Adapt or Die!
-
The Music Industry CaseSlow to recognize and adapt to new industry value-chain
Adam KleinFounder / CEO
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March 10, 2010 - Cross Media, New York
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we know that the volume of music ‘consumed’continues to grow significantly
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the go
od ne
ws!
The Music Case Study
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we know that the volume of music ‘consumed’continues to grow significantly
-
at the same time:
‘free’ remains the overwhelming payment method
&
despite significant increases in digital download sales,the total revenues earned by the industry continue to shrink
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The Music Case Study
the ba
d new
s!
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this was driven largely by unpaid content
the ba
d new
s!
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A value greater than ‘Free’ has not been readily perceived
Today90%+
not paid for
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938 mil 767 mil 385 mil - 18%
$13 bil $11.5 bil $5.5 bil
144 mil 1.07 bil 1.16 bil
$183 mil $1.6 bil
$14.6 bil $12.3 bil $8.4 bil - ? %
A snapshot of USA Music Sales
RIAA datanumbers rounded by this presenter
1999 2004 2008
CD Units sold
CD $ value
Digital Download tracks sold
Digital Download$ Value
Total value ($)
2009
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this is ‘classic’ strategic “substitution”
-
any useful discussion must be around how to pay for the creators/artists
and legitimate marketing & delivery models
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as opposed to protecting outmoded organizational structures
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The Music Case Study
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how did this happen?
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Music - 15 years of sales growth driven by increased value of CD
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GermanyMusic Sales1961 - 2004
Peak in 1996
Driven by substitution- Tape for Vinyl- CD for Tape
Downloads
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Music - 1999 a new ‘value’ proposition
Get the track(s) you want Free
NAPSTER
www.sean.co.ukSean McManus - A short history of filesharin; Aug 2003
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Music - First line of defense
when you won’t add value, you must lower the price!
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Music - 2001 a new ‘value’ proposition -----
the iPod - ‘ultra -portable’ &
to rip in “entire CD collection - 1,000 songs” - fast!
http://www.youtube.com/watch?v=kN0SVBCJqLs
‘That’s where we want to be’
Steve Jobs
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Music - 2001 a new ‘value’ proposition
the iPod - ‘ultra -portable’ to rip in “entire CD collection - 1,000 songs” - fast!
http://www.youtube.com/watch?v=kN0SVBCJqLs
‘That’s where we want to be’
Steve Jobs
April 26, 2003, iTunes starts sale
s online
200,000 tracks available
99c/track
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Music - Price alone not enough.A new consumer ‘value-paradigm’ had emerged
72%wanted tracks
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CollectionValued
Music - Where CD sales continuedthere was perceived value in owning ‘the collection’
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But the ‘industry’ chose not to hear ...
www.sean.co.ukSean McManus - A short history of filesharin; Aug 2003
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http://www.youtube.com/watch?v=kN0SVBCJqLs
‘That’s where we want to be’
Steve Jobs
April 26, 2003, iTunes starts sale
s online
200,000 tracks available
99c/track
Cavalry to the rescue !
oops!
The iTunes math - Dollars to Dimes economics
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Apple: 99c/trackIndustry 70c/track
By 2010, 10 billion tracks $1+ bil gross $700 mil to music co’s
Equiv of 1 bil CDs (10/cd)
CD: $10:99Industry $ 6:00
Over same 10 years sales down from $14.6 bil to $8+ bill (incl digital)
analysis by presenter
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Is the strategic debate over paying for intellectual property?
or
Is it really over protecting an old perception of the value chain,and associated bloated business models?
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Artistsmakemusic
Music Co‘finds’ & ‘signs’
Music Coproduces &finances
Music ComanufacturesCDs
Music CodistributesCDs
Music ComarketsCDs
The Old Music Value Chain
Music Company’s ‘Soup-to-Nuts’ Value
Retailerssell toconsumer
A&R
Scale
Bank
Consumers
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Artistsmakemusic
Music Co‘finds’ & ‘signs’
Music Coproduces &finances
Music ComanufacturesCDs
Music CodistributesCDs
The Emerging Music Value Chain
Digital Disruption
Music ComarketsCDs
Retailerssell toconsumer
Consumers
✖ ✖
☁☁
?
➥
+ISPsdistributesbroadband
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Artistsmakemusic
Music Co‘finds’ & ‘signs’
Music Coproduces &finances
Music ComanufacturesCDs
Music CodistributesCDs
The Emerging Music Value Chain
Digital Disruption
Music ComarketsCDs
Retailerssell toconsumer
Consumers
✖ ✖
☁☁
?
➥
+ISPsdistributesbroadband
New opportunities abound- value/price -
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The organizational
change implications are
significant ..
Lessons to be learned - 2006
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and this can be said for all entertainment media too ...
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“Being the coolest thing on television is a feat
but not one with a lot of future
when most of the coolest things no longer live there”
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Music
News
TV
Movies
90% Musicacquired
not paid for
but we know this ‘case’ is not only about music ...
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The newspaper says they may stop delivering
letters on Saturdays!
What’s a letter?
What’s a newspaper?Grandmother
grandsons
Scott Stantis - in NY Sunday Times 3/7/2010
teenager
tween
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Feb 10, 2010
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Music
News
TV
Movies
80% MediaGrad Students
NO TV set
District 912.5 mill downloads
BitTorrent
90% Musicacquired
not paid for
90% tell Murdoch to forget paywall
32+ bil videoswatched onlineJanuary -USA
‘When reality is labeled unthinkable, it creates a kind of sickness in an industry. Leadership becomes faith-based,
while employees who have the temerity to suggest that what seems to be happening is in fact happening
are herded into Innovation Departments, where they can be ignored en masse.’
Clay Shirky, NYU, March 2009
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A Leadership Development Platform for Media Leadersand all consumer facing companies are in media!
Leadership/Execs
Technology/Media Co’s- broken out already -
Established ConsumerFacing Companies
Digitally Enabled
Managerially Enabled
Constant
Innovation
Working Conferences
Skills, Frameworks, Tools
‘Hands-on’ Illustrations
Proprietary Information Pushed 24/7
Integrated ProgramPractical skills and knowledge
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Leadership, Innovation and Transformation of the Corporation in the Digital Age
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