changing value creation models in the music economy · playlists galore. digital media ......

Digital MediaResearch Centre

Changing value creation models in the music

economy

@pwikstrom @qutdmrc

Patrik Wikström

Patrik WikströmAssociate ProfessorPrincipal Research FellowQUT Digital Media Research Centre

Digital creative economy (Music)Computational social scienceTime

QUT Digital Media Research Centre

Journalism, Public Communication &

Democracy

Industries,Policies &Economies

DigitalMethod

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in Everyday Life

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QUT DMRC conducts world-leading research that helps society understand and adapt to the social, cultural and economic

transformations associated with digital media technologies.

Three shiftsChanging value creation

models in the music economy

T O D A Y

but first…

excludable non-excludable

Common good

(fish stocks)

Common good

(fish stocks)

Private good

(food)

Private good

(food)

Public good

(free-to-air television)

Public good

Club good

(theatre performance)

Club good

live licensing recorded

digitaldisruption

Integrated circuitFairchild Camera and Instrument Company 1961

The New York Clipper, November 3, 1906

loss of control

Common good

(fish stocks)

Common good

(fish stocks)

Private good

(food)

Private good

(food)

Public good

Club good

Three shiftsChanging value creation

models in the music economy

T O D A Y

industry sectors

licensing recordedlive

live 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 product-based to an access-based logic.

Loyalty, passion, ownership, products

& brands.

Products. Ownership. Brands.

service

product

Common good

(fish stocks)

Private good

(food)

Public good

Club good

(theat re performance)

a product-based music economy cannot compete

with “free”

Common good

(fish stocks)

Private good

(food)

Public good

Club good

service

product

Common good

(fish stocks)

Private good

(food)

Public good

Club good

Access-based music services

…have returned many music

markets to growth

…the dominating revenue model

in a growing number of music markets

…remain very controversial

Are access-based musicservices “fair” to creators?

“Bad for music”“Ridiculous payouts”

“Unfair to small artists”“It’s a scam!”

Incumbents’ response to technology-based disruption

DenialCombat

ResignationAcceptance

cf. Kübler‐Ross 1969

What is the controversy about?

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

access

ownership

Revenue streams

(1) Do streaming music services generate “enough” revenues?

per track

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

access ‐ accum

ownership ‐ accum

per track

Accumulated revenues

• 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

Ownership Access

per user

(2) Are labels fair?

Depends on the deal

Performance or sales?

Breakage?

Shareholder dividends?

Governmental intervention

Shift #3: From a product-based to an access-based logic.

Let’s take this reasoning just a little bit further…

what is the impact on audience behaviour?

Impact on audience behaviour?

E.g. Local music repertoire

Can access-based music services really reduce piracy?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Before you used Spotify

After you started using Spotify

How often do you use filesharing services, such as PirateBay?

Never Seldom Sometimes Often

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Time spent listening to music

Time spent searching for music

I play my digital downloads

I discover new music

I share music I listen to with my friends

Amount of money I spend on music

Listen to illegally downloaded music

More Don't know/won't say Less

Practices

Practices E.g.• 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 shiftthe focus from the collection…

…to the real-time listening experience

https://www.spotify.com/au/arts/serendipity/

how do access-based 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 start-ups 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

brands

awards

experts

mediaexposure

If algorithms take over the listening decisions, audiences no longer need a relationship with artists…

…they only needa 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 co-creative fan-artist relationships.

#3: From a product-based to an access-based logic.

#3*: From music celebrities to algorithmically curated music experiences.

thank youpatrik.wikstrom@qut.edu.au

@pwikstrom www.linkedin.com/in/patrikwikstrom

changing value creation models in the music economy · playlists galore. digital media ......

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