Josephine
Gavignet
‐
March
15,
2010
‐
For
Reims
Management
School
‐
Supervised
by
Alain
Goudey

The
impact
of
new

technologies
on
the

music
industry
 ACKNOWLEDGEMENTS

I would like  here  to  thank  the  people without whom I would not  have  been  able to  write 
this thesis.

First of all I would like to thank Reims Management School, for giving me the opportunity to 
study at Northeastern University and improve my analytical and writing skills.

I  would  like  to  thank  Anne‐Laure  Herard,  for  being  so  understanding  with  my  concerns 
over this thesis.

I want to thank Alain Goudey, my thesis supervisor, for sharing his ideas and concerns and
also for giving me advice and being so quick to respond to my e‐mails.

I would like to thank Junauro Landgrebe, my Rock History teacher, and Brian Bergeron, the
Teacher Assistant, for recommending me a very interesting book and giving me so much
information with their classes and discussions.

I want to thank the many people I discussed my thesis with: Sean Smith for his constant
support  and for always listening to  me talking about my Qindings,  Ana Sanchez for saying 
how much she disagreed and helping me look  at other points of view on the topic, Steffen 
Spillecke, Svenja Hering, Andreas Schäffer, and many more.

I  want  to  thank  my  parents  for  supporting me in  my  studies  and comforting  my  love  for 
music,  without which I  would never have been  able to  write this  thesis,  and of course my 
brother, for giving me the love of music. Finally,  thank you Bob Dylan, for being my favorite 
artist.
To Bob Dylan, for whom I am so passionate about music...
 GLOSSARY

A
AAC:
Advanced
Audio
Coding,
an
audio
compression
format.
AIM:
Association
of
Independent
Music.
ASCAP:
American
Society
of
Composers,
Authors
and
Publishers.
A&R:
Artist
and
Repertoire.
Talent
Acquisition.

B
Big
four:
The
four
major
record
labels:
EMI,
Universal
Music
Group,
Sony
Music

Entertainment,
Warner
Music
Group.
BMI:
Broadcast
Music
Incorporated.

C
CBS:
Columbia
Broadcasting
System.

D
DIY:
Do
It
Yourself.
DRM:
Digital
Rights
Management.

E
EMI:
Electric
and
Musical
Industries
Ltd.,
one
of
the
big
four.

G
GDP:
Gross
Domestic
Product.

H
HADOPI:
Illegal
downloading
law
(France).

HMV:
British
Entertainment
retail
chain.

I
IFPI:
International
Federation
of
the
Phonographic
Industry.
IPI:
Institute
for
Policy
Innovation.

ISP:
Internet
Service
Provider.

M
MPA:
Music
Publishers
Association.

N
Nielsen
SoundScan:
Information
and
sales
tracking
system
created
by
Mike
Fine
and
Mike

Shalett.
The
ofUicial
method
of
tracking
sales
of
music
and
music
video
products
throughout

the
US
and
Canada.
NME:
News
Musical
Express.
British
music
magazine.
P
Payola:
Pay‐for‐play.
The
illegal
practice
of
payment
or
other
inducement
by
record

companies
for
the
broadcast
of
recordings
on
music
radio,
in
which
the
song
is
presented
as

being
part
of
the
normal
day’s
broadcast.
P2P:
Peer
to
peer.
File‐sharing.

R
RIAA:
Recording
Industry
Association
of
America.
RCA:
Radio
Corporation
America.

S
SME:
Sony
Music
Entertainment.


U
UMG:
Universal
Music
Group.

W
WMG:
Warner
Music
Group.
 


1
 INTRODUCTION.................................................................................. 3

1.1
 SELECTED
 HISTORY
 OF
 THE
 RECORDING
 INDUSTRY
 AND
 MAIN

PLAYERS.......................................................................................................................................3

1.1.1
 TIN
PAN
ALLEY
ERA ........................................................................................................................... 3

1.1.2
 RACE
RECORDS ..................................................................................................................................... 3

1.1.3
 ARRIVAL
OF
THE
RADIO
AND
ITS
AFTERMATH .................................................................... 4

1.1.4
 ROCK’N’ROLL
AND
THE
APPEARANCE
OF
INDIE
LABELS ................................................ 4

1.1.5
 POP
MUSIC
REINVENTED................................................................................................................. 6

1.1.6
 TODAY’S
DISTRIBUTION
–
BY
COMPANY
AND
REGIONS................................................... 6

1.2
 ASSESSMENT
 OF
 THE
 MAJOR
 NEW
 TECHNOLOGIES
 THAT
 WILL
 BE

STUDIED.......................................................................................................................................8


2
 PART
 ONE
 –
 MUSIC
 PROMOTION
 AND
 THE
 NEW


TECHNOLOGIES ....................................................................................... 9

2.1
 MUSIC
MARKETING
AND
PROMOTION
DEFINED............................................9

2.1.1
 PROCESS .................................................................................................................................................10

2.2
 ONLINE
PROMOTION................................................................................................. 12

2.2.1
 FACEBOOK,
MYSPACE
AND
OTHER
SOCIAL
MEDIA
TOOLS............................................12

2.2.2
 WEB
MUSIC
101..................................................................................................................................15

2.2.3
 ARCTIC
MONKEYS,
AN
EXAMPLE
OF
BREAKTHROUGH
ONLINE
PROMOTION.....18

2.3
 AFTERMATH
ON
TODAY’S
INDUSTRY................................................................ 20

2.3.1
 CUSTOMER
BASE................................................................................................................................20

2.3.2
 IMPORTANCE
OF
TRADITIONAL
MEDIA
AT
STAKE ...........................................................21

2.3.3
 DIY
MUSIC
PROMOTION..................................................................................................................22


3
 PART
 TWO
 –
 MUSIC
 DISTRIBUTION
 AND
 THE
 NEW


TECHNOLOGIES .................................................................................... 22

3.1
 DIGITAL
DISTRIBUTION ........................................................................................... 22


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 1

 3.1.1
 WHAT
IS
DIGITAL
MUSIC
AND
HOW
IMPORTANT
IS
IT
IN
THE
INDUSTRY...........22

3.1.2
 THE
BUSINESS
MODELS
OF
DIGITAL
DISTRIBUTION.......................................................23

3.1.3
 ITUNES,
LEADER
OF
THE
INDUSTRY........................................................................................25

3.2
 MUSIC
PIRACY ............................................................................................................... 26

3.2.1
 WHAT
ARE
THE
EFFECTS
ON
THE
INDUSTRY? ...................................................................27

3.2.2
 WHAT
WERE
THE
RESPONSES?..................................................................................................29

3.2.3
 WHAT
ARE
THE
NEXT
STEPS? .....................................................................................................32

3.3
 EFFECT
 ON
 THE
 ROLE
 OF
 RECORD
 LABELS
 IN
 TERMS
 OF

DISTRIBUTION ....................................................................................................................... 32


4
 PART
THREE
–
THE
ROLE
OF
RECORD
LABELS
AT
STAKE 33

4.1
 MUSIC
 PIRACY
 IS
 NOT
 RESPONSIBLE
 FOR
 THE
 LATE
 FALL
 OF
 THE

INDUSTRY................................................................................................................................. 33

4.1.1
 LESS
MONEY
=
LESS
SPENT
ON
ENTERTAINMENT...........................................................34

4.1.2
 INCAPACITY
 FOR
 THE
 INDUSTRY
 TO
 REACT
 TO
 THE
 CHANGE
 IN
 CONSUMER

BEHAVIOR............................................................................................................................................................35

4.2
 HOW
NEW
TECHNOLOGIES
HELPED
THE
INDUSTRY ................................ 36

4.2.1
 DEVELOPMENT
OF
NEW
LABELS...............................................................................................36

4.2.2
 FOR
THE
CUSTOMERS......................................................................................................................38

4.3
 WHERE
DID
IT
ALL
GO
WRONG? .......................................................................... 39

4.3.1
 WHY
DID
THEY
FAIL
TO
RESPOND
TO
NAPSTER? .............................................................40

4.3.2
 MUSIC
IS
ANTI­CAPITALIST ..........................................................................................................42


5
 CONCLUSION..................................................................................... 42

5.1
 NEW
TECHNOLOGIES
HAVE
HELPED
THE
INDUSTRY............................... 42

5.2
 THE
TREND
SEEMS
TO
SHOW
THAT
INDIE
LABELS
ARE
BENEFITING

FROM
IT
MORE
THAN
MAJORS....................................................................................... 43

5.3
 WHAT
IS
THE
FUTURE? ............................................................................................ 44




J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 2

1 INTRODUCTION


1.1 SELECTED
 HISTORY
 OF
 THE
 RECORDING
 INDUSTRY
 AND
 MAIN


PLAYERS


The
 recording
 industry
 is
 an
 industry
 that
 can
 trace
 its
 history
 back
 to
 the
 late
 19th

century
and
the
Tin
Pan
Alley
Era.
Of
course
we
can
see
traces
of
business
around
sheet

sales
before
but
concerning
rock
music
and
popular
music,
Tin
Pan
Alley
is
the
definite

starting
point.



1.1.1 TIN
PAN
ALLEY
ERA


The
 Tin
 Pan
 Alley
 is
 the
 name
 given
 to
 the
 New
 York
 City
 music
 publishers
 and

songwriters
who
mastered
the
popular
music
at
that
time.
They
started
to
do
business

with
music
by
selling
sheet
music
of
traditional
and
well‐known
songs
such
as
“Take
Me

Out
 to
 the
 Ball
 Game”.
 As
 a
 result
 of
 the
 existence
 of
 the
 Tin
 Pan
 Alley,
 musicians,

publishers
and
songwriters
started
to
work
together
for
the
public
and
created
in
1914

the
 American
 Society
 of
 Composers,
 Authors
 and
 Publishers
 (ASCAP)
 to
 protect

copyright
 infringement,
 or
 in
 1895
 the
 Music
 Publishers
 Association
 of
 the
 United

States.1


1.1.2 RACE
RECORDS


Number
of
evolutions
during
the
20th
century
shaped
the
industry
as
we
know
it
today.

The
 beginning
 of
 the
 century
 was
 rarely
 organized
 around
 labels,
 however
 with
 the

arrival
 of
 blues
 in
 the
 1910s
 and
 1920s
 it
 began
 to
 be
 organized
 with
 a
 business
 goal.

Because
more
and
more
slaves
and
workers
from
the
South
were
creating
music
but
it

was
not
yet
accepted
by
the
society,
Race
Records
were
created
in
order
to
organize
and

promote
 those
 artists,
 it
 was
 music
 made
 by
 and
 for
 African
 American.
 Many
 major

record
labels
issued
special
“race”
series
records
between
the
mid
1920s
and
the
1940s

as
 a
 result
 of
 growing
 popularity
 even
 among
 white
 people.
 Mamie
 Smith,
 a
 famous

classic
 blues
 singer,
 was
 the
 first
 African
 American
 vocalist
 to
 be
 featured
 on
 a


























































1
Sanjek,
Russell.
American
Popular
Music
and
Its
Business:
The
First
Four
Hundred
Years,
Volume
III,
From
1900
to


1984.
New
York:
Oxford
University
Press,
1988.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 3

recording2.
This
part
of
the
century
was
a
great
turning
point
in
the
history
of
the
music

industry
because
it
recognized
music
as
an
art
that
everybody
could
participate
in
and

also
was
a
great
influence
on
the
rest
of
the
rock
and
roll
history.


1.1.3 ARRIVAL
OF
THE
RADIO
AND
ITS
AFTERMATH


In
1922,
an
important
factor
changed
the
industry:
radio
broadcasting
begun
in
the
USA.

Radio
networks
appeared
and
linked
together
to
bring
in
massive
advertising
revenue.

The
 companies
 running
 the
 different
 radio
 networks
 broadcasted
 programs
 that
 were

much
 more
 enticing
 to
 the
 listeners
 because
 it
 was
 free.
 As
 a
 result,
 people
 started
 to

buy
fewer
records
and
the
downturn
was
massive
for
the
players
in
the
industry.
Just
by

the
 beginning
 of
 the
 1920s,
 the
 size
 of
 the
 industry
 declined
 by
 one
 half.
 It
 then

stabilized
 but
 is
 still
 considered
 as
 the
 first
 major
 depression
 of
 the
 record
 industry.
 3

This
first
hard
hit
that
the
industry
took
led
to
the
first
need
to
reevaluate
the
offer
and

demand
of
the
industry.



Because
 the
 main
 drawback
 of
 listening
 to
 the
 radio
 was
 the
 poor
 quality
 of
 the

recordings,
manufacturers
began
to
introduce
new
recording
equipment
to
improve
the

quality
of
the
sound.
This
began
in
the
late
20s
and
was
called
the
“electrical
recording”.

The
hope
behind
this
was
to
get
back
the
customers
that
decided
to
buy
fewer
records

by
promising
them
an
outstanding
quality.
This
helped
a
little
but
the
Great
Depression

of
the
30s
arrived
and
the
labels
were
still
too
weak
to
go
through.
Victor
Records
was

bought
by
the
Radio
Corporation
of
America
(RCA
records);
Columbia
was
bought
by
the

Columbia
Broadcasting
System.
The
others
just
disappeared.
The
market
declined
little

by
 little
 even
 though
 new
 opportunities
 arose
 such
 as
 motion
 pictures
 (Walt
 Disney

Company
was
created
in
1926)
or
jukeboxes.


1.1.4 ROCK’N’ROLL
AND
THE
APPEARANCE
OF
INDIE
LABELS


The
next
turning
point
in
the
history
of
the
record
industry
is
the
1950s
and
the
arrival

of
 Rock
 and
 Roll.
 Because
 the
 market
 grew
 bigger
 with
 the
 social
 changes
 of
 the
 50s

(teens
had
more
money
and
became
a
real
market,
they
defined
themselves
both
socially



























































2
Charlton,
Katherine.
Rock
Music
Styles,
a
history.
Fifth
Edition.
New
York:
McGraw
Hill
Companies
Inc.,
2008.
Ch.
1
&
2

3
History
of
the
recording
technology,
Recording
History.
www.recording‐history.org,
page
3.
Retrieved
on
Monday


March
the
8th


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 4

and
 economically…),
 major
 records
 saw
 a
 real
 opportunities
 to
 revive
 the
 industry.

However
rock
and
roll
was
not
accepted
by
the
society
because
it
was
too
crude,
went

against
the
good
values
of
the
USA
and
some
was
sung
by
black
people.
As
a
result,
the

recording
 industry
 began
 to
 divide
 and
 saw
 the
 appearance
 of
 the
 first
 “independent”

labels.



Major
 labels
 such
 as
 RCA‐Victor,
 Columbia
 or
 Decca
 were
 the
 ones
 distributing
 the

socially
acceptable
music
of
America.
They
produced
75%
of
the
hits
between
1948
and

1955
and
included
popular
artists
that
reflected
the
tastes
and
values
of
Middle
America

such
 as
 Frank
 Sinatra,
 Patti
 Page
 &
 Perry
 Cuombo.
 The
 music
 was
 inoffensive,

conservative
 and
 most
 importantly,
 mainstream.
 Those
 labels
 had
 been
 well
 and
 alive

for
 many
 decades
 yet
 and
 had
 the
 financial
 stability
 needed
 to
 use
 state
 of
 the
 art

recording
 equipment,
 they
 had
 ownership
 of
 the
 record
 presses,
 used
 a
 system
 of

warehouses
and
wholesalers
and
promoted
their
artists
through
the
radio,
movies
and

TV.



On
the
other
side
of
the
industry
began
to
appear
independent
labels
as
a
response
to

the
 major’s
 failure
 to
 offer
 what
 the
 people
 wanted:
 rock
 and
 roll.
 It
 was
 not
 the
 first

time
that
independent
labels
had
a
significant
importance
(Race
Records
in
the
20s)
but

definitely
reflects
the
next
decades
of
the
industry.
The
independent
record
labels
were

a
niche
market
that
gathered
recorded
artists
of
music
for
the
audience
that
the
majors

did
 not
 serve.
 This
 was
 jazz,
 blues,
 rhythm
 and
 blues,
 country
 and
 of
 course
 Rock
 and

Roll.
 The
 main
 people
 responsible
 for
 this
 kind
 of
 music
 to
 be
 recorded
 and
 released

were
 predominantly
 white
 club
 owners,
 retailers
 or
 sound
 engineers;
 they
 served

different
 musical
 tastes
 that
 did
 not
 correspond
 to
 the
 mainstream
 society.
 However

because
 they
 were
 pretty
 new
 in
 existence
 they
 did
 not
 have
 the
 financial
 capabilities

that
major
labels
had.
As
a
result
they
had
to
use
outdated
equipment,
garage
as
studios

and
needed
to
be
highly
innovative
in
recording
techniques
to
cut
costs.
Thanks
to
those

labels
 the
 50s
 were
 a
 period
 of
 great
 technological
 innovation
 in
 terms
 of
 recording:

multi‐track
recording,
tape
slicing,
overdubbing,
echo,
reverb
and
other
effects.4


The
main
independent
labels
were
focusing
on
specific
styles.
Atlantic
Records
(created

in
 1947
 in
 New
 York
 City),
 owned
 by
 Ahmet
 Ertegun
 and
 Herb
 Abrahmson,
 were


























































4
Landgrebe,
Junauro.
Class:
Rock
Music
History,
MUSC1101,
Northeastern
University
Spring
Semester.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 5

focusing
on
Rhythm
and
Blues,
Blues,
Gospel,
Jazz,
Soul,
Hard
Rock
and
Heavy
Metal.
Sun

Records
 (aka
 Memphis
 Recording
 Service,
 was
 created
 in
 1944
 in
 Memphis),
 were

owned
by
Sam
Phillips
and
focused
on
Blues,
Country,
Rhythm
and
Blues
and
Rockabilly,

they
 were
 at
 the
 helm
 of
 Rock’n’Roll
 during
 the
 fifties.
 Finally,
 Chess
 Records
 was

created
in
Chicago
by
Phil
and
Leonard
Chess
and
was
mainly
a
blues
record
(Chicago

Blues
artists
such
as
Muddy
Waters,
Howlin’
Wolf,
Aretha
Franklin…).


