Business
Models
in
the
Music
Industry
Eurosonic
Noorderslag
January
14th,
2011
Business
models
in
the
music
industry?
Value
creation?
Firms
that
record,
produce,
publish,
distribute,
and
market
music.
Fans
that
listen
to
(or
experience)
music.
How does the music
industry create,
deliver and capture
value?
What different
business models do
exist in the music
industry?
Business
Model?
Business
Models?
Denition_Business
Model
A
business
model
describes
the
rationale
of
how
an
organization
creates,
delivers
and
captures
value
Self
Published
www.businessmodelgeneration.com
14
translations
70.000
sold
copies
THE
BUSINESS
MODEL
CANVAS
1.
CUSTOMER
SEGMENTS
2.
VALUE
PROPOSITION
3.
CHANNELS
4.
CUSTOMER
RELATIONSHIPS
5.
REVENUE
STREAMS
6.
KEY
RESOURCES
7.
KEY
ACTIVITIES
8.
KEY
PARTNERS
9.
COST
STRUCTURE
Key
Activities!
Value
Proposition!
Client
Relationship!
Key
Partners!
Cost
Structure!
Client
segments!
Key
Resources!
Channels!
Revenue
Streams!
PARTNER
NETWORK
KEY
ACTIVITIES
KEY
RESOURCES
COST STRUCTURE
OFFER
CUSTOMER
RELATIONSHIPS
DISTRIBUTION
CHANNELS
REVENUE STREAMS
CUSTOMER
SEGMENTS
The
The
Music
Industry
Industry
A
dynamic
market
a
global
industry
characterized
by
many
players
and
erce
competition
A
product
or
service
with
a
mass-market
potential
The
role
of
music
in
peoples
lives
Music is something most people love,
that no one dislikes and that touches
everyone throughout their lives
BrandAmp
study,
Millward
Brown,
2007
A
global
industry
Something
for
everyone
The
creative
genius
Lots
of
good
advisors
Enough
players
Technology
advancements
Declining
sales
Global
music
sales
Global
music
sales
(physical
and
digital)
excluding
VAT
1997:
38
billion
USD
2009:
17
billion
USD
Business
models
in
the
music
industry
A
record
company
The
big
4
Independent
labels
1
main
activity
The
business
model
of
a
record
company
PARTNER
NETWORK
KEY
ACTIVITIES
OFFER
CUSTOMER
RELATIONSHIPS
CUSTOMER
SEGMENTS
Marke:ng
&
promo:on
Distribu:on
channels
Detec:ng
&
building
talent
Manufacturers
Mass
market
Hits
and
wannabee
hits
KEY
RESOURCES
DISTRIBUTION
CHANNELS
Por@olio
of
star
ar:sts
TV
Retailers
Copyrighted
content
Radio
Digital
COST STRUCTURE
Marke:ng
&
promo:on
Subsidizing
unsuccessful
ar:sts
REVENUE STREAMS
Royalty
payments
Tours
and
concerts
Huge
sales
from
a
few
ar:sts
albums
Merchandising
Piracy
The
dominating
phenomenon
The
big
discussion
The
business
model
of
piracy
PARTNER
NETWORK
KEY
ACTIVITIES
OFFER
CUSTOMER
RELATIONSHIPS
CUSTOMER
SEGMENTS
Upload
Developers
of
illegal
applica:ons
and
soGware
A
network
of
commiLed
users
Peer-to-peer
Download
All
the
worlds
music
KEY
RESOURCES
DISTRIBUTION
CHANNELS
User
skills,
interest
and
commitment
Digital
COST STRUCTURE
REVENUE STREAMS
Mass
market
iTunes
Rock
and
Roll
will
never
die.
It
is,
however,
being
reborn.
