Act UMG – Universal Music Group VCR – video cassette recorder WEA – Warner-Elektra-Atlantic WMG – Warner Music Group Table of Contents 1 Introduction ..................................................................................................... 1 2 Music history from a technological point of view .......................................... 2 2.1 Sheet music ............................................................................................... 2 2.2 Recorded music ........................................................................................ 3 2.2.1 The beginning of recorded music: Phonograph ................................ 3 2.2.2 Gramophone: first disc media start to appear ................................... 3 2.2.3 Compact cassettes ............................................................................. 4 2.2.4 Rise of the digital era: Compact Disc ............................................... 5 3 Record label .................................................................................................... 8 3.1 Organization of a record label .................................................................. 8 3.2 Music Publishing .................................................................................... 10 3.2.1 Mechanics of publishing ................................................................. 11 4 Major companies in the industry ................................................................... 12 4.1 EMI Group ............................................................................................. 12 4.1.1 EMI’s labels and artists ................................................................... 13 4.2 Sony Music Entertainment ..................................................................... 14 4.2.1 SME’s labels and artists .................................................................. 16 4.3 Universal Music Group .......................................................................... 16 4.3.1 UMG’s labels and artists ................................................................. 18 4.4 Warner Music Group .............................................................................. 18 4.4.1 WMG labels and artists ................................................................... 20 5 Marketing and the business models in today’s industry ............................... 21 5.1 The traditional business model ............................................................... 21 5.1.1 Services Marketing Mix .................................................................. 21 5.1.2 The Traditional Business Model and the Services Marketing Mix . 23 6 Legal environment in the music industry ...................................................... 26 6.1 Copyright Law ........................................................................................ 26 6.1.1 Rights of the copyright owner ......................................................... 26 6.2 Influence of the digital age on the current state of the music industry... 28 6.2.1 Piracy............................................................................................... 28 6.2.1.1 Physical piracy ......................................................................... 28 6.2.1.2 Digital piracy ........................................................................... 30 6.2.2 The effect of piracy on the recording industry ................................ 32 6.2.3 The latest legal issues: SOPA & PIPA ............................................ 32 6.3 The search for a new business model ..................................................... 37 6.3.1 Direct-to-fan model ......................................................................... 39 6.3.2 Free-to-consumer model ................................................................. 39 6.3.3 Subscription model ......................................................................... 40 7 Conclusion .................................................................................................... 42 Summary ............................................................................................................... 43 References (bibliography) ..................................................................................... 48 Annotation ............................................................................................................. 54 Anotace ................................................................................................................. 55 1 Introduction This work captures the development of the music industry, mainly the ways of promotion and distribution. This topic attracts a lot of attention from experts and the customers in the market. Since music is present in most people’s lives, the possible customer base is enormous. The aim of this paper is to summarize the history of recording industry, the ups and downs and most importantly, the impact of technological evolution on the music market – the way the inventions like compact disc, the internet, or data compression influenced record sales and what did or didn’t the main players in the industry do to adapt to the newly established digital age environment. The paper doesn’t try to find a particular solution to the problems the industry is going through. Instead, it tries to capture possible directions the music market will take. The first chapter briefly summarizes the history of recorded music from the technological point of view. How have the different formats that kept appearing influenced the marketing strategies of the main players and of course the attitude of all people towards the business of music. The greatest changes came in the 1990s so the thesis focuses primarily on the modern era of the music industry. The following chapter then continues describing the modern music industry. This time an analysis of the traditional marketing model and its drawbacks in connection with today’s technological possibilities is made. The final decision to at least partly leave the conservative approach of the biggest companies which for a long time refused to adapt to the environment created by people who quickly learned to use and misuse the digital technology might have come too late. The industry instead of using the technology to make profit only started to fight back with law enforcement falling behind with the actual development of any new system. After discussing the problems that the traditional model set in the modern age suffers, the next part of the thesis focuses on alternative approaches in some new business models. Those models of course are made not only for the customers’ well-being but to save the industry from the way it is heading now. 1 2 Music history from a technological point of view In this first chapter I am going to summarize and organize in chronological order major inventions and some other terms important to understand the evolution of music marketing. Most important are the advancements in music recording area, for recorded music is the main subject of marketing. Although it doesn’t count as recorded, I am going to include sheet music, because it was the first tangible form of music sold to people. 2.1 Sheet music One of the forms of music which has been around for a very long time is sheet music. The term refers to a paper containing one piece of music, usually main voice accompanied by a guitar tablature or more commonly a combination of voice and piano. Its spread began mainly after the invention of the printing press and it dominated until the early decades of the twentieth century. In the late nineteenth century it was common for many people in the US to have a piano at home. Therefore, the popularity of sheet music was at its peak. 1 Early sheets consisted of only a single page having no cover. Later, some pieces began to have more interesting design, being