Independent
 labels
 promoted
 their
 music
 mainly
 through
 radio
 as
 local
 radio
 stations

turned
away
from
mainstream
music
to
reflect
tastes
and
interests
of
their
audience.
For

example
 WDIA
 Memphis
 was
 in
 1948
 the
 first
 radio
 station
 to
 adopt
 all
 black

programming.
 To
 do
 so
 they
 had
 to
 pay
 DJs
 such
 as
 Alan
 Freed
 (who
 first
 coined
 the

term
Rock’n’Roll
in
1956
through
his
movie
Rock,
Rock,
Rock.
The
problem
is
that
under

US
law
47
U.S.C.
§3175
it
is
highly
forbidden
to
bribe
DJs
to
play
songs
on
the
radio.
As
a

result,
 the
 career
 of
 Alan
 Freed
 was
 thrown
 into
 the
 dumpsters
 for
 being
 accused
 of

being
 bribed.
 The
 payola
 scandal
 was
 a
 first
 example
 of
 the
 battle
 between
 major
 and

independent
label,
a
pattern
repeated
often
in
the
second
half
of
the
century.


1.1.5 POP
MUSIC
REINVENTED


However,
major
labels
did
recognize
a
change
in
consumer
behavior
and
responded
to
it

with
pop
music.
Cover
artist
such
as
Pat
Boone
and
teen
pop
idols
were
widely
marketed

while
still
pleasing
the
society
by
removing
suggestive
lyrics
and
using
the
music
style

that
 the
 youth
 fancied
 the
 most.
 The
 Brill
 Building
 in
 New
 York
 City
 was
 the

headquarters
of
those
labels
who
owned
songwriters
such
as
Neil
Diamond,
Neil
Sedaka

or
Phil
Spector
but
also
musicians
to
write
and
record
music
that
were
played
by
socially

acceptable
artists
such
as
Paul
Anka
or
Fabian.
The
line
between
mainstream
music
and

indie
music
was
traced
and
Rock’n’Roll
began
its
challenging
journey.


1.1.6 TODAY’S
DISTRIBUTION
–
BY
COMPANY
AND
REGIONS


Nowadays
 the
 industry
 is
 still
 divided
 between
 the
 “big
 four”
 and
 independent
 labels.

The
music
industry
itself
is
comprised
of
various
players
such
as
individuals,
companies,

trade
 unions,
 not‐for‐profit
 organizations,
 rights
 collectives
 and
 other
 bodies,



























































5
US
Code,
Title
47,
Chapter
5,
Subchapter
III,
Part
I,
Section
317.
Announcement
of
payment
for
broadcast.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 6

professional
(studio)
musicians,
performers,
venue
owners
etc.
In
the
USA,
the
two
main

copyright
 collectives
 and
 performance
 rights
 associations
 are
 ASCAP
 and
 BMI

(Broadcast
Music
Incorporated).


According
to
a
Nielsen
SoundScan
report
of
2009,
the
big
four
accounted
for
88.53%
of

full
album
sales
and
was
divided
as
follows6:


Album
sales
distribution
­
2009

Independent
Labels

11%


EMI

Group
 Universal
Music
Group

Universal
Music

9%

Group
 Sony
Music
Entertainment

30%

Warner
Music
Group

Warner
Music

EMI
Group

Group

21%
 Independent
Labels

Sony
Music

Entertainment

29%


The
 four
 big
 players
 in
 the
 industry
 are
 Universal
 Music
 Group
 (UMG),
 Sony
 Music

Entertainment
(SME),
Warner
Music
Group
(WMG)
and
EMI
Group
(EMI).
Prior
to
1998,

the
industry
was
dominated
by
the
“big
six”
as
Sony
Music
and
BMG
had
not
merged
and

PolyGram
had
not
yet
been
purchased
by
UMG.


Geographically,
the
repartition
is
mainly
done
between
the
US,
Europe
and
Asia:
the
USA

are
responsible
for
27%
of
recorded
music
sales,
Europe
for
39.6%,
Asia
for
25.9%
and

Latin
America
for
2.8%.7




























































6
The
Nielsen
Company
2009
Year‐End
Music
Industry
Report

7
IFPI.
Recorded
music
sales
report.
2008


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 7

A
 report
 for
 the
 IFPI
 (Recorded
 Music
 Sales
 2007)
 shows
 that
 the
 main
 5
 players

globally
 are
 the
 USA,
 Japan,
 the
 UK,
 Germany
 and
 France
 for
 both
 physical
 and
 digital

music
sales.8



 %
Physical
Sales
 %
Digital
Sales
 %
of
worldwide
sales
 %
 Change
 from


2006

USA
 75%
 24%
 31.2
($6,059m)
 ‐
9%

Japan
 82%
 16%
 18.4
($3,577m)
 0%

UK
 85%
 8%
 10.5
($2,042m)
 ‐
13%

Germany
 89%
 6%
 8.1
($1,564m)
 ‐
4%

France
 86%
 7%
 5.5
($1,086m)
 ‐
17%

TOTAL
 82%
 15%
 100
($19,405m)
 ­
8%




As
you
can
see
from
this
table
the
distribution
between
Physical
and
Digital
sales
mainly

reflects
the
trend
in
countries
such
as
France,
Japan,
Germany
and
the
UK
with
the
only

exception
of
the
US
where
digital
sales
are
higher
as
a
percentage.
The
country
that
has

the
lowest
percentage
of
sales
in
the
digital
format
is
Germany.


The
 table
 also
 shows
 that
 the
 music
 industry
 is
 an
 industry
 that
 exists
 mainly
 in

developed
 countries
 and
 that
 is
 distributed
 between
 four
 major
 players
 and
 the

independent
labels.
This
is
the
industry
we
are
going
to
investigate
further
to
see
how

the
 new
 technologies
 changed
 its
 business
 model
 and
 led
 to
 new
 horizons
 and

opportunities,
but
also
challenges
as
seen
in
the
selected
history.


1.2 
 ASSESSMENT
 OF
 THE
 MAJOR
 NEW
 TECHNOLOGIES
 THAT
 WILL
 BE

STUDIED


New
technologies
in
the
music
industry
are
technologies
that
showed
big
changes
in
the

last
 decades.
 Those
 are
 recording
 technologies
 first
 of
 all,
 but
 also
 exogenous

technologies,
 not
 directly
 related
 to
 the
 industry,
 which
 had
 an
 impact
 on
 the
 way

companies
did
business.
Those
are
the
Internet
and
mobile
technologies
(new
products

or
services
that
can
be
used
to
enhance
our
lives
and
productivity
when
we
are
on
the

go9).
 Because
 we
 will
 mainly
 focus
 on
 the
 business
 side
 (promotion
 and
 distribution),

the
 new
 technologies
 we
 are
 going
 to
 study
 are
 Internet,
 high‐tech
 improvements
 and


























































8
IFPI.
Recorded
music
sales
report.
2007

9
MIT
$100k
Entrepreneurship
Competition
–
Track
Description.
Retrieved
from
http://www.mit100k.org/the‐100k‐

competition/track‐descriptions/
on
March
the
8th


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 8

the
 technology
 linked
 to
 mobile
 devices
 improvement.
 We
 will
 investigate
 the
 trends

linked
to
the
development
of
social
medias
websites,
online
radios,
digital
stores
such
as

the
iTunes
Music
Store,
video
games,
smart
phones,
MP3
readers
etc.


2 PART
 ONE
 –
 MUSIC
 PROMOTION
 AND
 THE
 NEW


TECHNOLOGIES


In
 order
 to
 fully
 comprehend
 the
 changes
 linked
 to
 the
 advancement
 of
 new

technologies,
we
have
to
first
investigate
how
marketing
and
promotion
of
the
music
is

traditionally
done.



2.1 MUSIC
MARKETING
AND
PROMOTION
DEFINED


The
bottom
line
of
music
marketing
and
promotion
is
and
has
always
been
maximizing

sales
and
exposure
of
the
music.
It
is
the
systematic
approach
to
looking
for
money
with

commercial
music
and
doing
with
as
much
precision
and
skills
as
any
other
industry.



The
 process
 of
 marketing
 in
 the
 music
 goes
 from
 point
 A
 to
 point
 B.
 Point
 A
 being

“having
 a
 product”
 and
 then
 getting
 “rack
 space”.
 Rack
 space
 is
 making
 sure
 that
 the

product
 is
 presented
 and
 sold
 in
 every
 distribution
 channel
 one
 can
 think
 of,
 both

physical
and
digital.


Music
 promotion
 is
 one
 part
 of
 the
 marketing
 process,
 music
 distribution
 is
 the
 other.

Music
 promotion
 involves
 launching
 awareness
 of
 the
 product
 and
 spurring
 attraction

to
 it,
 always
 with
 the
 goal
 of
 boosting
 sales
 before
 everything
 else.
 Promotion
 can
 be

made
 through
 4
 media:
 print,
 radio,
 television
 and
 the
 Internet.
 They
 all
 present

different
 opportunities
 and
 challenges
 and
 can
 all
 be
 traced
 back
 to
 the
 history
 of
 the

record
business.


Additionally,
 we
 can
 consider
 live
 performance
 as
 another
 kind
 of
 promotion
 as
 the

artist
 itself
 is
 a
 product,
 being
 marketed
 as
 himself
 and
 not
 only
 as
 the
 music
 he

performs.



J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 9

The
basic
infrastructure
of
today’s
marketing
can
be
traced
back
to
the
1950s
when
the

main
 formats
 (records
 and
 sheet
 music)
 were
 accompanied
 by
 communication
 tool
 to

promote
 their
 sales
 (radio,
 movies,
 jukebox
 and
 live
 performances)
 and
 expose
 their

music
to
a
much
wider
customer
base.
In
the
1980s,
Music
Television
(MTV)
appeared

and
led
path
to
a
new
kind
of
promotion
tool:
music
videos.
Performers’
image
became

more
important
to
the
crowds
and
a
bigger
emphasis
was
put
on
video
stars.
MTV
was
a

first
because
it
showed
music
videos
and
not
live
performances
on
the
contrary
to
the

Old
 Grew
 Whistle
 Test,
 Ed
 Sullivan
 Show,
 the
 Rock’n’Roll
 Circus
 or
 other
 shows
 that

brought
 live
 bands
 to
 be
 broadcast
 globally
 (that
 is
 to
 say
 in
 developed
 countries
 and

mainly
 the
 US
 and
 the
 UK).
 Finally
 the
 21st
 century
 showed
 the
 appearance
 of
 a
 new

communication
tool:
the
Internet.10


2.1.1 PROCESS


Traditionally
 there
 are
 6
 departments
 involved
 in
 the
 marketing
 activities
 of
 a
 large

record
companies.
Those
are


• Sales:
 responsible
 for
 distribution
 and
 sales
 promotion.
 They
 will
 check

out
 the
 retailers’
 calendars
 for
 rack
 space
 availability
 and
 cost,
 look
 for
 CD
 pressing

facilities
 aligned
 with
 their
 cost
 strategy
 (usually
 the
 lowest),
 set
 the
 suggested
 retail

price
 of
 the
 CD
 and
 confirm
 ad
 placement
 to
 make
 sure
 it
 is
 aligned
 with
 the
 cost

strategy.

• Publicity:
 responsible
 for
 exposure
 of
 the
 product
 through
 print,

electronic
 and
 broadcast
 media.
 The
 publicity
 department
 will
 ensure
 that
 the
 media

exposure
 campaign
 is
 aligned
 with
 their
 goals.
 They
 will
 design
 and
 organize
 press

releases
or
other
PR
materials
such
as
photo
shoots,
interviews
of
the
artists
and
make

sure
that
the
CD
release
go
to
the
right
persons
to
get
the
most
needed
reviews.

• Creative
 Services:
 are
 responsible
 for
 creation
 and
 production
 of

marketing
material.
This
also
means
CD
packaging
(usually
co‐decided
with
the
band),

web‐site
 design
 (if
 a
 web‐site
 is
 dedicated
 to
 the
 band,
 another
 publicity
 platform)
 or

video
production
for
the
music
video.

• Advertising:
 responsible
 for
 the
 creation
 of
 ads
 and
 placement
 in
 print,

electronic
and
broadcast
media.


























































10
Lathrop,
Ted.
This
business
of
Music
Marketing
and
Promotion.
New
York:
Billboard
Books.
2003


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 10

 • Promotion:
 responsible
 for
 radio
 play
 of
 recordings.
 The
 VP
 will
 be
 in

close
 contact
 with
 regional
 promotion
 personnel
 such
 as
 DJs,
 programmers,
 and
 press

people.

• Marketing:
 responsible
 for
 development
 and
 management
 of
 marketing

programs.
This
means
responsible
for
every
step
from
manufacturing
to
distribution.
In

the
 music
 industry,
 manufacturing
 also
 means
 discovering
 the
 artist
 and
 organizing

recordings.


Traditionally
 then,
 the
 marketing
 process
 can
 be
 seen
 as
 the
 flowchart
 exhibit
 1
 –

Flowchart
of
the
standard
record
manufacturing/marketing
process.



The
 first
 link
 between
 the
 artist
 and
 the
 record
 company
 is
 the
 A&R
 (or
 Artists
 and

Repertoire
aka
Talent
Acquisition),
the
most
important
links
between
the
artists
and
the

consumers
are
therefore
A&R,
Recording
Studio,
Pressing/Duplication,
Distributor
and

Mass
 Media.
 All
 those
 steps
 are
 prominent
 to
 the
 distribution
 of
 an
 artist.
 If
 an
 artist

does
not
get
mass
media,
it
means
it
will
get
no
airplay
or
publicity
and
will
be
unknown

to
the
public.
On
the
other
hand
if
the
recording
studio
or
the
Pressing/Duplication
steps

are
forgotten,
the
band
can
get
much
airplay
or
be
invited
to
many
live
shows,
they
will

not
be
able
to
sell
their
album,
i.e.
not
respond
to
the
demand
and
will
soon
be
forgotten.

It
is
important
to
note
however
than
an
artist
can
come
directly
to
the
A&R
of
a
record

company
 and
 sell
 his
 already
 recorded
 album,
 the
 next
 step
 will
 then
 be

Marketing/Promotion
as
shown
on
the
chart.



The
 crucial
 element
 in
 this
 entire
 process
 is
 finally
 the
 distributor,
 and
 thus
 the
 sales

team,
making
sure
it
has
enough
rack
space,
is
distributed
where
there
is
demand
and
at

the
right
time.


Other
 steps
 in
 the
 process
 include
 copyright,
 performance
 rights
 and
 mechanical
 and

synchronization
 rights.
 Copyrights
 are
 registered
 with
 the
 US
 Copyright
 Office
 (in
 the

US),
 it
 provides
 legal
 protection
 from
 theft
 or
 plagiarism
 for
 both
 the
 music
 and
 the

lyrics
of
a
song.
Performance
rights
are
registered
with
the
ASCAP
or
BMI.
This
step
is
to

make
sure
the
royalties
due
to
the
artists
are
calculated
without
any
conflict
of
interest

and
 paid
 to
 duly.
 It
 covers
 every
 source
 of
 income
 for
 a
 song
 as
 shown
 in
 exhibit
 2
 –

Examples
 of
 income­generating
 uses
 for
 a
 song.
 Mechanical
 and
 synchronization
 rights

cover
“the
collection
and
payment
of
licensing
fees
for
new
versions
of
the
music
used


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 11

on
other
artists’
CDs
and
tapes”,
the
synchronization
rights
include
the
use
of
music
in
a

movie,
television
or
even
home
videos.
11


Those
four
rights
add
a
very
lucrative
aspect
to
the
business
in
the
hope
of
diminishing

copyright
 infringement
 and
 generating
 more
 revenue
 or,
 as
 the
 goal
 is,
 maximizing

profits
and
exposure.


This
 paragraph
 shows
 us
 well
 how
 the
 usual
 process
 goes
 for
 marketing
 of
 the
 music.

