Changing value creation models in the music economy Patrik Wikström @pwikstrom @qutdmrc
Patrik Wikström Associate Professor Principal Research Fellow QUT Digital creative economy (Music) Computational social science Time
QUT QUT DMRC conducts world-leading research that helps society understand and adapt to the social, cultural and economic transformations associated with digital media technologies. Journalism, Public Communication & Democracy Industries, Policies & Economies DIGITAL MEDIA Digital Method Innovation Technologies & Practices in Everyday Life
TODAY Three shifts Changing value creation models in the music economy
but first
excludable non-excludable rivalrous Private good (food) Common good (fish stocks) non-rivalrous Club good (theatre performance) Public good (free-to-air television)
live licensing recorded
digital disruption
Integrated circuit Fairchild Camera and Instrument Company 1961
loss of control The New York Clipper, November 3, 1906
loss of control
excludable non-excludable rivalrous Private good (food) Common good (fish stocks) non-rivalrous Club good (theatre performance) Public good (free-to-air television)
TODAY Three shifts Changing value creation models in the music economy
industry sectors
live licensing recorded
live recorded
live licensing recorded
live licensing recorded Music licensing revenues have more than doubled during the past two decades
The revival of the music publisher
Shift #1: From recorded music to music licensing and live performance.
social and creative fans
Shift #2: From finished products to platforms for co-creative fan-artist relationships.
tools, building blocks & rewards
Shift #2: From finished products to platforms for co-creative fan-artist relationships.
ownership v access
Shift #3: From a productbased to an accessbased logic.
Loyalty, passion, ownership, products & brands.
Loyalty, passion, ownership, products & brands.
Loyalty, passion, ownership, products & brands.
Products. Ownership. Brands.
Products. Ownership. Brands.
excludable non-excludable rivalrous Private good (food) Common good (fish stocks) non-rivalrous Club good (theatre performance) Public good (free-t o-air television) service product
excludable non-excludable rivalrous Private good (food) Common good (fish stocks) a product-based non-rivalrous Club good (theatre performance) Public good (free-t o-air television) music economy cannot compete with free
excludable non-excludable rivalrous Private good (food) Common good (fish stocks) non-rivalrous Club good (theatre performance) Public good (free-t o-air television) service product
Access-based music services
Access-based music services have returned many music markets to growth
Access-based music services the dominating revenue model in a growing number of music markets
Access-based music services remain very controversial
Are access-based music services fair to creators? Bad for music Ridiculous payouts Unfair to small artists It s a scam!
Incumbents response to technology-based disruption Denial Combat Resignation Acceptance cf. Kübler Ross 1969
Access-based music services What is the controversy about?
(1) Do streaming music services generate enough revenues? 0.8 Revenue streams 0.7 0.6 0.5 0.4 0.3 access ownership 0.2 0.1 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 per track
(1) Do streaming music services generate enough revenues? 0.8 Accumulated revenues 0.7 0.6 0.5 0.4 access accum ownership accum 0.3 0.2 0.1 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 per track
(1) Do streaming music services generate enough revenues? Ownership Access 2 x 12 new tracks per year $0.7 x 24 = $17 per year 30 min per day (excl. radio) 10+ tracks per day 3500 tracks per year $0.005 x 3500 = $17.5 per year per user
(2) Are labels fair? Depends on the deal Breakage? Shareholder dividends? Performance or sales?
Governmental intervention
Shift #3: From a productbased to an accessbased logic.
Let s take this reasoning just a little bit further
Access-based music services what is the impact on audience behaviour?
Impact on audience behaviour? E.g. Local music repertoire %
Can access-based music services really reduce piracy? How often do you use filesharing services, such as PirateBay? After you started using Spotify Before you used Spotify 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Never Seldom Sometimes Often
Impact on audience Listen to illegally downloaded music Amount of money I spend on music I share music I listen to with my friends I discover new music I play my digital downloads Time spent searching for music Time spent listening to music behaviour? Practices 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% More Don't know/won't say Less
E.g. Impact on audience behaviour? Practices I listen less to illegally downloaded music: 70% I discover more new music: 80% I spend less time searching for music: 70%
Access-based music services shift the focus from the collection
to the real-time listening experience https://www.spotify.com/au/arts/serendipity/
how do accessbased music services compete?
May 2007
today: more or less identical catalogues
access is about to become commoditized (commoditization / commodification)
access-based music services look for new ways to compete
A. Audiences focused on a real-time listening experience B. Service providers look for new points of differentiation
Playlists galore
Successful music data analytics startups have been acquired
in the search for the ultimate algorithmically curated playlist
What happens when algorithms make our music listening decisions?
music is an experience product
peers awards experts brands media exposure
If algorithms take over the listening decisions, audiences no longer need a relationship with artists
they only need a relationship with Spotify!
How is this different from other cultural sectors?
What about live music?
Shift #3*: From music celebrities to algorithmically curated music experiences.
Changing value creation models in the music economy #1: From recorded music to music licensing and live performance. #2: From finished products to platforms for cocreative fan-artist relationships. #3: From a product-based to an access-based logic. #3*: From music celebrities to algorithmically curated music experiences.
thank you patrik.wikstrom@qut.edu.au @pwikstrom www.linkedin.com/in/patrikwikstrom