A
new,
successful
business
model
Very
successful
1
billion
songs
sold:
February
23,
2006
1.5
billion
songs
sold:
September
12,
2006
2
billion
songs
sold:
January
10,
2007
2.5
billion
songs
sold:
April
9,
2007
3
billion
songs
sold:
July
31,
2007
Steve
Jobs
announced
in
his
"It's
Showtime"
keynote
that
Apple
had
88%
of
the
legal
U.S.
music
download
market
on
September
12,
2006
The
business
model
of
iTunes
PARTNER
NETWORK
KEY
ACTIVITIES
Record
labels
Hardware/
soGware
design
Marke:ng
&
Sales
OFFER
iTunes
soGware
Supply
chain
management
Seamless
music
experience
and
great
design
(music
and
hardware)
Mass
market
Switching
costs
DISTRIBUTION
CHANNELS
iPod
hardware
iTunes
store
Content
&
agreements
Talented
Apple
brand
people
(designers)
COST STRUCTURE
Apple
stores
Retail
stores
apple.com
People,
design
&
development
Music
royal:es
CUSTOMER
SEGMENTS
Lovemark
KEY
RESOURCES
OEMs
CUSTOMER
RELATIONSHIPS
Marke:ng
&
Sales
Hardware
manufacturing
REVENUE STREAMS
High-volume
content
revenue
High-margin
hardware
revenue
Spotify
We
are
going
to
provide
music
to
everyone
(any
time,
any
place)
for
free
in
a
legal
way
Our
dream
is
to
collect
all
the
worlds
music
and
make
it
accessible
to
everyone.
Spotify
aggregates
content
from
right
holders,
distributes
it
to
consumers
through
the
technical
platform
and
monetizes
both
through
a
free,
ad
funded
service,
and
a
subscription
service.
The
business
model
of
Spotify
The
Business
Model
of
Spotify
PARTNER
NETWORK
KEY
ACTIVITIES
OFFER
Pla@orm
development
and
maintenance
CUSTOMER
RELATIONSHIPS
Automated
online
rela:onship
Adver:sing
Rightholders
(labels
and
publishers)
3rd
party
APIs
KEY
RESOURCES
Licensing
agreements
Pla@orm
and
brand
Access
to
music
via
streaming
and
download
services
SoGware
and
network
engineers
Communi:es
DISTRIBUTION
CHANNELS
Internet
+
PC
Global
music
fans
REVENUE STREAMS
Bandwith
costs
Salaries
Adver:sers
Internet
+
mobile
COST STRUCTURE
Royal:es
to
rightholders
CUSTOMER
SEGMENTS
Ad
fees
Subscrip:on
fees
PC
Subscrip:on
fees
PC
+
mobile
The
artist
I
just
want
to
sing
and
perform.
Crowd-funding
paves
the
way
for
the
independent
artist
40.000
11
days
24.000
promotion
The
business
model
of
Hind
PARTNER
NETWORK
Musicians
&
Songwriters
KEY
ACTIVITIES
Songwri:ng
OFFER
Singing
&
performing
Producers
Promo:on
Artwork
&
Studios
KEY
RESOURCES
The
Brand
Hind
Tech
&
tour
team
Band
Music
archive
Music
fans
Videos
(performance)
Concerts
Brand
experience
DISTRIBUTION
CHANNELS
Radio/TV
Online
pla@orms
Hind.com
Events
COST STRUCTURE
Investment
concerts,
transporta:on
REVENUE STREAMS
IT,
website
and
marke:ng
Salaries
CUSTOMER
SEGMENTS
(Social)
media
Music
CD
produc:on
&
distribu:on
Management
CUSTOMER
RELATIONSHIPS
Concerts
Merchandising
Music
sales
Looking
back
at
some
major
shifts
in
the
music
industry
A
fragmented
copyright
industry
made
it
impossible
to
set
up
legal,
sustainable
business
models.
The
gap
of
legitimate
business
models
for
customers
paved
the
way
for
the
rise
of
piracy.
The
unbundling
of
the
album
killed
signicant
revenue
streams
impacting
the
whole
music
industry.
Looking
at
some
current
shifts
in
the
music
industry
Legislation
around
piracy
Music
distribution
Shift
from
ownership
to
access
Technology
capacity
Customer
in
charge
What
do
customers
want
(tomorrow)?
The
Big
Challenge
in
Business
Modeling
Who
is
my
customer?
What
does
he
or
she
wants?
What
is
he
or
she
willing
to
pay
for?
Dierent
needs
Market
split-up
Multi-party
scene
serving
customers
needs
More
questions?
www.businessmodelsinc.com
www.businessmodelgeneration.com