Lately
 new
 technologies
 have
 opened
 the
 way
 to
 new
 challenges
 and
 also
 new

opportunities
that
we
will
investigate
further.


2.2 ONLINE
PROMOTION


Online
promotion
is
the
act
of
developing
a
promotional
campaign
via
online
tools,
that

is
to
say
the
Internet.
This
can
be
done
through
many
different
media
but
always
imply
a

website.
 The
 term
 media
 then
 refers
 to
 the
 different
 platforms:
 social
 media,
 online

radio
or
online
management
tools.


2.2.1 FACEBOOK,
MYSPACE
AND
OTHER
SOCIAL
MEDIA
TOOLS


Facebook
 and
 MySpace
 might
 probably
 be
 the
 best‐known
 social
 media
 tools
 and
 the

very
first
too.



Facebook
 was
 created
 from
 Mark
 Zuckerberg’s
 dorm
 at
 Harvard
 in
 2003,
 first
 as

Facemash,
 a
 website
 dedicated
 to
 rating
 the
 “hottest”
 person
 between
 two
 Harvard

students.
 Because
 it
 was
 the
 first
 online
 Harvard
 directory
 with
 photos
 and
 basic

information,
the
website
received
450
visitors
and
22,000
photo
views
in
its
first
hour

online.12
 Nowadays
 Facebook
 offers
 much
 more
 feature
 and
 notably
 fan
 pages,
 groups

and
music
applications
including
games
or
options
to
share
the
music
people
like
among

friends
(iLike).


MySpace
was
founded
in
2003
as
well
by
Brad
Greenspan,
Chris
DeWolfe,
Josh
Berman

and
Tom
Anderson
as
a
response
to
the
creation
to
the
late
Friendster.
It
was
created
at

first
 as
 a
 data
 storage
 and
 sharing
 website.
 It
 was
 later
 bought
 by
 Rupert
 Murdoch’s


























































11
Lathrop,
Ted.
This
business
of
Music
Marketing
and
Promotion.
New
York:
Billboard
Books.
2003.
pp.
9‐19

12
Locke,
Laura.
The
Future
of
Facebook.
Time
Online.
Retrieved
on
March
8th
from


http://www.time.com/time/business/article/0,8599,1644040,00.html


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 12

News
Corporation
(parent
of
Fox
Broadcasting)
and
later
launched
in
the
UK
(2006)
in
a

plan
 to
 tap
 into
 the
 UK
 music
 scene.13At
 that
 time,
 all
 MySpace
 hoped
 for
 was
 for
 the

bands
“to
market
through
MySpace
so
they
could
tap
into
the
local
events
scene,
parties,

clubs,
artists,
film
makers,
television
producers”
by
integrating
bands
from
MySpace
into

the
show
CD:USA
that
was
about
to
come
the
UK
at
that
time.



Nowadays,
 both
 Facebook
 and
 MySpace
 offer
 similar
 tools
 for
 bands
 to
 promote

themselves.



Facebook
pages
offer
the
band
to
upload
songs
(after
having
proved
they
are
allowed
to

promote
 this
 band),
 pictures,
 and
 videos,
 manage
 a
 calendar
 of
 event
 and
 send
 mass

messages
 to
 their
 fans.
 Facebook
 states
 on
 their
 website
 that
 “only
 the
 official

representative
of
an
artist,
business,
or
brand
may
create
a
page”,
this
gives
an
idea
of

legitimacy
 to
 the
 status
 of
 pages.
 Pages
 are
 a
 very
 useful
 tool
 for
 artists
 to
 promote

themselves
for
the
following
reasons:


• Facebook
 pages
 are
 indexed
 in
 search
 engines.
 This
 means
 not
 only

Facebook
 search,
 but
 also
 Google,
 Bing,
 Yahoo
 or
 whatever
 search
 engine
 someone

wants
 to
 use.
 Put
 it
 another
 way,
 by
 creating
 a
 Facebook
 page,
 bands
 do
 not
 have
 to

struggle
 with
 developing
 an
 online
 promotion
 campaign,
 a
 process
 that
 can
 be

complicated
and
costly
to
the
rookies.

• A
 Page
 can
 have
 multiple
 administrators.
 This
 can
 be
 compared
 to
 the

process
 of
 music
 marketing
 aforementioned.
 Because
 a
 page
 can
 have
 multiple

administrator,
 someone
 can
 be
 responsible
 of
 uploading
 the
 song,
 another
 one
 for

writing
 newsletters
 (called
 “updates”),
 uploading
 photos,
 responding
 to
 the
 fans
 and

much
more

• Facebook
 pages
 allow
 you
 to
 analyze
 traffic
 once
 you
 have
 reached
 a

certain
 number
 of
 fans.
 It
 captures
 data
 about
 its
 visitors:
 how
 often,
 what
 song
 was

listened
to
the
most
etc.

• There
are
no
limits
to
the
number
of
fans
a
page
can
have.
Word
of
Mouth

then
has
an
outstanding
power
as
it
will
exponentially
increase
the
number
of
fans
as
it



























































13
Bridge,
Rowan.
MySpace
looks
to
UK
music
scene.
BBC
online.
Retrieved
on
March
8th
from


http://news.bbc.co.uk/2/hi/technology/4642622.stm


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 13

is
most
likely
that
people
will
suggest
the
page
to
their
friends
(another
feature
of
the

Pages
tool)

• You
 can
 send
 updates
 and
 message
 to
 all
 of
 your
 fans
 at
 once,
 those

messages
 on
 the
 contrary
 to
 regular
 “friend‐to‐friend”
 inbox
 messages,
 can
 be
 either

forwarded
or
“post”
to
other
peoples’
“walls”.14


The
opportunities
for
artists
to
do
their
own
promotion
are
thus
very
big.


MySpace
 offers
 an
 interactive
 music
 player
 to
 distribute
 songs.
 On
 this,
 artists
 can

choose
 to
 allow
 or
 forbid
 download
 of
 the
 song.
 Other
 features
 present
 on
 MySpace

include
 profiles,
 comments,
 friends
 list,
 events
 calendar,
 and
 blog.
 Also
 a
 main
 feature

that
differentiates
MySpace
from
Facebook
is
the
fact
that
MySpace
allows
HTML
editing

to
its
pages.
This
means
that
a
band
that
is
tech‐savvy
can
personalize
its
MySpace
page

to
the
fullest,
designing
and
choosing
its
own
background,
the
design
of
its
music
player,

and
so
much
more.



MySpace
has
been
getting
much
attention
from
the
media,
organized
band
slams
(band

competition).
 The
 Rolling
 Stones
 Magazine
 has
 even
 released
 a
 list
 of
 the
 25
 most

popular
bands
on
MySpace,
asking
its
readers
to
rank.
1,700
people
participated
in
the

survey.15


Other
 social
 media
 websites
 used
 by
 bands
 or
 labels
 for
 promotion
 include
 Twitter.

Twitter
 was
 created
 by
 Evan
 Williams
 in
 2007
 as
 an
 sms‐microblogging
 website.
 The

way
 bands
 and
 labels
 use
 Twitter
 is
 for
 short
 messages
 (microblogging)
 announcing

anything
 really.
 A
 band
 could
 use
 it
 to
 announce
 the
 launch
 of
 their
 new
 album
 (sales

objective)
 or
 to
 tell
 their
 fans
 that
 they
 are
 eating
 apples
 and
 drinking
 beers
 at
 that

particular
time.
Twitter
helps
to
cut
the
wall
between
the
fans
and
the
artists,
the
latter

becoming
 more
 human,
 more
 approachable.
 Eventually
 this
 leads
 to
 a
 more
 loyal
 fan

base
 and
 indeed
 a
 better
 exposure.
 
 On
 Twitter
 it
 is
 not
 compulsory
 to
 have
 a
 form
 of

identification
 that
 proves
 you
 are
 the
 official
 representative
 of
 the
 artist
 but
 accounts

can
have
a
cloud
that
says
“verified
account”.



























































14
Haydon,
John.
Facebook
Groups
and
Pages
–
Features,
benefits
and
killer
tips.
Retrieved
on
March
8th
from


http://johnhaydon.com/2009/04/facebook‐groups‐pages‐tips/

15
Rolling
Stone
Declares
the
25
best
bands
on
MySpace.
Retrieved
on
March
8th
from


http://www.rollingstone.com/rockdaily/index.php/2006/12/22/rolling‐stone‐declares‐the‐25‐best‐bands‐on‐
myspace/


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 14

See
exhibits
3,
4
and
5
for
screen
grabs
of
the
MySpace,
Facebook
and
Twitter
pages
of

different
bands.


Zach
Pentel,
supervisor
of
social
media
at
Martin/Williams
Advertising
in
Minneapolis,

MN
and
CEO
of
808
Management,
a
consultancy
firm
for
independent
artists,
wrote
an

article
called
“5
superb
social
media
tools
for
musicians”.
In
this
article
he
goes
beyond

the
regular
Facebook
Page
and
Twitter
Account.
In
Facebook
he
describes
an
application

called
ReverbNation’s
MyBand
(see
exhibit
6)
that
allows
a
better
layout
of
your
page,

with
the
main
info
on
the
center.
It
also
allows
downloading
songs.
Concerning
Twitter,

the
 application
 Mr.
 Pentel
 describes
 is
 Twiturm
 that
 allows
 sharing
 songs
 with
 your

followers;
it
allows
integrating
MySpace
into
Twitter,
once
again
limiting
the
need
to
go

through
the
struggle
of
managing
different
websites.
Additionally,
as
exhibit
7
shows,
a

small
bar
allows
the
listener
to
share
the
song
on
multiple
other
social
media
websites:

Facebook,
Tumblr,
StumbleUpon
etc.


FanBridge
(exhibit
8)
is
a
service
that
allows
managing
mailing
lists.
Allowing
reaching

people
that
are
not
on
Facebook,
Twitter
and
MySpace.


BandCamp
 (exhibit
 9)
 again
 is
 a
 solution
 alternative
 to
 the
 three
 main
 tools

aforementioned.
 On
 BandCamp,
 a
 band
 manager
 can
 build
 and
 share
 a
 digital
 album,

without
needing
to
find
distribution
through
a
record
deal.
It
is
a
complete
DIY
solution

for
digital
music
distribution.
Highly
customizable,
it
allows
to
basically
create
your
own

online
store
and
website
for
both
sales
and
exposure
objectives.


Finally
the
last
tool
describe
by
Mr.
Penter
is
BandMetrics
(exhibit
10).
BandMetrics
is

designed
only
for
musicians
that
are
looking
to
estimate
the
success
of
their
e‐marketing

campaign.16


2.2.2 WEB
MUSIC
101


Web
 Music
 101
 is
 to
 look
 at
 the
 different
 ways
 the
 web
 is
 used
 with
 the
 music.
 Web

Music
does
not
necessarily
mean
social
media
tools
for
bands.
It
is
every
single
way
for

an
 individual
 to
 either
 share
 music
 he
 likes,
 discover
 new
 music,
 promote
 his
 band
 or

create
 himself
 a
 name
 in
 the
 music
 world.
 Those
 sites
 can
 be
 sites
 to
 share
 music
 but


























































16
Pentel,
Zach.
5
super
social
media
tools
for
musicians.
Mashable,
the
Social
Media
Guide
Online.
Retrieved
on
March


9th
from
http://mashable.com/2010/01/04/social‐media‐tools‐bands/


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 15

also
 online
 management
 companies
 that
 link
 artists
 and
 venue
 managers
 or
 finally

websites
that
everybody
can
use
to
listen
to
music
online.


Internet
radios
are
websites
to
either
build
a
playlist,
listen
to
a
specific
radio
stations

everywhere
 in
 the
 world
 or
 listen
 to
 random
 songs.
 The
 most
 famous
 online
 radios

(besides
radio
stations’
websites)
are:


• Pandora:
Available
only
in
the
US,
Pandora
allows
the
visitor
to
create
a

free
account
that
will
allow
him
to
listen
to
a
multitude
of
songs.
The
way
it
is
set
up
is

that
the
visitor
will
be
prompt
to
input
the
name
of
a
song
or
the
name
of
a
band
he
likes

and
Pandora
will
then
create
a
playlist
based
on
similar
sounds.
“It’s
a
new
kind
of
radio,

the
one
that
only
plays
music
you
like,”
announces
the
website.
When
someone
has
an

account,
he
is
not
limited
to
the
number
of
songs
it
can
listen
to,
without
an
account
this

number
is
limited
to
20
songs.
Other
features
available
on
Pandora
are
the
“thumbs
up”

or
“thumbs
down”,
“thumbs
up,”
allows
to
narrow
your
playlist
by
favoring
the
genres

that
you
really
like.
By
clicking
on
“thumbs
down”
you
tell
the
website
you
do
not
want

to
listen
to
that
song
anymore.
It
is
also
possible
to
create
playlists
based
on
genre
or
get

information
about
the
music
you
are
listening
to
(e.g.
why
they
picked
this
one,
artist’s

bio
etc).
The
biggest
advantage
with
Pandora
is
that
it
takes
into
account
that
each
song

will
 be
 different
 and
 really
 recommends
 songs
 and
 not
 artists
 as
 a
 whole.
 Playlist
 are

usually
 called
 as
 a
 song
 (e.g.
 “Run
 Chicken
 Run”
 by
 The
 Felice
 Brothers),
 putting
 the

emphasis
on
the
song’s
style
and
not
the
artist’s.
See
exhibit
11
for
a
description
of
what

they
call
the
“Music
Genome
Project”
by
which
they
recommend
songs.

• Last.Fm:
A
British
website
created
in
2002,
Last
FM
allows
the
visitor
to

have
 a
 personalized
 profile
 on
 which
 he
 can
 add
 as
 many
 songs
 as
 he
 wants,
 create

playlists
 and
 share
 those
 playlists.
 Another
 feature
 is
 what
 Last.Fm
 calls
 the

“audioscrobbler”
that
will
skim
through
your
portable
audio
player,
iTunes
or
Windows

Media
Player
library
and
recommend
artists
based
on
what
is
out
there.
On
Last.Fm
once

you
have
created
a
profile
and
added
a
couple
of
songs,
you
get
recommendations
each

time
you
log
in.
You
also
have
the
possibility
to
download
MP3
that
were
made
available

for
 free
 through
 the
 artist
 itself.
 You
 are
 also
 allowed
 to
 add
 “fan
 pics”
 of
 your
 artists.

The
way
it
works
for
artists
is
to
register
their
label
or
artists
with
Last.Fm.
Registration

as
an
artist
is
entirely
free,
only
some
optional
features
are
available
for
a
fee.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 16

 • Deezer:
 Launched
 in
 France
 in
 2007,
 Deezer
 was
 originally
 a
 free
 music

streaming
 website.
 Put
 it
 simply
 one
 could
 listen
 to
 any
 song
 available
 on
 their
 small

catalogue
 (only
 165,000
 Sony
 and
 Universal
 songs).
 They
 had
 some
 legal
 issues

regarding
 uploading
 but
 changed
 their
 business
 model
 with
 the
 new
 launch
 in
 early

2009.
 Today
 the
 website
 is
 restricted
 based
 on
 the
 location
 of
 the
 user,
 it
 is
 also

prompted
to
create
an
account.
Deezer
now
offers
monthly
subscription
fees
that
allows

access
 to
 a
 broader
 catalogue,
 to
 retrieve
 one’s
 playlist
 wherever
 they
 are
 with
 an

Internet
 collection
 (quite
 useful
 when
 associated
 with
 they
 Blackberry,
 Android
 and

iPhone
 applications)
 and
 allows
 people
 to
 create
 profiles,
 giving
 a
 bigger
 social

networking
dimension
to
the
website.
It
is
not
possible
on
Deezer
to
upload
one’s
song

and
distribute
it
as
“any
personal
MP3s
uploaded
to
the
site
can
only
be
accessed
by
the

member
who
uploaded
it”17

• Musicovery:
 An
 interactive
 and
 completely
 customizable
 Internet
 radio

that
allows
the
listener
to
make
a
very
advanced
search
to
listen
to
music.
Going
on
the

website
 (see
 exhibit
 12),
 the
 listener
 can
 either
 look
 for
 an
 artist,
 go
 to
 his
 favorite

songs,
 artists,
 listen
 to
 the
 “hits”
 or
 play
 a
 random
 song.
 It
 is
 also
 possible
 to
 look
 for

songs
 by
 selecting
 or
 unselecting
 genres
 (20
 different
 are
 proposed),
 a
 period
 (by

decades
since
the
50s,
or
older
than
the
50s),
a
mood
(energetic,
positive,
calm,
dark),

choose
the
dance
of
the
song
(tempo
+
or
‐,
dance
+
or
‐).
When
everything
is
selected
a

song
shows
up
aligned
in
a
cloud
of
other
songs
related
one
to
another
by
genre,
period

etc.
 It
 is
 then
 possible
 to
 “heart”
 or
 “broken
 heart”
 a
 song,
 to
 be
 redirected
 to
 iTunes

Music
Store,
Amazon
or
eBay
to
buy
the
song
or
to
switch
song
(see
exhibit
13).


