Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email The Music Industry in the 21st Century Facing the digital challenge Jürgen Preiser and Armin Vogel ma non troppo" This sample is for evaluation purposes only: unauthorised use or distribution is forbidden *" REPORT EXTRACT: FULL VERSION IS 236 PAGES WITH OVER 200 CHARTS AND TABLES screendigest Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email The music industry in the 21st century The music industry in the 21st century: Facing the digital challenge screendigest Published May 2002 by Screen Digest Limited Screen Digest Limited Lymehouse Studios 38 Georgiana Street London NW1 0EB telephone +44/20 7424 2820 fax +44/20 7580 0060 e-mail [email protected] website www.screendigest.com Authors Jürgen Preiser, Armin Vogel Jürgen Preiser has 15 years’ experience in Editorial Mark Smith music and film entertainment sectors with the Editorial/design David Fisher major multi-media companies Time Warner, Polygram and Universal. He has held national and international positions with these companies as Director Business Development, Director Strategic Planning and Director Market Research. Over the past seven years he worked on various international projects, particularly in new media. More recently, as Venture Director, Media at venture capitalist Venturepark Incuba- tor he was responsible for advising portfolio companies on their strategy and its implementa- tion, directing deal evaluation, and performing due diligence. Armin Vogel is co-founder and managing director of the independent e-business consulting and business development firm Tivona Partners. Prior to that he worked several years as consultant and equity analyst for US and German banks, and as senior research analyst for Roland Berger Strategy Consultants. Most recently he held a position as head of research in the venture capital industry. He has This sample is for evaluation purposes only: unauthorised use or distribution is forbidden long experience with business research and analysis, having worked on benchmark and due diligence projects, industry and company reports, and numerous business plan evaluations. All rights reserved. No part of this publication may be reproduced, transmitted, or stored in a retrieval system, in any form or by any means without the prior written permission of the publisher, nor be otherwise circulated in any form of cover or binding other than that in which is it published and without a similar REPORT EXTRACT: FULL VERSION IS 236 PAGES WITH OVER 200 CHARTS AND TABLES condition (including this condition) being imposed on the subsequent publisher. Copyright © Screen Digest 2002 2 screendigest © 2002 Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Contents 7 List of tables and charts 19 Only with mass adoption of broadband and new devices will 11 Introduction online music delivery take off. Major record companies will 1 Executive summary continue to play an important role. Record companies will become 15 Traditional record industry has better at marketing artists. low growth perspective. 20 The main currency of the record Internet users and music industry will be the song instead of purchasers have very similar socio- the album. demographic profiles. Legal framework for prospering 16 Music will be consumed anytime online music market is largely in and anywhere. place. Non-physical distribution of music will help to increase catalogue sales. Artists will strengthen their 2 The global music market position in the record industry value chain. 21 The value chain E-commerce will replace 21 The economics traditional record clubs and mail 22 Who does what in the music order. industry 17 A handful of mega music 24 The global market This sample is for evaluation purposes only: unauthorised use or distribution is forbidden destination sites will emerge. 25 Repertoire Streamed subscription services 27 Distribution channels will prove to be the dominant way of 31 A publishers five main sources of delivering music. income The record industry needs ASP 31 Music publishing based business models. 33 How music publishers can benefit 18 There will be no absolute from the Internet protection against piracy. 34 The traditional music industrys Standardisation is a prerequisite prospects for mass adoption of online music. Population Huge investments in content Music spend per capita warehouses will be required. Pricing REPORT EXTRACT: FULL VERSION IS 236 PAGES WITH OVER 200 CHARTS AND TABLES Online delivery of music will see a Volume increases divergence rather than convergence Shift from analogue to digital of devices. Geographic expansion screendigest © 2002 ! Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email The music industry in the 21st century 3 The new music consumer 70 File sharing (P2P networks) 74 Music destination sites/Affinity 39 General consumer trends portals 77 Online record labels The music consumer 80 Internet radio 85 Obstacles currently preventing 41 Reach and buying intensity Internet radio becoming a mass 46 Music consumption in the context market of entertainment media in general 86 Challenges for traditional radio Reasons not to buy more records broadcasting and radio prospects Sources of awareness 89 E-commerce 49 Purchase motives and behaviour 89 E-commerce music market Behaviour at POS 90 Characteristics of preferred online products The Internet user 93 Challenges to music retailersthe changing structure of retail 52 Reach and usage intensity 96 Music e-commerce prospects 53 Socio-demographics 97 Digital kiosks 55 Music-related behaviour and 98 Consumer awareness and usage motives 98 Obstacles 99 Potential utilisation in the music industry This sample is for evaluation purposes only: unauthorised use or distribution is forbidden 57 4 Online business models 99 Strategy and prospects Online business modelsB2C Online business modelsB2B 59 Digital downloads 101 Shopping aids 61 Challenges for the music industry 101 Recommendation engines and 63 Obstacles for digital downloads agents 64 Initial target groups 101 Example: Recommendation engine: 65 Subscription Gigabeat 66 Cable TV economics 102 Example: Recommendation engine: 68 Change of existing music Hifind consumption patterns 102 Shopping bots REPORT EXTRACT: FULL VERSION IS 236 PAGES WITH OVER 200 CHARTS AND TABLES 68 Penetration of CD-R and MP3 103 Example: Agent: CyMON players (developed by Agentscape) 68 Metered Internet access in Europe 103 Example: Shopping bots: books.com " screendigest © 2002 Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Report title here 104 Music licensing platforms 120 Online copyright protection 105 Prospects technologies and methods Watermarking Encryption 5 The legal framework Fingerprinting Spoofing 107 Copyright 123 Digital rights management The Berne Convention 123 Secure Digital Music Initiative The Rome Convention (SDMI ) Trade Related Aspects of 125 DRM technologies and Intellectual Property (TRIPS) applications Agreement 125 Fundamental security approaches World Intellectual Property 126 DRM commerce platforms Organisation (WIPO) treaties 128 DRM business models 109 Case law Prevention models MP3 vs the record industry Marketplace model Napster vs the record industry Advertising-supported model 111 New legislation 133 Conclusion Digital Millennium Copyright Act (DMCA) European directives on Copyright 135 7 Digital music and new in the Information Society and technologies This sample is for evaluation purposes only: unauthorised use or distribution is forbidden Ecommerce The EU Directive on E-commerce 136 Compression formats 112 The role of collection societies 138 Short guide to MPEG codecs and proprietary compression formats 139 Storage media 6 Copyright protection and Flash memory digital rights management DVD-A and SACD 142 Broadband access 117 The problem 145 Wireless Internet access 118 Traditional approaches of Wireless data transfer and network copyright protection online generations 119 Example: New revenue source 148 WAP (Wireless Application REPORT EXTRACT: FULL VERSION IS 236 PAGES WITH OVER 200 CHARTS AND TABLES Protocol) 149 Services and applications 149 Barriers screendigest © 2002 # Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email Source: REPORTS PORTAL Pricing and ordering | Visit the Screen Digest REPORTS portal |Send us an email The music industry in the 21st century 150 Examples of music-related 183 EMusic.com services 185 InterTrust i-mode 187 Launch Media Location-based service 189 Liquid Audio Ringing tone downloads 190 Listen.com Song recognition 191 Loudeye Wireless Internet radio 193 Microsoft 152 Digital Audio Broadcasting (DAB) 197 MP3.com 153 iTV 199 Napster 154 New consumer electronics 201 NTT DoCoMo 155 Portable digital compressed audio 205 RealNetworks player 207 Sony Music Entertainment 155 Other devices 209 Viacom 210 MTVi Group 212 Vitaminic 8 Winners and losers 214 Vivendi Universal 215 Universal Music Group 160 Ability to secure financing 218 Yahoo 161