Online
management
websites
are
sites
that
allow
venue
managers
to
be
put
in
contact

with
 independent
 artists.
 Those
 websites
 play
 the
 role
 of
 Talent
 Acquisition
 or

Promoters
and
sometimes
offer
promotion
tools
for
the
musicians.
They
can
also
include

agents,
managers
and
record
companies
looking
for
new
talents.



Such
 a
 website
 I
 was
 introduced
 to
 at
 a
 conference
 on
 Entrepreneurship
 in
 the
 Music

Industry
 is
 called
 SonicBids.
 “SonicBids
 helps
 bands
 get
 gigs
 and
 promoters
 book
 the

right
 bands”18.
 A
 website
 for
 promoters
 and
 bands.
 By
 creating
 your
 profile
 you
 can

apply
 (as
 an
 artist)
 to
 different
 promoter
 profiles
 you
 want
 to
 listen
 to
 your
 music.


























































17
www.deezer.com

18
www.sonicbids.com


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 17

Promoters
 also
 have
 access
 to
 a
 broad
 catalogue
 of
 artists.
 Artists
 have
 to
 create
 their

Electronic
 Press
 Kit
 (EPK)
 and
 can
 track
 their
 Twitter,
 MySpace
 and
 Facebook
 stats

through
SonicBids.
Promoters
create
their
EPK
too
and
then
list
the
gigs
they
are
having

for
 artists
 to
 apply
 to
 them.
 Brands
 can
 also
 have
 a
 profile
 on
 SonicBids
 to
 sponsor

events
such
as
college
gigs,
sponsor
artists,
get
more
online
advertising
etc.


To
conclude,
web
music
is
every
single
tool
that
artists
can
use
to
promote
their
music

either
voluntarily
or
not.
The
buzz
created
around
the
Internet
is
a
great
help
for
bands

who
can
benefit
from
free
promotion.
If
people
like
that
music
they
hear
they
will
share

it
 with
 their
 friends
 either
 using
 Youtube,
 Facebook,
 Twitter,
 Tumblr,
 Last.Fm,

StumbleUpon
or
any
single
social
networking
site
one
can
think
about
that
has
a
“share”

option.
Have
one
friend
on
it
and
it
is
sufficient,
chances
are
this
friend
will
share
with

two
of
his
friends
who
will
then
share
with
two
of
them
friends
and
so
on.
It
spreads
like

wild
fire.
A
good
example
of
how
tremendous
the
snowball
effect
of
online
promotion
is

the
British
band
the
Arctic
Monkeys
who
are
the
first
band
to
become
famous
thanks
to

online
DIY
promotion.


2.2.3 ARCTIC
 MONKEYS,
 AN
 EXAMPLE
 OF
 BREAKTHROUGH
 ONLINE


PROMOTION


The
 Arctic
 Monkeys
 are
 a
 British
 band
 created
 circa
 2002
 in
 Sheffield,
 England.
 The

band
consists
of
Alex
Turner,
Jamie
Cook,
Nick
O’Malley
and
Matt
Helders.
Besides
being

a
well‐known
British
pop
band,
the
Arctic
Monkeys
are
known
in
the
industry
for
being

responsible
for
the
breakthrough
in
online
promotion.
In
an
interview
with
the
band
in

2005,
 the
 question
 of
 their
 online
 is
 being
 discussed.
 Alex
 Turner,
 the
 singer,
 explains

that
the
Internet
played
a
big
part
in
their
success.


It
 all
 started
 after
 their
 first
 concerts
 back
 in
 2003
 when
 they
 had
 already
 recorded

tracks
and
burned
CDs
that
they
would
distribute
for
free
at
the
end
of
concerts,
doing

their
 own
 promotion.
 Because
 those
 tapes
 were
 obviously
 in
 limited
 editions,
 fans

started
to
copy
them
onto
their
computers
and
share
them
on
the
Internet.
This
know

could
be
regarded
as
high
risk
because
of
copyright
infringement
but
the
Arctic
Monkeys

did
 not
 know
 about
 it,
 were
 young
 and
 just
 wanted
 to
 please
 their
 fans.
 Turner
 even

said,
“the
band
did
not
mind,
they
never
did
it
to
make
money
or
anything
anyway.
They


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 18

were
giving
them
away
for
free
–
it
was
a
better
way
for
fans
to
listen
to
the
songs
and

sing
along
at
concerts”19


Another
 reason
 they
 recall
 that
 helped
 a
 lot
 is
 two
 specific
 fans.
 Those
 two
 fans
 were

putting
 up
 songs
 on
 the
 Internet
 and
 created
 a
 profile
 on
 a
 new
 social
 media
 website

called
MySpace.
The
Arctic
Monkeys
themselves
did
not
know
about
MySpace.



The
Arctic
Monkeys
were
the
first
example
of
DIY
music
promotion.
According
to
Laura

Barton,
 a
 Guardian
 journalist,
 the
 Arctic
 Monkeys
 are
 an
 “Internet
 phenomenon
 that

allowed
the
Sheffield
four‐piece
to
flourish
despite
not
receiving
much
airplay”20,
airplay

traditionally
being
the
key
to
being
known.
The
reason
why
it
worked
so
well
is
because

the
Arctic
Monkeys
responded
to
what
their
fan
base
wanted.
It
had
become
even
harder

for
 unknown
 band
 to
 get
 a
 record
 deal
 without
 their
 own
 promotion
 and
 therefore
 it

was
hard
for
them
to
reach
a
wide
base.



However
by
making
their
song
available
on
MySpace,
the
band
did
not
just
allow
fans
to

listen
but
also
to
download
and
track
their
whereabouts
through
the
most
useful
feature

on
MySpace:
blogs.
Tour
dates
are
announced,
comments
can
be
left
to
other
“friends”

and
everybody
can
“follow”
what
the
Arctic
Monkeys
are
doing.
Their
success
and
fame

spread
 like
 wildfire
 around
 England
 and
 soon
 became
 number
 one.
 Nowadays,
 the

release
of
their
first
album
“Whatever
people
say
I
am
that’s
what
I
am
not”
is
known
to

be
the
fastest
selling
debut
album
in
the
UK
selling
363,735
copies
in
the
first
week.
This

outnumbered
the
previous
record
of
3036,631
copies
sold
by
the
band
Hear’Say,
and
it

sold
more
copies
on
its
first
day
118,501
copies,
than
the
Top
20
albums
of
that
week

combined.
 A
 music
 retailer
 from
 HMV
 even
 compared
 this
 success
 to
 the
 one
 of
 the

Beatles:
 “In
 terms
 of
 sheer
 impact,
 where
 a
 band
 has
 come
 from
 virtual
 obscurity
 to

achieve
 huge,
 overnight
 success,
 we
 haven't
 seen
 anything
 quite
 like
 this
 since
 the

Beatles”
 21.
 Since
 then,
 the
 band
 signed
 on
 Domino
 Records
 and
 their
 album
 Whatever

People
Say
I
am
That’s
What
I
am
Not
came
fifth
in
NME’s
greatest
British
album
poll.



























































19
Arctic
Monkeys
aren’t
fooling
around.
Prefixmag
Interview.
November
21,
2005.
Retrieved
on
March
8th
on


http://www.prefixmag.com/features/arctic‐monkeys/arent‐fooling‐around‐part‐1‐of‐2/12565/

20
Barton,
Laura.
The
Question:
Have
the
Arctic
Monkeys
changed
the
music
business?.
The
Guardian
online.
Retrieved


from
http://www.guardian.co.uk/music/2005/oct/25/popandrock.arcticmonkeys
on
March
8th

21
Arctic
Monkeys
make
UK
charts
history.
The
Guardian
Online.
Retrieved
from


http://www.guardian.co.uk/uk/2006/jan/30/arts.artsnews
on
March
8th


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 19

The
reason
behind
this
success
is
definitely
due
to
an
increase
in
the
use
of
technologies.

Stephen
McRobbie
of
the
Pastels
(a
Domino
band)
suggests
that:



The
music
industry
has
become
less
predictable
as
a
result
in
the
recent

months.
 It
 is
 very
 difficult
 for
 major
 labels
 to
 understand
 what’s
 going

on,
 and
 they
 never
 really
 understood
 the
 whole
 downloading

phenomenon.
 Things
 have
 gone
 really
 out
 of
 control,
 and
 it
 has
 suited

labels
that
are
smaller
and
can
react
much
quicker.22


Laura
 Barton,
 to
 explain
 the
 phenomenon,
 coined
 the
 term
 “musical
 socialism”
 to

describe
the
fact
that
“this
is
the
beginning
of
a
music
putsch
for
the
major
labels
have

failed
 to
 engage
 with
 or
 prescribe
 to
 music‐lovers.
 The
 simple
 fact
 that
 the
 Internet

allows
a
fledging
band’s
music
to
be
heard
without
label
assistance”23.


2.3 AFTERMATH
ON
TODAY’S
INDUSTRY


2.3.1 CUSTOMER
BASE



Every
 industry
 is
 facing
 a
 change
 of
 their
 customers’
 behavior.
 More
 and
 more
 people

are
spending
time
online
and
less
offline.
On
April
23,
2007
Advertising
Age
released
a

supplement
to
its
issue
called
“Digital
Marketing
&
Media
Fact
Pack”.
Through
this
issue

we
understand
thanks
to
many
statistics
that
the
entire
business
world
is
affected
by
a

digital
revolution.


Between
 2006
 and
 2007,
 the
 first
 websites
 in
 major
 categories
 (see
 exhibit)
 all

increased
 the
 number
 of
 their
 visitors
 by
 an
 average
 of
 18.175%
 with
 categories

Classifieds
and
Social
Networking
increasing
by
87.6%
and
72.5%
respectively.


Blog
ad
spending
in
2005
was
$16.6
million,
it
is
estimated
to
be
$300.4
million
in
2010.

Blogs
attract
57
million
of
readers
(38.77%
of
the
US
Internet
Population)
daily
and
the

ROI
on
blogging
was
61%
in
2006
according
to
Forrester
Research.


Download
music
is
the
top
11
online
activity
for
users
with
15.7%

responding
(23.3%

increase
since
2005).
Radio
is
number
17
with
10.9%.


























































22
McRobbie,
Stephen.
Record
Labels,
the
Domino
Effect.
The
Independent
Online.
Retrieved
on
March
8th
on


http://www.independent.co.uk/arts‐entertainment/music/features/record‐labels‐the‐domino‐effect‐525404.html

23
Barton,
Laura.
See
note
20


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 20

We
 admitted
 that
 the
 biggest
 use
 of
 Internet
 for
 music
 was
 through
 social
 networking

websites.
According
to
the
same
Ad
Age
report,
55%
to
18
to
34
years
old
Internet
users

admitted
 that
 they
 would
 not
 be
 able
 to
 keep
 in
 touch
 with
 friends
 without
 social

networks
and
new
technologies,
showing
a
real
potential
for
growth.



With
 Facebook
 Pages
 you
 can
 appear
 in
 Google
 Search,
 or
 47.5%
 of
 the
 search
 engine

market
share.



The
 fact
 is,
 customers’
 behavior
 is
 changing.
 People
 are
 spending
 more
 time
 on
 the

Internet
and
it
is
now
the
place
where
you
can
get
the
most
visibility.
This
is
why
other

traditional
media
are
decreasing
and
there
is
such
an
opportunity
for
unknown
persons

to
 became
 Internet
 heroes.
 A
 small
 band
 from
 Connecticut
 can
 find
 itself
 being
 very

famous
in
Lyon
without
ever
having
set
foot
there.


2.3.2 IMPORTANCE
OF
TRADITIONAL
MEDIA
AT
STAKE


When
we
look
at
what
is
available
to
bands
or
record
labels
for
promotion
it
is
easy
to

ask
how
are
traditional
media
doing
in
the
midst
of
this
revolution.
According
to
Zenith

Optimedia
 (part
 of
 Publicis),
 Global
 Advertising
 Expenditure
 since
 2005
 has
 increased

from
 $19,235
 million
 to
 $48,139
 million
 for
 the
 Internet
 alone
 when
 the
 overall
 US

advertising
 expenditure
 has
 increased
 from
 $399,431
 million
 to
 $504,557.
 This
 means

that
Internet
went
from
representing
4.8%
of
total
US
spending
to
being
9.5%
in
just
4

years.
On
the
other
hand,
newspapers
advertising
dropped
from
representing
29.7%
in

2005
to
26.2%
in
2009.
While
television
still
continued
to
increase,
the
steepness
of
the

increase
curve
is
much
smaller
than
Internet,
growing
from
37.8%
to
38.1%,
stagnating

in
 2006
 and
 2007.
 Magazines
 advertising
 dropped
 too
 to
 12.1%
 in
 2009
 (13.2%
 in

2005).
 See
 exhibit
 for
 a
 complete
 overview
 of
 US
 advertising
 spending
 between
 2005

and
2009.


What
is
important
to
note
here
is
that
more
and
more
advertising
is
done
digitally.
This

means
that
now
record
labels
have
to
be
able
to
respond
to
this
change
or
they
will
not

be
able
to
reach
their
target.
As
seen
up
above,
customer
behavior
is
changing
as
well,

with
more
and
more
people
spending
time
on
the
Internet
or
their
mobile
devices.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 21

 2.3.3 DIY
MUSIC
PROMOTION


As
seen
up
above,
the
Internet
offers
many
tools
for
self‐promotion.
The
Arctic
Monkeys

showed
 it
 well
 and
 websites
 such
 as
 SonicBids,
 Last.Fm
 or
 even
 Youtube
 or
 Facebook

allow
 an
 artist
 to
 promote
 himself
 simply
 and
 most
 of
 the
 time
 free
 of
 charge
 from

everywhere
in
the
world.
This
reflects
the
overall
trend
that
is
true
for
every
business,

technological
 globalization
 has
 made
 the
 world
 flatter
 and
 broke
 down
 geographical

boundaries.
 When
 looking
 back
 at
 the
 flowchart
 of
 the
 standard

marketing/manufacturing
process
in
the
music
industry
(exhibit
1),
we
can
reevaluate

the
impact
that
such
a
possibility
has
on
the
industry.
The
A&R
part
can
be
deleted
when

an
artist
can
use
SonicBids
to
get
himself
to
the
promoter
or
do
his
own
promotion.
All

that
 happens
 in
 the
 store
 is
 also
 easily
 deleted
 when
 the
 promotion
 works
 so

successfully
 online.
 The
 role
 of
 record
 labels
 is
 diminished
 because
 of
 the
 DIY
 music

promotion.




However,
 did
 new
 technologies
 diminish
 the
 impact
 of
 record
 labels
 in
 terms
 of

distribution?


3 PART
 TWO
 –
 MUSIC
 DISTRIBUTION
 AND
 THE
 NEW


TECHNOLOGIES


3.1 DIGITAL
DISTRIBUTION


3.1.1 WHAT
IS
DIGITAL
MUSIC
AND
HOW
IMPORTANT
IS
IT
IN
THE
INDUSTRY


Webster’s
 Dictionary
 defines
 digital
 as:
 “characterized
 by
 electronic
 and
 especially

computerized
technology”.
Distribution
is
the
“marketing
or
merchandising
of
products

or
 commodities”24.
 Therefore
 digital
 music
 distribution
 is
 considered
 to
 be
 the
 sale
 of

music
 merchandise,
 that
 is
 to
 say
 songs,
 album
 or
 even
 image,
 over
 the
 Internet.
 On
 a

financial
 standpoint,
 any
 revenue
 that
 is
 made
 through
 such
 distribution
 is
 accounted

for
 “digital
 sales”
 on
 the
 balance
 sheet,
 to
 differentiate
 from
 “physical
 sales”
 such
 as

pressed
CDs
in
retail
stores.



























































24
Webster’s
Dictionary


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 22

To
 purchase
 digitally,
 people
 can
 “acquire
 tracks
 and
 albums
 in
 ways
 inconceivable
 a

few
 years
 ago
 –
 from
 download
 stores,
 streaming
 sites,
 subscription
 services,
 free‐to‐
user
sites,
bundled
with
their
broadband
or
mobile
phone
handset”25.


In
the
period
2004‐2009
digital
sales
increased
by
940%
when
the
total
music
market

decreased
 by
 30%.
 It
 now
 accounts
 for
 27%
 of
 the
 entire
 music
 revenue
 (40%
 in
 the

US),
only
second
biggest
share
after
the
gaming
industry
whose
digital
revenue
accounts

for
 32%
 of
 its
 total
 revenue.
 According
 to
 the
 IFPI,
 in
 2003
 there
 were
 less
 than
 50

licensed
music
services,
versus
more
than
400
in
2009.
The
catalogue
available
in
2003

was
ten
times
smaller
than
the
one
available
now
and
the
industry’s
digital
revenue
was

only
$20
million
(less
than
1%)
versus
$4.2
billion
in
2009.26


The
opportunity
for
consumers
now
is
that
music
is
available
in
much
more
format
that

it
 used
 to.
 In
 the
 last
 decades,
 an
 album
 would
 be
 available
 only
 in
 a
 few
 formats.

Nowadays
 with
 ringtones,
 mastertones,
 waiting
 tones,
 audio
 tracks,
 online,
 offline
 and

so
much
more,
an
album
can
be
found
in
hundreds
of
different
format.
As
an
example,

Beyoncé’s
I
am…
Sasha
Fierce
is
available
in
more
than
260
different
products
in
the
US.

There
are
also
many
different
business
models
that
we
are
going
to
study.


3.1.2 THE
BUSINESS
MODELS
OF
DIGITAL
DISTRIBUTION


A­la­carte
downloads
account
for
the
major
revenue
stream
of
digital
sales.
According

to
the
IFPI
there
were
three
key
developments
in
2009:
more
DRM‐free
services,
growth

in
 digital
 album
 offerings
 and
 the
 introduction
 to
 variable
 pricing.
 
 Music
 companies

have
expanded
their
DRM‐free
catalogue
which
means
that
more
than
ever
consumers

can
purchase
a
song
and
transfer
it
to
as
many
devices
as
wished,
which
used
not
to
be

the
 case
 as
 iTunes
 for
 example
 limited
 the
 distribution
 to
 5
 devices.
 Variable
 pricing

means
 discounting
 the
 catalogue
 relative
 to
 the
 top
 charting
 tracks
 helped
 convert

single‐track
 purchases
 into
 album
 sales.
 Also,
 some
 companies
 have
 increased
 the

quality
of
their
offering
to
attract
consumers.
iTunes
for
example
is
now
offering
iTunes

LP,
a
deluxe
digital
format
that
Apple
describes
as
follows:



























































25
Kennedy,
John.
Chairman
&
Chief
Executive
IFPI.
Music
how,
when,
where
you
want
it
–
but
not
without
addressing


piracy.
Digital
Music
Report
2010.
p.3

26
IFPI.
Report
on
Digital
Music
2010.
Retrieved
on
March
9th
from


http://www.ifpi.org/content/library/DMR2010.pdf


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 23

 The
best
thing
to
happen
to
fandom.

The
 visual
 experience
 of
 the
 record
 album
 returns
 with
 iTunes
 LP.
 Download

select
 albums
 and
 experience
 a
 beautifully
 designed,
 interactive
 world
 right
 in

your
iTunes
library
on
a
Mac
or
PC
—
many
are
created
by
the
artists.
While
you

listen
 to
 your
 favorite
 songs,
 you
 can
 dive
 into
 animated
 lyrics
 and
 liner
 notes,

watch
 performance
 videos,
 view
 artist
 and
 band
 photos,
 and
 enjoy
 other
 bonus

materials.
And
become
an
even
bigger
fan.27


The
 innovation
 by
 Apple
 is
 a
 very
 important
 step
 that
 perfectly
 responds
 to
 the
 main

critic
 made
 about
 digital
 albums:
 that
 we
 cannot
 experience
 the
 pleasure
 linked
 to

buying
a
physical
album
and
flipping
through
the
booklet
or
the
CD
case.
(See
exhibit
for

a
screengrab
of
an
iTunes
LP
album).


ISP
and
mobile
partnerships
is
the
act
of
offering
music
downloads
as
a
bundle
with

the
purchase
of
a
mobile
or
broadband
plan.
ISP
are
looking
into
doing
this
much
often

as
 their
 market
 is
 saturating
 and
 it
 is
 becoming
 much
 more
 difficult
 to
 differentiate

themselves
 among
 the
 competition.
 In
 order
 to
 do
 so
 they
 try
 to
 partner
 with
 music

companies.
In
Denmark
for
example,
TDC’s
Play
is
a
service
offered
by
the
ISP
TDC
that

opens
 their
 customers’
 access
 to
 a
 6.1
 million
 tracks
 catalogue
 that
 can
 be
 streamed

unlimitedly
at
no
additional
cost.
In
the
UK,
Sky
Song,
a
service
from
the
company
Sky,

offers
to
stream
over
4
million
tracks
with
packages
of
10
to
15
downloads
per
month.


Music
 subscription
 with
 bundled
 with
 devices
 is
 the
 offering
 of
 songs
 through
 the

purchase
of
a
mobile
device.
Nokia
and
Sony
Ericsson
have
started
doing
this
in
2008.
It

usually
allows
downloading
of
songs
on
the
mobile
device.


Streaming
services
as
a
business
model
is
paying
for
premium
services
on
streaming

websites
 such
 as
 Deezer
 or
 Spotify.
 On
 Spotify
 for
 example,
 users
 can
 pay
 €9.99
 to

stream
 the
 music
 on
 portable
 handsets
 and
 have
 no
 advertising.
 On
 Deezer,
 users
 can

pay
 €4.99
 per
 month
 to
 remove
 advertising
 and
 receive
 higher
 quality
 streaming
 or



























































27
www.apple.com
What’s
New
in
iTunes.
Retrieved
on
March
9th
from
http://www.apple.com/itunes/whats‐

new/#itunes‐lp


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 24

€9.99
to
add
a
desktop
app
and
mobile
streaming
to
phones
such
as
iPhone,
Blackberry

or
Android.28


Monetizing
music
videos
online
means
getting
revenue
from
music
videos
streaming.

In
 December
 2009,
 Universal
 Music
 Group
 and
 Sony
 Music
 Entertainment
 partnered

with
video
websites
such
as
YouTube
to
launch
VEVO
in
the
US
and
Canada.
It
is
focused

on
 ad‐supported
 distribution
 of
 videos
 to
 generate
 revenue
 as
 recognized
 how

important
 the
 potential
 was.
 In
 Europe
 for
 example
 watching
 videos
 on
 Youtube

accounts
for
31%
of
the
Internet
activity.
The
advantage
with
VEVO
is
that
it
distributes

professional
 music
 videos,
 in
 a
 world
 where
 quality
 is
 becoming
 more
 and
 more

important.
 Everything
 is
 made
 for
 the
 customer
 to
 have
 a
 better
 experience
 watching

videos
 on
 VEVO,
 including
 links
 to
 artist
 websites,
 high‐quality
 premium
 player
 and

professionalism.
Hulu,
another
video
provider
already
offers
premium
quality
concerts

and
music
videos.
Recently,
MySpace
has
launched
MySpace
Music
Videos.


Direct
to
consumer
means
having
consumers
buying
a
premium
membership
to
access

an
artist’s
website
and
receive
premium
features
such
as
blogging
from
the
artist.


3.1.3 ITUNES,
LEADER
OF
THE
INDUSTRY


All
 those
 different
 business
 models
 allow
 companies
 that
 would
 not
 have
 been

considered
in
the
industry
back
in
the
physical
age,
to
flourish
tremendously
as
vendors.

iTunes
Music
Store
is
nowadays
considered
the
leader
in
the
music
industry
with
more

than
10
billion
songs
downloaded
from
iTunes,
as
announced
on
Apple’s
official
website

and
sales
accounting
for
25%
of
the
overall
music
market29.


As
 announced
 before,
 iTunes
 offers
 to
 download
 songs
 by
 the
 unit,
 albums,
 but
 also

iTunes
LPs,
music
videos,
TV
shows,
movies
or
iPhone/iPod
apps.


What
 is
 remarkable
 is
 that
 Apple
 is
 not
 a
 music
 company,
 its
 business
 model
 is
 not

originally
 based
 on
 selling
 songs
 and
 yet
 in
 less
 than
 6
 years
 (iTunes
 Music
 Store
 was

launched
in
2003)
they
managed
to
top
the
charts
and
become
the
most
music
revenue

generating
company
in
the
US,
shortly
followed
by
Wal‐Mart,
Best
Buy
and
Amazon.



























































28
Bonanos,
Paul.
Deezer:
Another
startup
that
will
face
the
music
on
premium
streaming.
Retrieved
on
March
9th
from


http://gigaom.com/2009/11/05/deezer‐another‐startup‐that‐will‐face‐the‐music‐on‐premium‐streaming/

29
IFPI.
Digital
Music
Report
2010


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 25

iTunes
 business
 model
 is
 based
 on
 à‐la‐carte
 services
 where
 consumers
 can
 create
 an

account
once
and
then
download
as
many
songs
as
they
want,
paying
per
download
and

not
a
bundle.
The
tremendous
innovation
iTunes
made
on
the
music
store
are
DRM‐free

songs
 (it
 used
 not
 to
 be
 the
 case)
 and
 variable
 pricing.
 Now,
 6
 millions
 songs
 are

available
DRM‐free
at
$0.69,
$0.99
or
$1.29.
Apple
also
offers
partnership
with
iTunes,
it

offers
two
kinds
of
partners
the
option
of
having
visibility
on
iTunes:
Content
providers

(record
 labels
 for
 example,
 that
 can
 benefit
 from
 Apple’s
 marketing
 program,
 but
 also

individuals),
 companies
 and
 organizations
 (helping
 iTunes
 through
 marketing
 efforts,

iTunes
Corporate
Gift
Cards.



By
 becoming
 an
 iTunes
 content
 provider,
 an
 artist
 has
 access
 to
 iTunes
 Producer,
 a

software
dedicated
to
making
songs
ready
for
distribution
on
iTunes
(encoding
on
AAC

format,
including
album
name,
song
name
and
cover
art
information).
The
artist
also
has

access
 to
 Downloadable
 financial
 reports,
 available
 at
 the
 end
 of
 each
 month
 and

archived
through
the
last
12
months.
An
artist
is
also
entitled
to
Apple
discounts
and
the

access
to
iTunes
Label
Connect,
a
VIP
website
dedicated
to
making
it
easy
for
artist
to

sell
their
songs.


iTunes
then
offers
DIY
music
distribution.
Granted
it
might
be
more
difficult
for
a
solo

artist
or
band
to
be
completely
successful
in
distributing
its
songs
on
iTunes
faced
to
the

stiff
competition
of
promotion
sharks
that
labels
are.
However
it
allows
them
to
handle

everything
 and
 find
 a
 way
 to
 sell
 their
 songs
 without
 needing
 a
 record
 deal.
 Also
 the

promotion
 tools
 offered
 by
 iTunes
 for
 content
 providers
such
 as
 “Tell
 a
 Friend”
 or
 the

iTunes
 Affiliate
 Program
 (allowing
 for
 example
 to
 place
 badges
 on
 the
 artist’s
 website

linking
 to
 their
 iTunes
 page)
 have
 an
 important
 place
 in
 the
 promotion
 process
 of
 an

artist.


3.2 MUSIC
PIRACY


Illegal
downloading
and
Music
Piracy
are
two
interchangeable
terms
in
this
situation.
It

is
 the
 act
 of
 getting
 songs
 on
 the
 Internet
 while
 violating
 copyright
 and
 intellectual

property.
People
who
download
illegally
do
not
pay
for
the
songs
they
get
or
do
not
go

through
a
valid
and
legal
distribution
service
such
as
the
ones
described
above.
In
1999,

record
sales
started
to
decline,
a
first
after
a
steady
growth
for
over
ten
years.
1999
was


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 26

also
the
year
Napster
was
created.
Napster
was
the
first
P2P
software
that
people
would

use
to
pirate
music.
Both
the
IFPI
and
the
RIAA
believe
the
decline
and
the
arrival
of
P2P

are
 highly
 related.
 It
 is
 argued
 that
 music
 piracy
 does
 not
 hurt
 the
 music
 industry.

Indeed
even
though
it
is
proven
that
it
led
to
significantly
smaller
sales,
it
can
be
argued

that
without
music
piracy
and
the
growth
of
the
Internet,
people
would
not
have
access

to
as
much
music
as
they
do
now.
Both
sides
are
highly
confident
in
their
position
but
it

is
 yet
 important
 to
 wonder
 what
 are
 the
 real
 effects
 of
 music
 piracy
 on
 the
 music

industry.


3.2.1 WHAT
ARE
THE
EFFECTS
ON
THE
INDUSTRY?


One
can
look
at
the
financials
of
the
music
industry
without
much
knowledge
to
notice

that
 it
 is
 in
 plain
 decline.
 Between
 2004
 and
 2009,
 revenue
 decreased
 by
 30%.

According
to
the
Institute
for
Policy
Innovation,



Global
music
piracy
causes
$12.5
billion
of
economic
losses
every
year,
71,060

US
 jobs
 lost,
 a
 loss
 of
 $2.7
 billion
 in
 workers’
 earnings,
 and
 a
 loss
 of
 $422

million
in
tax
revenue,
$291
million
in
personal
income
tax
and
$131
million

in
lost
corporate
income
and
production
taxes30


What
 is
 important
 to
 note
 is
 that
 in
 Siwek’s
 study,
 the
 Sound
 Recording
 industry

comprises
both
producers
and
retailers.
Both
of
those
actors
suffer
from
piracy.
One
can

imagine
 that
 revenue
 loss
 from
 piracy
 is
 equal
 to
 potential
 gain
 in
 a
 scenario
 where

piracy
would
not
exist.
Another
study
from
the
IPI
(2006
Global
Recording
Industry
in

Numbers)
concludes
that
a
decrease
in
piracy
would
expand
production.
The
study
first

assesses
 that
 in
 a
 no
 piracy
 scenario,
 competition
 would
 not
 change
 between
 music

retailers
and
producers,
it
also
assumes
that
higher
revenues
would
allow
the
producers

to
increase
their
spending
in
sound
recording
equipment,
to
offer
better
quality
or
more

recordings
to
the
customers
as
they
face
a
stiff
competition.
Investing
in
higher
quality,

but
 also
 broadcasting,
 marketing
 and
 retailing,
 will
 increase
 production
 in
 other

industries
 that
 are
 related
 to
 the
 good
 functioning
 of
 the
 record
 industry.
 It
 will
 also

allow
 producers
 and
 retailers
 to
 invest
 more
 in
 the
 discovery
 of
 new
 artists
 and
 the

promotion
of
those,
thus
offering
a
wider
catalogue
to
the
people.



























































30
Siwek,
Stephen
E.
The
True
Cost
of
Sound
Recording
Piracy
to
the
US
Economy.
IFPI
Policy
Report.
August
21,
2007


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 27

The
 opposite
 is
 therefore
 true,
 decreasing
 revenues
 caused
 by
 piracy
 for
 the
 industry

implies
that
the
recording
industry
needs
to
cut
costs
and
has
less
money
for
investment

in
 better
 quality
 recording
 or
 artists.
 In
 France
 for
 example
 there
 has
 been
 a
 dramatic

change
 in
 the
 introduction
 of
 new
 artists.
 In
 the
 first
 half
 of
 2009
 for
 example
 107

French
repertoire
albums
were
released,
versus
271
for
the
same
period
in
2003,
a
60%

decrease.
French
artists
discovery
has
plummeted
as
well,
going
from
91
in
the
first
half

of
 2002
 to
 35
 in
 2009.
 On
 a
 promotional
 standpoint,
 global
 advertising
 revenue
 in
 the

French
recording
industry
decreased
by
9%
in
the
first
6
months
of
2009.
It
is
admitted

that
25%
of
the
French
population
uses
P2P
networks
to
get
their
music
monthly.31
In

Spain
it
is
even
worse
where
illegal
file
sharing
is
an
activity
for
32%
of
the
population.

The
European
rate
is
15%32


Digital
music
business
models
such
as
the
iTunes
Music
Store
offer
to
download
songs
at

an
average
of
$0.99,
a
price
that
is
now
considered
extravagant
by
many,
according
to

Teemu
Brunila
(singer‐songwriter
interviewed
in
the
IFPI
report
on
Digital
Music).
On

the
other
hand
the
IFPI
estimated
that
in
2005
alone,
more
than
20
billion
songs
were

download
illegally,
or
twice
as
much
as
legal
downloads
on
the
iTunes
Music
store
in
6

years.
 The
 effect
 on
 the
 music
 industry
 is
 highly
 costly
 for
 the
 retailers
 and
 the

producers.


On
 the
 other
 hand,
 as
 mentioned
 above,
 people
 can
 argue
 that
 music
 piracy
 has

broadened
the
catalogue
offered
to
customers.
It
is
especially
a
study
from
Oberholzer

and
Strumpf
in
2006
that
showed
that
not
only
is
there
is
zero
impact
on
record
sales

due
 to
 music
 piracy
 but
 also
 that
 music
 piracy
 might
 boost
 sales.
 The
 reflection
 they

follow
is
that
music
piracy
forced
a
decrease
in
price
offering
to
the
customer,
therefore

boosting
the
interest
of
listening
to
new
artists.
“Observing
that
people
consume
lots
and

lots
at
zero
dollar
makes
sense
to
an
economist”
Oberholzer
says.
The
idea
behind
their

study
 is
 that
 on
 an
 emotional
 standpoint,
 music
 piracy
 is
 helping
 the
 industry33.
 They

also
argue
that
the
decline
in
record
sales
is
not
due
to
an
increase
in
file
sharing.
Indeed

they
 believe
 that
 this
 fall
 can
 be
 linked
 with
 “poor
 macroeconomic
 conditions,
 a



























































31
Jupiter
Research
and
IFPI
Digital
Music
Report.
2009.
Retrieved
on
March
10
from


http://www.ifpi.org/content/library/DMR2010.pdf
page
19.

32
IFPI

33
Oberholzer‐Gee,
Felix
and
Strumpf,
Koleman.
The
effect
of
file
sharing
on
record
sales.
Harvard
Business
School.


2004


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 28

reduction
 in
 the
 number
 of
 album
 releases,
 growing
 competition
 from
 other
 forms
 of

entertainment
 such
 as
 video
 games
 and
 DVDs,
 a
 reduction
 in
 music
 variety
 stemming

from
the
large
consolidation
in
radio
along
with
the
rise
of
independent
promoter
fees

to
 gain
 airplay,
 and
 possibly
 a
 consumer
 backlash
 against
 record
 industry
 tactics.”

Chapter
26
of
the
study
also
argues,
“a
similar
drop
in
record
sales
occurred
in
the
late

1970s
 and
 early
 1980s,
 and
 that
 record
 sales
 in
 the
 1990s
 may
 have
 been
 abnormally

high
as
individuals
replaced
old
recordings
with
newer
formats”.34


While
the
study
is
widely
discredited
and
more
papers
tried
to
counteract
their
findings,

people
can
argue
that
on
a
cultural
standpoint,
music
piracy
has
helped
the
industry
as

people
had
the
possibility
to
listen
to
many
more
artists
because
they
did
not
pay
for
it.

For
artists
this
has
been
of
a
tremendous
help
as
the
Arctic
Monkeys
example
shows.
On

the
other
hand
it
is
not
deniable
that
record
sales
have
plummeted
and
that
it
can
in
part

be
due
to
an
increase
in
file
sharing.
The
IFPI,
the
RIAA
and
co‐operatives
of
artists
have

recently
launched
a
backlash
against
illegal
file
sharing,
on
the
grounds
that
it
attacked

intellectual
 property
 and
 was
 leading
 to
 a
 more
 difficult
 terrain
 in
 the
 creative

industries.


3.2.2 WHAT
WERE
THE
RESPONSES?


Most
recent
responses,
according
to
the
IFPI,
are
cooperation
between
labels
and
ISPs.

According
 to
 a
 2009
 study
 by
 Entertainment
 Media
 Research,
 45%
 of
 consumers
 said

they
would
stop
downloading
illegally
if
a
graduate
response
model
was
implemented.

The
graduate
response
model
is
a
model
that
has
three
main
actors:
the
individual,
the

ISP
and
the
rights
holders.
An
individual
caught
practicing
music
piracy
would
receive
a

first
warning
by
its
ISP,
advising
them
to
stop
infringing
copyright
and
suggest
the
use
of

other
 legitimate
 models
 such
 as
 à‐la‐carte
 programs
 that
 respect
 copyrights
 and

accordingly
 rewards
 the
 rights
 holder
 (i.e.
 the
 artist).
 If
 such
 a
 warning
 were
 to
 be

ignored,
 an
 escalating
 series
 of
 warning
 from
 the
 ISP
 would
 be
 launched,
 eventually

leading
 to
 a
 temporary
 account
 suspension.
 Differentiating
 from
 major
 lawsuits
 that

already
 occurred
 and
 proved
 to
 have
 no
 effects,
 the
 graduate
 response
 model
 would

protect
to
anonymity
of
the
individuals.
In
France,
a
study
from
IPSOS
conducted
in
May



























































34
Pollock,
Rufus.
P2P,
Online
File­Sharing,
and
the
music
industry.
2(1).
2005.
Retrieved
on
March
10
from


http://www.rufuspollock.org/economics/p2p_summary.html#id21000960


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 29

2008
 concluded
 that
 90%
 of
 French
 people
 would
 completely
 stop
 illegal
 file
 sharing

after
receiving
a
second
warning
from
their
ISP.
France
itself
was
an
early
champion
in

implementing
 the
 graduate
 response
 model.
 In
 October
 2009,
 a
 new
 authority
 was

implemented,
 the
 HADOPI.
 The
 authority
 will
 require
 ISP
 to
 send
 warnings
 to
 their

users
for
copyright
infringement.
HADOPI
will
then
transfer
the
files
of
recidivists
(after

a
 second
 warning
 being
 ignored)
 to
 the
 criminal
 courts
 where
 judges
 (not
 ISP)
 would

then
decide
on
multiple
sentences
such
as
suspension
of
Internet
access
for
up
to
a
year

and
a
full
range
of
criminal
penalties.35
Similar
actions
have
been
taken
in
South
Korea

and
 Taiwan
 and
 are
 going
 to
 be
 taken
 in
 Germany,
 the
 UK,
 New
 Zealand,
 Ireland,

Australia,
Hong
Kong,
Brazil
and
Japan.
Concerning
the
US,
the
IFPI
states
that
“private

deals
 have
 been
 struck
 between
 some
 individual
 rights
 holders
 and
 ISPs
 that

incorporate
a
commitment
by
the
ISP
to
put
in
place
a
system
of
graduated
response”36


South
 Korea
 is
 a
 really
 good
 example
 of
 good
 response
 towards
 illegal
 downloading.

They
passed
their
law
concerning
graduate
response
system
in
April
2009.
Soribada,
an

illegal
 P2P
 website
 was
 subject
 to
 legal
 actions
 for
 copyright
 infringement
 as
 early
 as

2007
 and
 then
 turned
 legitimate
 by
 charging
 its
 consumers.
 Also
 South
 Korea
 became

one
of
the
first
countries
in
the
world
to
require
P2P
file‐sharing
websites
to
completely

ban
 the
 illegal
 distribution
 of
 copyrighted
 work
 on
 request
 from
 the
 right‐holder
 (and

not
 necessarily
 the
 record
 label).
 Also,
 in
 2008,
 legal
 unlimited
 MP3
 subscription

services
 began
 to
 flourish.
 Now
 major
 players
 like
 Soribada
 and
 M.Net
 Media
 all
 offer

those
 services
 for
 a
 fee.
 Three
 websites
 in
 South
 Korea:
 Soribada,
 M.Net
 Media
 and

Neowiz
 Bug
 total
 a
 number
 of
 990,000
 subscribers
 to
 their
 services.
 Just
 for
 Soribada,

300,000
 of
 its
 700,000
 illegal
 consumers
 switched
 to
 the
 legal
 format,
 which
 shows
 a

strong
positive
response
from
the
consumers.


A
situation
that
worries
the
industry
is
the
leaks
prior
the
release
of
an
album.
Graduate

Response
model
can
tackle
illegal
downloading
as
it
is,
through
P2P
but
the
IFPI
and
the

record
labels
agree
that
major
actions
have
to
be
taken
in
terms
of
securing
the
release

of
 an
 album
 to
 avoid
 pre‐release
 tracks
 to
 be
 available
 on
 the
 Internet.
 
 One
 action



























































35
Loi
N°2009­669
du
12
juin
2009
favorisant
la
distribution
et
la
protection
de
la
creation
sur
Internet.
Retrieved
on


March
10
from

http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000020735432&categorieLien=id#JORFARTI0000
20735439

36
IFPI.
Digital
Music
Report
2010.
P.
25


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 30

 considered
as
an
example
by
the
industry
is
related
to
the
release
of
Leona
Lewis’
album

in
 2009.
 An
 Internet
 account
 at
 her
 record
 company
 was
 hacked
 and
 her
 songs
 were

posted
online
prior
to
the
release.
Syco
Records
(her
record
label)
upon
notification
of

the
fraud
called
in
the
police
and
investigators
and
was
able
to
track
back
the
hacker
in

North
America
and
Europe.



Even
though
if
we
see
some
encouraging
results,
the
battle
is
yet
not
over
and
as
Jonas

Sjöström
 from
 Playground
 Music
 puts
 it:
 “There
 is
 now
 positive
 news
 but
 our
 whole

sector
is
still
at
risk”.


On
 another
 level,
 prevention
 seems
 to
 be
 the
 new
 trend.
 Education
 is
 being

implemented
in
different
countries,
either
by
informing
people
about
the
law,
but
also

teaching
 them
 how
 to
 legally
 get
 music.
 The
 IFPI
 for
 example
 has
 made
 available
 DFC

(Digital
 File
 Check)
 to
 inform
 people
 on
 how
 computer
 users
 can
 legally
 and
 safely

download
music.
The
software
also
implies
to
the
customer
both
legal
and
technological

risks
for
them.
However
a
Harris
Research
concluded
that
increasing
familiarity
with
the

law
has
not
shown
to
have
reduced
file
sharing
and
that
it
has
to
be
associated
with
the

“carrot”
 in
 a
 “carrot
 and
 the
 stick”
 scenario
 to
 entice
 people
 to
 go
 towards
 legal
 file

sharing
 services.
 To
 support
 that
 finding,
 a
 European
 Union
 2007
 Report
 called
 “Safer

Internet
for
the
Children”
dedicates
an
entire
part
to
illegal
downloading.
Its
conclusions

are
that
in
the
vast
majority
of
the
cases,
children
know
downloading
is
illegal
but
their

response
 is
 to
 minimize,
 deny
 or
 justify
 it.
 Frequent
 quotes
 from
 the
 report
 are
 the

following:


• “It’s
illegal
but
it
does
not
look
it’s
illegal”
(Boys
group,
12‐14
years,
Denmark)

• “It’s
wrong
but
it’s
not
our
fault”
(Girls
group,
12‐14
years,
Belgium)

• “People
download
but
it’s
just
for
themselves,
it
is
less
serious
than
downloading
for

burning
and
reselling”
(Boys
group,
12‐14
years,
France)

• “I
really
don’t
care,
it’s
not
my
problem,
artists
are
rich
enough”
(All
groups,
Italy)


Also
another
conclusion
at
the
end
of
the
day
is
that
the
risk
of
catching
a
virus
on
their

computer
 is
 more
 dissuasive
 than
 legal
 repercussions,
 as
 most
 do
 not
 believe
 such
 a


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 31

thing
 will
 happen
 but
 have
 witnessed
 “friends
 having
 viruses
 because
 they

downloaded”.37


3.2.3 WHAT
ARE
THE
NEXT
STEPS?


According
to
Sjöström,
the
good
recipe
for
a
sturdier
industry
is
a
combination
of
user‐
friendly
 legal
 solutions
 to
 downloading
 and
 a
 deterrent
 response
 to
 piracy.
 The
 law

really
has
to
be
enforced
to
avoid
people
thinking
they
will
never
get
caught,
as
it
seems

to
have
been
the
case
in
the
past.
Also
what
is
important
is
to
have
higher
investment

and
 cooperation
 from
 labels
 and
 governments
 to
 allow
 the
 offering
 of
 a
 much
 wider

catalogue.
 Also
 the
 government
 has
 to
 put
 more
 pressure
 on
 the
 ISPs
 to
 be
 sure
 they

implement
the
graduate
response
model
as
should
be.
Education
is
also
very
important,

people
 have
 to
 be
 aware
 of
 how
 big
 the
 effects
 are
 on
 the
 industry
 and
 that
 they
 are

being
 lured
 by
 the
 impression
 of
 “free”
 products.
 Even
 though
 people
 think
 they
 are

getting
free
music
and
it
is
fine
by
them,
they
have
to
know
that
it
harms
the
industry

not
 only
 financially
 but
 also
 because
 in
 the
 long
 run
 much
 less
 artists
 are
 going
 to
 be

able
to
be
invested
in
because
of
a
lack
of
subvention
due
to
decreased
revenue
which

will
 eventually
 lead
 to
 a
 dramatic
 decline
 in
 the
 industry,
 more
 “mainstream”
 to
 sell

more
and
less
choice
that
will
satisfy
the
music‐lovers.


3.3 EFFECT
 ON
 THE
 ROLE
 OF
 RECORD
 LABELS
 IN
 TERMS
 OF

DISTRIBUTION

As
seen
above,
the
new
technologies
have
impacted
the
industry
in
many
different
ways.

Artists
 can
 distribute
 themselves
 without
 needing
 a
 record
 deal
 as
 long
 as
 they
 target

digital
 sales.
 The
 cost
 of
 it
 is
 much
 less
 important
 than
 to
 produce
 a
 physical
 album,

indeed
the
only
cost
they
encounter
is
the
recording
cost.
When
we
look
back
at
the
flow

chart
in
exhibit
1,
it
suppresses
the
need
to
press
and
package
a
CD,
all
is
done
digitally

and
a
track
can
virtually
be
distributed
to
every
single
person
on
Earth
without
facing
a

risk
 of
 not
 having
 enough
 supplies.
 In
 the
 same
 situation,
 the
 artists
 or
 the
 labels
 that

choose
to
concentrate
on
an
all‐digital
format
do
not
have
to
go
through
physical
retail

store.
iTunes
Music
store
offers
a
good
solution
to
those
who
can
concentrate
on
an
all‐
digital
offering
and
this
is
why
the
iTunes
Music
store
has
benefited
so
much
from
the


























































37
Safer
Internet
for
the
Children.
2007.
European
Union
Report.
Retrieved
on
March
10
from


http://ec.europa.eu/public_opinion/quali/ql_safer_internet_summary.pdf


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 32

increase
 in
 digital
 sales
 and
 is
 likely
 to
 be
 responsible
 for
 this
 increase.
 New

technologies
have
allowed
people
to
get
a
quicker
access
to
music
and
also
a
much
wider

access.
On
the
traditional
format
of
distribution,
a
CD
would
not
have
been
offered
in
a

market
if
the
demand
were
not
here.
On
the
digital
format
of
distribution
the
demand
is

limitless
and
there
is
virtually
only
one
market:
the
online
market.
Another
advantage
of

the
 digital
 format
 is
 being
 able
 to
 offer
 the
 purchase
 of
 single
 tracks,
 the
 à‐la‐carte

format.
 To
 do
 so,
 traditional
 distribution
 systems
 were
 releasing
 “Singles”
 based
 on

popularity,
thus
reducing
the
capacity
of
a
record
labels
to
respond
to
the
entire
demand

and
being
accused
of
being
too
mainstream.



On
the
other
hand
it
has
been
shown
that
new
technologies
have
not
successfully
been

controlled
and
led
to
a
dramatic
threat
for
the
industry
that
is
piracy.
This
badly
hurt
the

industry
 as
 show
 the
 statistics
 proving
 a
 decrease
 in
 revenue,
 it
 has
 also
 forced
 music

industry
 players
 to
 start
 prosecute
 its
 own
 customers,
 not
 being
 the
 best
 customer‐
friendly
industry
there
is.



Fortunately,
measures
are
being
taken
to
save
the
industry
and
the
artists’
intellectual

property.
Doing
so
is
a
much‐needed
action
to
sustain
the
creative
industry.


4 PART
THREE
–
THE
ROLE
OF
RECORD
LABELS
AT
STAKE


4.1 MUSIC
 PIRACY
 IS
 NOT
 RESPONSIBLE
 FOR
 THE
 LATE
 FALL
 OF
 THE

INDUSTRY


It
is
a
fact;
the
music
industry
has
suffered
recently.
Its
revenue
decreased
by
30%
in
5

years
 after
 a
 steady
 growth
 over
 a
 decade.
 The
 releases
 per
 year
 are
 shrinking
 as
 the

French
example
shows
and
some
might
even
say
that
the
quality
decreased
as
well,
this

probably
 due
 to
 less
 money
 and
 therefore
 less
 possibility
 to
 invest
 in
 new
 artists
 and

improvement
in
recording,
promotion
and
distribution
quality.
However
we
have
seen

that
revenue
from
digital
sales
has
increased
by
940%
and
is
now
accounting
for
25%
of

the
total
revenue
of
the
industry
in
the
United
States
of
America
and
for
little
less
than

10%
in
other
main
countries
(France,
Germany,
the
United
Kingdom
and
Japan
as
shown

in
the
Introduction).



J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 33

Most
 professionals
 will
 argue
 that
 this
 is
 due
 to
 the
 new
 technologies
 and
 the
 pike
 in

music
piracy
but
also
an
increase
in
DIY
music
creation,
promotion
and
distribution.


Others
 will
 say
 it
 is
 an
 overall
 trend
 for
 the
 entertainment
 industry
 that
 relates
 to
 a

general
economic
downturn.


4.1.1 LESS
MONEY
=
LESS
SPENT
ON
ENTERTAINMENT


It
 is
 widely
 accepted
 that
 in
 the
 scenario
 of
 an
 economic
 downturn,
 people
 will
 start

saving
money
on
their
entertainment
expenses.
When
the
industry
declined
in
the
late

70s
and
early
80s,
this
was
due
to
two
economic
shocks.
In
the
US
alone
the
GDP
in
1982

declined
by
1.82%
compared
to
1981.
In
the
90s,
when
the
industry
recorded
a
steady

growth,
 the
 GDP
 growth
 had
 an
 average
 increase
 of
 3%
 per
 year
 and
 even
 peaked
 at

4.55%
 in
 97.
 However,
 the
 GDP
 growth
 rate
 of
 the
 US
 since
 2004
 has
 been
 in
 decline

with
increase
by
3.65%
in
2004
but
then
only
3.08%,
2.87%,
2%
and
1.1%
in
2008.
In

2009
 alone
 it
 decreased
 by
 2.4%38.
 The
 trend
 is
 similar
 for
 France,
 which
 registers
 a

2.1%
decrease
in
2009,
Germany
with
a
5%
decrease
or
the
UK
with
a
4.3%
decrease.

Exhibit
 shows
 the
 overall
 trend
 between
 the
 5
 main
 players
 in
 the
 industry:
 Japan,

Germany,
France,
the
US
and
the
UK,
with
respect
to
the
overall
world’s
trend.



A
study
released
by
Nielsen
on
February
22,
2010
shows
that
buying
CDs,
MP3s
or
other

forms
 of
 music
 only
 represents
 2.8%
 of
 the
 global
 spending
 on
 entertainment
 by
 the

average
American
household.
If
the
GDP
is
decreasing
and
people
have
less
money
it
is

likely
that
the
recording
industry
is
going
to
suffer
from
it
as
less
people
will
have
the

financial
capability
to
spend
as
much
as
they
used
to
in
the
90s.



As
 an
 example,
 the
 US
 Department
 of
 Labor
 released
 a
 study
 concluding
 that

entertainment
spending
was
about
4%
in
the
1950s
and
1960s,
then
increased
to
8.6%

in
 1972
 (a
 record
 high)
 to
 finally
 drop
 at
 a
 level
 of
 5%
 since
 1984.39
 Another
 trend

showed
by
the
Consumer
Expenditure
Survey
is
that
since
1999
annual
spending
for
the

Internet
soared,
implementing
an
expense
than
most
people
did
not
have
ten
years
from

today.
In
1999
the
average
annual
spending
for
Internet
access
was
$49,
it
is
now
$222.



























































38
CIA
World
Factbook.

39
Bureau
of
Labor
Statistics.
The
Consumer
Expenditure
Survey.
Retrieved
on
March
11
from


http://www.bls.gov/cex/ceturnsthirty.htm.
2009


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 34

Comparatively,
 newspapers
 and
 magazine
 spending
 went
 from
 $97
 to
 less
 than
 $61.40

When
 we
 know
 that
 consumer
 spending
 on
 newspapers
 and
 magazines
 is
 1.25
 times

higher
than
recorded
music41,
it
is
easy
to
realize
how
two
factors
led
to
a
decrease
in

consumer
 spending
 on
 recorded
 music:
 higher
 spending
 on
 the
 Internet,
 but
 also

housing,
personal
insurance,
healthcare42
and
a
weakening
economy.


4.1.2 INCAPACITY
 FOR
 THE
 INDUSTRY
 TO
 REACT
 TO
 THE
 CHANGE
 IN

CONSUMER
BEHAVIOR


When
 we
 look
 at
 the
 revenue
 streams
 of
 the
 music
 industry,
 besides
 noticing
 that
 the

revenue
is
in
a
steady
decline
since
2003,
we
notice
that
digital
sales
have
dramatically

rocketed
to
an
increase
of
940%.
What
this
number
shows
is
that
the
recording
industry

is
not
suffering
per
se,
it
shows
that
physical
sales
are
suffering.
People
are
buying
less

and
 less
 CDs,
 rather
 they
 buy
 online,
 they
 subscribe
 to
 websites
 such
 as
 Deezer
 or

Last.fm
to
listen
to
music,
they
do
not
give
their
money
to
Universal
or
Warner
to
get
a

CD.
The
reason
behind
this
is
that
consumer
behavior
changed
and
labels
did
not
notice

it,
or
decided
to
ignore
it.
In
a
Business
Week
article
from
March
6,
2009
we
can
hear
the

voice
of
a
San
Francisco‐based
graphic
designer
who
explains
that
he
used
to
pay
$100

per
month
on
CDs
to
refill
his
iPod.
Now
he
pays
less
than
$10
per
month
but
listens
to

much
 more
 music
 than
 he
 used
 to.
 The
 reason
 is
 not
 because
 he
 started
 to
 download

illegally,
 the
 reason
 is
 because
 he
 gets
 almost
 all
 of
 his
 music
 from
 services
 such
 as

Last.Fm
 where
 he
 can
 listen
 to
 any
 music
 he
 wants
 anywhere
 he
 has
 Internet.
 When

someone
has
mobile
devices
such
as
the
iPhone
or
the
Blackberry,
“anywhere”
virtually

means
“everywhere”.
Senior
Vice‐President
and
general
counsel
for
the
National
Music

Publishers
Association
Jay
Rosenthal
recognizes
the
problem
that
people
do
not
need
to

own
 music
 anymore
 when
 they
 can
 listen
 to
 it
 on
 the
 Internet.43
 The
 demand
 that

boosted
the
sales
15
years
ago
and
50
years
ago
is
not
here
anymore.
Truth
is
there
was

a
boost
in
the
90s
due
to
people
replacing
their
old
formats
with
CDs,
but
in
our
digital



























































40
Bureau
of
Labor
Statistics.
Consumer
Expenditure
Survey.
Spending
on
newspapers
and
magazines
slides
as
spending


on
Internet
access
soars.
Retrieved
on
March
11
from
http://www.bls.gov/cex/newspapers.htm.
2009

41
The
Nielsen
Company.
US
Household
Entertainment
Budget
As
a
percent
of
Spending
on
Recorded
Music.
See
Exhibit.

42
Bureau
of
Labor
Statistics,
by
Flowing
Data.
Retrieved
on
March
11
from


http://projects.flowingdata.com/america/spending/

43
MacMillian,
Douglas.
The
Music
Industry’s
New
Internet
Problem.
Business
Week,
March
6
2009,
retrieved
on
March


11
2010
from
http://www.businessweek.com/technology/content/mar2009/tc2009035_000194.htm


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 35

age,
people
do
not
need
to
replace
their
CDs
with
MP3s
because
they
can
already
upload

their
CDs,
buy
single
songs
or
even
listen
to
music
everywhere
they
have
Internet.


Labels
 tried
 to
 use
 this
 opportunity
 as
 a
 way
 to
 make
 more
 sales,
 thinking
 that
 those

websites
would
serve
as
catalysts
to
launch
sales;
that
people
would
want
to
buy
what

they
listen
to
if
they
like
it.
However
this
is
not
how
it
worked
out.
According
to
the
same

Business
 Week
 article,
 researchers
 and
 industry
 consultants
 concluded
 that
 online

music
 sites
 are
 being
 used
 by
 a
 growing
 number
 of
 listeners
 not
 as
 a
 catalyst
 but
 as
 a

substitute.
 Most
 of
 the
 time
 the
 reason
 why
 someone
 would
 buy
 a
 CD
 is
 because
 they

cannot
find
their
music
online.



The
 problem
 therefore
 is
 not
 music
 piracy
 but
 simply
 that
 people
 are
 migrating
 away

from
the
physical
format
of
songs
and
that
labels
do
not
know
yet
how
to
react
to
this

change
 that
 might
 as
 well
 be
 the
 most
 dramatic
 one
 for
 the
 industry.
 If
 they
 do
 so
 is

because
 spending
 on
 entertainment
 has
 become
 less
 extravagant
 in
 a
 world
 where

people
can
now
get
as
much
at
virtually
no
cost.


4.2 HOW
NEW
TECHNOLOGIES
HELPED
THE
INDUSTRY


Most
of
the
literature
on
the
digitalized
recording
industry
accuses
new
technologies
of

killing
the
industry.
We
have
a
lot
of
data
to
back
up
this
assumption
that
financially
it

has
 been
 a
 bad
 turn.
 On
 the
 other
 hand
 a
 qualitative
 analysis
 has
 to
 be
 done
 that
 can

conclude
the
good
it
did
to
the
industry,
both
for
the
customers
and
the
actors.


4.2.1 DEVELOPMENT
OF
NEW
LABELS


The
two
first
parts
of
this
thesis
showed
us
that
it
is
possible
for
an
artist
to
distribute

and
 promote
 itself
 without
 a
 record
 deal.
 However,
 for
 easier
 representation
 and

registration,
artists
who
do
not
get
record
deals
because
they
either
do
not
want
to
or

simply
do
not
find
any
can
associate
themselves
or
create
their
own
record
labels.
It
is

common
 practice
 in
 this
 industry
 and
 one
 can
 remember
 the
 Beatles
 creating
 Apple

Records
or
Elton
John
creating
Rocket.
Those
labels
by
definition
are
independent
labels

as
 independent
 labels
 are
 labels
 operating
 without
 the
 funding
 of
 or
 outside
 the


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 36

organizations
 of
 major
 record
 labels,
 representing
 less
 than
 5%
 of
 the
 revenue
 of
 the

industry44.



Because
 DIY
 music
 is
 more
 than
 ever
 possible
 thanks
 to
 new
 technologies,
 artists
 less

need
the
help
of
record
deals
to
record,
play
and
distribute
music.
The
other
reason
why

artists
 tend
 to
 go
 independent,
 is
 also
 due
 to
 the
 financial
 decline
 of
 the
 industry.

Because
 revenues
 are
 shrinking,
 labels
 will
 tend
 to
 cut
 costs
 to
 increase
 their
 profits.

And
by
cutting
costs
they
mean
cutting
the
artists’
share
of
the
pie.
As
soon
as
in
2000,

Courtney
Love
(singer
and
widow
of
Kurt
Cobain)
wrote
a
pamphlet
accusing
the
major

record
 labels
 to
 be
 the
 ones
 doing
 music
 piracy,
 not
 the
 individuals
 downloading
 the

music.
To
express
her
thought
she
does
the
math
of
where
the
money
goes
with
a
major

label
 contract
 for
 an
 artist.
 What
 she
 explains
 is
 that
 every
 cost
 of
 promotion,
 touring

and
 distribution
 is
 being
 recouped
 thanks
 to
 the
 band’s
 share
 of
 the
 profit,
 this
 in
 an

ultimate
goal
to
stabilize
the
label’s
revenue.
In
a
scenario
where
sales
are
going
down

but
 costs
 are
 staying
 the
 same
 it
 is
 forecasted
 that
 the
 profit
 will
 be
 decreasing
 in
 the

artists’
 pockets45.
 For
 this
 reason
 there
 is
 much
 more
 incentive
 for
 a
 band
 to
 go

independent
where
they
handle
all
the
financials
and
get
full
profit
of
what
they
make
if

it
 is
 possible.
 And
 digitalization
 makes
 it
 possible.
 What
 the
 Internet
 is
 doing
 to
 the

industry
is
basically
shifting
the
balance
of
power
from
the
labels
to
the
artists.


Another
reason
why
DIY
labels
–
or
independent
labels
–
are
so
popular
is
because
they

know
 how
 to
 respond
 to
 the
 Internet.
 They
 know
 that
 to
 get
 money
 whether
 they
 are

indie
or
major,
they
need
to
communicate,
they
know
that
people
are
rarely
enticed
to

pay
to
experiment,
which
means
to
pay
for
a
CD
they
do
not
even
know
if
they
will
like.

The
 entire
 music
 industry’s
 success
 is
 based
 on
 communication
 because
 that
 is
 what

music
 does,
 it
 communicates
 things
 to
 people
 and
 this
 is
 why
 people
 like
 music.
 John

Lennon
said
it
“My
role
in
society,
or
any
artist's
or
poet's
role,
is
to
try
and
express
what

we
 all
 feel.
 Not
 to
 tell
 people
 how
 to
 feel.
 Not
 as
 a
 preacher,
 not
 as
 a
 leader,
 but
 as
 a

reflection
of
us
all.”
So
for
an
industry
based
on
communication,
the
response
to
Internet

has
been
pretty
bad.
Instead
of
using
this
medium
as
a
way
to
be
more
effective,
they
try

to
accuse
it
of
destroying
them
when
it
clearly
is
doing
the
opposite.


























































44
Source:
Association
of
Independent
Music
(AIM)

45
Love,
Courtney.
Courtney
Love
does
the
math.

June
14,
2000.
Retrieved
on
March
11
from


http://dir.salon.com/story/tech/feature/2000/06/14/love/index.html


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 37

On
 the
 other
 hand,
 everything
 “out
 there”
 helps
 indie
 labels
 to
 get
 more
 coverage
 and

that
might
as
well
be
what
the
industry
–
also
known
as
the
major
labels,
the
RIAA,
the

IFPI
(or
their
equivalent)
and
the
money‐getters
–
dislikes
currently.


4.2.2 FOR
THE
CUSTOMERS


The
 trend
 might
 as
 well
 be
 similar
 for
 the
 customers.
 Because
 indie
 labels
 and
 artists

have
taken
the
opportunity
to
be
on
the
Internet
and
major
labels
had
no
choice
but
to

follow
the
trend
(by
making
their
catalogue
available
on
streaming
websites,
à‐la‐carte

services
and
online
radios)
,
customers
from
everywhere
in
the
world
now
have
access

to
music
from
everywhere
in
the
world.



The
most
compelling
argument
backing
up
the
assumption
that
the
digital
world
helped

the
industry
is
the
fact
that
the
customer
base
is
enormous
compared
to
what
it
was
a

few
decades
ago.
Once
again
to
quote
Thomas
Friedman,
the
world
is
flatter
thanks
to

globalization
and
cultural
globalization
might
as
well
be
the
best
example.



Cultural
 globalization
 ”refers
 to
 worldwide
 cultural
 standardization
 ­
 as
 in


‘Coca
Colonization’
and
‘McDonaldization’
­
as
well
as
to
postcolonial
cultures,

cultural
pluralism,
and
‘hybridization.’
The
various
aspects
of
globalization
that

have
 promoted
 growing
 contacts
 between
 different
 cultures,
 leading
 partly
 to

greater
 understanding
 and
 cooperation
 and
 partly
 to
 the
 emergence
 of

transnational
communities
and
hybrid
identities”46


On
 a
 musical
 point
 of
 view,
 what
 it
 means
 is
 that
 cultures
 around
 the
 world
 are
 more

open
 to
 being
 shared
 globally
 and
 eventually
 be
 absorbed
 by
 the
 local
 culture.

Digitalization
 has
 made
 it
 possible
 for
 Burma
 to
 listen
 to
 British
 pop
 music
 and
 for

Australia
to
listen
to
Chilean
music.


What
it
also
changed
for
the
customers
is
the
impression
of
ownership.
As
the
European

Union
Safer
Internet
for
the
Children
described
it
(see
p.
)
children
blindly
assume
that

because
it
is
on
the
Internet,
it
is
not
illegal,
or
that
because
everybody
does
it
they
can

do
it
too.
As
much
as
that
might
hurt
the
industry
(financially)
it
also
spurs
sharing,
and

by
 spurring
 sharing,
 it
 spurs
 promotion
 of
 the
 music.
 Facebook
 has
 more
 than
 400


























































46
Moghadam,
V.M.
(2005).
Globalizing
women:
Transnational
feminist
networks.
Baltimore,
MD:
The
Johns
Hopkins


University
Press.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 38

million
 active
 users47,
 which
 means
 that
 potentially,
 a
 band
 creating
 its
 page
 on

Facebook
can
have
up
to
400
million
fans.
Another
statistic
from
Facebook
is
that
a
user

has
an
average
of
130
friends,
which
can
translate
into
the
fact
that
when
one
Facebook

user
becomes
fan
of
a
page
(at
the
average
of
4
pages
per
month),
130
other
people
are

aware
 of
 it.
 Those
 people
 hear
 about
 the
 band
 from
 Facebook,
 check
 them
 out
 on

MySpace,
talk
about
it
on
Twitter,
buy
their
songs
on
iTunes,
listens
to
free
streaming
on

Last.Fm
and
go
to
concerts
they
have
heard
of
from
many
other
platforms.
Because
they

control
their
discovery
and
experiencing
of
the
music
so
tightly,
they
are
more
likely
to

appreciate
this
process
and
try
to
look
for
similar
artists
because
it
is
so
easy
to
do
so.


Concerning
 distribution,
 the
 digital
 world
 has
 developed
 many
 new
 opportunities
 to

deliver
music
to
the
customers.
Now
to
get
music,
someone
does
not
necessarily
need
to

purchase
a
CD,
or
even
a
single
track,
but
they
can
listen
to
it
once
or
many
more
times

online,
download
a
ring
tone
for
their
phone,
hear
it
on
the
radio,
in
a
video
game
or
in
a

movie,
see
it
live
or
else.
It
is
very
difficult
not
to
find
a
music
we
are
looking
for
as
we

will
be
able
to
get
live
versions
(as
badly
recorded
as
they
might
be)
on
YouTube,
type
in

the
lyrics
on
Google
and
get
the
name
or
use
an
application
for
iPhone
like
Shazam
that

will
tell
us
“who
sings
that”
and
then
eventually
give
us
a
link
to
purchase
it
online.


The
 impact
 of
 new
 technologies
 for
 the
 customers
 is
 tremendous;
 it
 opened
 up
 new

horizons
that
no
one
might
have
thought
of
decades
ago.
The
success
of
Napster
in
1999

is
an
example
of
how
the
industry
missed
an
opportunity
to
understand
its
customers.

Music
lovers
voiced
how
they
wanted
to
get
music
and
why
they
wanted
it
this
way
and

instead
of
crafting
on
this,
the
industry
unsuccessfully
tried
to
tackle
it.
Customers
had

already
been
accustomed
to
this
new
way
of
getting
music
and
on
this
developed
many

other
models
that
led
to
the
situation
of
the
industry
now.



In
a
way,
Napster
might
as
well
have
been
the
best
thing
to
ever
happen
to
the
industry.


4.3 WHERE
DID
IT
ALL
GO
WRONG?


As
much
as
we
can
now
be
certain
that
new
technologies
have
helped
the
industry,
we

have
to
be
cautious
and
admit
that
this
is
only
ephemeral.
As
it
is
similar
to
any
other



























































47
Facebook
Press
Room.
Retrieved
on
March
11
from
http://www.facebook.com/press/info.php?statistics


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 39

trend,
 the
 digitalization
 has
 a
 life
 cycle
 and
 the
 problem
 is
 that
 the
 industry
 jumped

onboard
 too
 late
 to
 benefit
 from
 it
 to
 the
 fullest.
 Also
 the
 industry’s
 response
 to
 the

arrival
 of
 Napster
 in
 1999
 (trying
to
shut
it
down)
shows
 us
that
the
only
reason
why

the
 industry
 is
 now
 onboard
 is
 because
 they
 did
 not
 have
 a
 choice
 when
 the

strategically‐wise
 move
 would
 have
 been
 to
 identify
 the
 opportunities
 and
 turn
 them

into
a
competitive
advantage.


4.3.1 WHY
DID
THEY
FAIL
TO
RESPOND
TO
NAPSTER?


Quickly
 looking
 back
 at
 why
 the
 industry
 declined,
 we
 have
 to
 remember
 one
 thing:

Physical
 sales
 plummeted
 because
 of
 consumers’
 preference
 for
 low‐profit‐margin

digital
 single
 tracks
 over
 full,
 hard
 to
 stock,
 albums.
 Consumers
 changed,
 the
 industry

responded
 too
 late
 and
 suffered
 from
 it.
 When
 something
 was
 going
 wrong
 for
 the

industry,
the
managers
of
the
big
six
and
then
big
four
used
to
think
they
needed
a
big

hit
and
it
would
make
it
all
go
away.
A
few
years
later,
when
the
crisis
was
still
going
on

they
 realized
 they
 had
 to
 do
 something
 else
 because
 no
 hit
 would
 help
 them.
 Now
 we

have
 four
 big
 majors
 instead
 of
 six
 in
 1998,
 2,700
 record
 stores
 have
 closed
 in
 the
 US

between
 2003
 and
 200748
 and
 very
 few
 of
 those
 top
 executives
 are
 still
 heads
 of
 the

companies.



The
response
came
late
but
eventually
labels
accepted
to
release
their
catalogue
to
the

streaming
websites
that
we
love,
hoping
we
would
pay
for
the
songs
if
we
like
them,
a

move
that
would
have
been
unthinkable
a
few
years
before.



So
what
went
wrong
with
the
way
the
industry
dealt
with
Napster?
According
to
Simon

Wright
 (CEO
 of
 Virgin
 Entertainment
 Group)
 and
 Jeff
 Kwatinetz
 (CEO
 of
 the

management
company
The
Firm)49
there
was
a
great
opportunity
there
but
the
industry

did
not
see
it.
The
response
was
suing
Napster,
leaving
billions
of
billions
of
dollars
on

the
 table
 and
 not
 accepting
 to
 “jump
 off
 of
 a
 cliff”
 and
 transform
 Napster
 into
 a

subscription‐based
 streaming
 service
 where
 they
 could
 have
 reached
 the
 already

existing
 40
 millions
 of
 users.
 The
 response
 of
 those
 users
 when
 Napster
 shut
 down
 in

2001
was
to
go
to
the
hundred
others
file‐sharing
websites
that
were
created
when
the



























































48
Almighty
Institute
for
Music
Retail

49
Wright,
Simon
and
Kwatinetz,
Jeff
in
Rolling
Stone
Magazine.
The
Record
Industry’s
Decline.
Retrieved
on
March
13


from
http://www.rollingstone.com/news/story/15137581/the_record_industrys_decline/print


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 40

industry
was
too
busy
suing
Napster.
They
had
30
to
40
millions
of
people
listening
to

the
same
station,
going
onto
the
same
website,
doing
the
same
thing
and
had
billions
of

dollars
of
opportunities
ahead
of
them.
On
the
other
hand
they
had
retail
store
pressing

them
 not
 to
 sell
 cheaper
 online
 and
 artists
 asking
 them
 not
 to
 cut
 down
 their
 profit

(again),
cannibalization
was
needed
and
the
dinosaurs
of
the
industry
did
not
see
it
as
a

solution.


The
ultimate
problem
was
waiting
for
such
a
long
time
before
licensing
the
iTunes
Music

Store.
 Before
 2003,
 services
 were
 created
 jointly
 between
 labels
 but
 they
 failed
 to
 be

successful.
 Why
 iTunes
 did
 not?
 Because
 iTunes
 was
 offering
 a
 user‐friendly

environment
 and
 was
 integrating
 everything
 needed
 to
 make
 it
 easy
 to
 not
 download

illegally.
 With
 the
 iTunes
 Music
 Store
 you
 would
 buy
 your
 song
 on
 the
 store,
 directly

from
the
software
you
use
to
listen
to
the
music
(iTunes)
and
you
can
put
it
on
any
MP3

player
you
have.
The
services
offered
by
the
labels
such
as
PressPlay
and
MusicNet
were

too
expensive
and
did
not
work
on
every
mp3
player.
Also
the
hassle
was
bigger:
people

had
to
go
on
the
website,
buy
the
song,
import
in
the
media
player
they
were
using,
all

these
 steps
 from
 3
 different
 places,
 when
 they
 were
 not
 yet
 that
 tech‐savvy.
 Hilary

Rosen,
former
CEO
of
the
RIAA
admits
that
the
period
2001‐2003
(Napster
shut
down
–

iTunes
licensed)
was
the
worst
downfall
ever
for
the
industry:



That’s
when
we
lost
the
users.
Peer­to­peer
took
hold.
That’s
when
we
went
from

music
having
a
real
value
in
people’s
minds
to
music
having
no
economic
value,

just
emotional
value.50


As
long
as
it
changed
in
people’s
minds,
it
might
be
irreversible.
People
are
listening
to

more
music
than
ever
but
sales
are
plummeting.
Also
the
concert
industry
is
thriving,
it

earned
a
record
$437
million
in
2006.
The
problem
the
industry
is
facing
is
to
turn
that

interest
into
money
if
they
want
to
be
sustainable
as
an
industry.
On
the
other
hand
will

it
 hurt
 the
 artists
 if
 they
 cannot?
 Well
 they
 can
 do
 their
 music
 themselves,
 are
 getting

more
profit
by
being
independent
and
can
distribute
themselves
without
a
record
deal

so
I
am
guessing
not.
The
current
model
is
just
wrong.



























































50
Rosen,
Hilary
in
Rolling
Stone
Magazine.
The
record
industry’s
decline.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 41

 4.3.2 MUSIC
IS
ANTI‐CAPITALIST


This
 should
 be
 the
 name
 of
 our
 generation
 of
 file‐sharers.
 Exactly
 as
 Rosen
 put
 it,
 in

people’s
 minds,
 music
 stopped
 having
 an
 economic
 value
 with
 the
 arrival
 of
 Napster.

The
industry,
as
every
for
profit
organization
would
respond,
did
not
accept
this
and
as

far
as
10
years
later
have
yet
not
accepted
it.
But
the
truth
is
here;
people
do
not
want
to

pay
 for
 music.
 People
 argue
 it
 would
 be
 a
 right
 to
 have
 access
 to
 music
 and
 since
 it
 is

possible
to
get
it
for
free
why
should
they
bother
buying
CDs
that
they
do
not
have
the

space
to
stock
when
they
can
just
get
one
song
they
like
on
the
Internet
and
stock
it
on

their
hard
drive
or
iPod?
Also
they
are
already
paying
for
Internet
access
and
this
allows

them
to
get
music
legally
and
at
no
additional
cost,
so
why
bother?
On
the
artists’
side,

for
once
talent
makes
it
all.
On
the
back
of
the
book
This
business
of
music
marketing
and

promotion
by
Ted
Lathrop
it
says
“because
music
is
not
only
about
talent”,
the
book
was

written
 in
 2005.
 We
 are
 now
 in
 2010
 and
 we
 have
 much
 more
 tools
 thanks
 to
 the

Internet
to
use
our
talent
to
create
the
best
product,
and
at
the
end
of
the
day,
because

we
 have
 so
 much
 choice
 online,
 the
 ones
 we
 remember
 are
 the
 talented
 ones,
 not
 the

easiest
ones
to
find,
not
the
free
ones
(because
they
all
are)
but
the
most
talented,
the

ones
who
caught
our
emotions.


5 CONCLUSION


5.1 NEW
TECHNOLOGIES
HAVE
HELPED
THE
INDUSTRY


The
revolution
of
the
digital
world
has
had
many
impacts
on
our
society.
It
is
even
more

true
 when
 associated
 with
 globalization
 and
 the
 current
 situation
 concerning

information.
We
are
now
able
to
have
access
to
much
more
information
than
we
used
to,

we
 can
 get
 this
 information
 much
 quicker
 and
 at
 barely
 no
 cost
 thanks
 to
 the
 main

example
of
digitalization:
the
Internet.
New
technologies
have
also
helped
us
innovate
in

many
ways
and
develop
tools
that
are
now
broadly
used
such
as
computers,
and
more

precisely
for
the
music
industry:
MP3
readers
and
mobile
devices.
People
have
access
to

the
Internet
pretty
much
everywhere
and
our
Generation
D
(for
digital)
spends
so
much

time
linked
to
a
computer
or
some
form
of
technology
that
it
begins
to
raise
concerns.



J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 42

More
 specifically,
 we
 have
 seen
 that
 the
 Internet
 opened
 up
 a
 brand
 new
 market
 in

terms
 of
 promotion
 and
 it
 affected
 traditional
 media
 greatly
 as
 we
 see
 a
 decrease
 in

their
 use
 for
 promotional
 purposes.
 For
 the
 same
 reason
 that
 information
 is
 carried

quicker
 by
 the
 use
 of
 the
 Internet,
 this
 platform
 is
 becoming
 a
 crucial
 element
 in
 an

advertising
campaign,
if
not
the
most
prominent
one.
If
this
helped
companies
to
extend

their
 customer
 base,
 it
 also
 helped
 the
 individuals
 who
 now
 can
 exist
 on
 the
 Internet

with
websites
such
as
Facebook
or
MySpace
or
even
Twitter.
On
another
level
it
helped

the
 artists
 and
 the
 labels
 to
 do
 a
 bigger
 promotion
 of
 the
 arts
 without
 extra
 costs.
 For

independent
 labels
 and
 artists
 it
 showed
 to
 be
 the
 tool
 to
 use
 to
 completely
 cut

marketing
costs.


The
 Internet
 and
 our
 mobile
 devices
 such
 as
 the
 iPhone
 has
 also
 helped
 to
 develop
 a

brand
 new
 kind
 of
 distribution:
 a
 digital
 distribution.
 Not
 only
 can
 we
 get
 most
 of
 our

products
thanks
to
the
Internet,
we
can
now
get
some
of
our
products
in
a
non‐physical

way
 such
 as
 MP3s
 or
 ebooks.
 With
 the
 help
 of
 the
 Internet
 and
 its
 growing
 presence

worldwide,
we
are
now
able
to
store
this
information
in
the
clouds,
not
having
to
own

them
anymore,
because
we
are
able
to
access
them
everywhere
with
websites
such
as

Last.FM
 or
 Deezer
 or
 even
 Pandora.
 And
 with
 the
 exception
 of
 some
 of
 those,
 it
 is

virtually
free
to
do
so
providing
that
we
have
Internet.


Those
innovations
are
revolutionary
in
the
information
industry,
and
so
are
they
in
the

music
 industry.
 Artists
 get
 more
 recognition
 and
 customers
 get
 more
 choice.
 But
 it
 is

true
that
at
the
end
of
the
day
people
still
think
music
has
no
economic
value
and
this

led
 to
 a
 major
 decrease
 in
 the
 industry’s
 revenues.
 If
 the
 new
 technologies
 helped
 the

industry
it
is
in
a
non‐monetized
way,
it
helped
promoting
the
art
of
music
and
making
it

available
to
more
people,
it
helped
the
artists
and
it
helped
the
music
lovers.


5.2 THE
 TREND
 SEEMS
 TO
 SHOW
 THAT
 INDIE
 LABELS
 ARE
 BENEFITING

FROM
IT
MORE
THAN
MAJORS


The
 only
 fault
 we
 can
 accuse
 the
 new
 technologies
 of
 is
 that
 it
 killed
 the
 industry
 as
 a

profitable
one.
People
do
not
see
the
music
as
an
economic
good
anymore
and
hence
do

not
 see
 the
 need
 to
 pay
 for
 it.
 New
 business
 models
 have
 been
 implemented,
 showing

that
 the
 trend
 is
 reversible,
 providing
 that
 the
 offer
 is
 still
 good
 for
 the
 customer;


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 43

customers
 will
 agree
 to
 pay
 a
 flat
 rate
 if
 they
 can
 access
 pretty
 much
 the
 entire
 music

catalogue
 of
 the
 world.
 People
 are
 not
 buying
 CDs
 anymore.
 On
 the
 other
 hand

attendance
 to
 concerts
 has
 increased
 and
 the
 revenue
 from
 touring
 is
 still
 strong.

Because
of
the
DIY
promotion
and
distribution,
and
because
customers
are
much
more

eager
to
experiment
and
consume
and
consume
and
consume
again
and
again
as
long
as

it
is
free,
there
is
a
real
opportunity
for
indie
artists
to
get
a
growing
fan
base
rapidly.
On

the
other
hand
because
revenues
are
decreasing,
major
labels
are
not
capable
to
invest

in
new
artists
as
they
used
to,
it
is
getting
harder
for
an
artist
to
get
a
major
record
deal

if
 the
 label
 do
 not
 see
 it
 as
 mainstream
 and
 therefore
 big
 profits
 material.
 In
 such
 a

position,
 artists
 who
 need
 the
 support
 of
 labels
 for
 representation
 reasons
 are
 more

likely
 to
 cooperate
 and
 create
 or
 join
 independent
 labels.
 Because
 those
 independent

labels
have
fewer
artists
to
manage
and
are
more
likely
to
cut
costs,
they
are
capable
of

moving
 and
 reacting
 much
 faster
 than
 the
 big
 corporations,
 where
 the
 risks
 are
 much

higher.
For
this
reason
I
believe
that
indie
labels
have
not
suffered
from
music
piracy
as

much
the
major
labels
have.
And
for
this
reason
they
could
and
will
benefit
from
it
much

more.


5.3 WHAT
IS
THE
FUTURE?


Nowadays
everything
proves
that
the
industry
is
going
completely
digital,
physical
sales

are
going
to
steadily
decline
and
digital
sales
to
steadily
increase.
What
the
labels
have

to
accept
is
to
move
on
because
what
the
last
ten
years
have
proved
is
that
by
trying
to

hold
 on
 to
 the
 past
 and
 prevent
 changes
 they
 were
 crushed.
 Fortunately
 enough
 the

recorded
 music
 industry
 is
 not
 close
 to
 dying.
 And
 this
 because
 the
 incentives
 have

never
been
particularly
high
compared
to
other
industries.
As
much
as
we
can
call
the

major
labels
“sharks”
or
“capitalist
pigs”
they
are
people
who
love
music
and
who
record

music
for
them
too.



Otherwise
they
would
go
work
for
Goldman
Sachs
where
the
big
money
is.
The
future
of

the
 music
 industry
 is
 really
 hard
 to
 forecast,
 it
 will
 only
 depend
 on
 the
 decision
 that

major
labels
take.
When
they
realize,
and
accept,
that
consumers
are
always
going
to
go

for
the
most
convenient
and
less
expensive
way
to
get
their
product,
maybe
they
will
be

able
 to
 prevent
 a
 new
 kind
 of
 piracy,
 for
 the
 reason
 that
 they
 will
 be
 the
 one


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 44

implementing
this
“piracy”,
except
that
this
time
it
will
please
everybody.
If
Napster
did

one
 thing
 good
 to
 the
 industry,
 it
 did
 it
 to
 the
 music
 itself.
 Music
 became
 available,

affordable
and
now
people
are
addicted
to
it.
People
have
an
unprecedented
appetite
for

music
 and
 they
 are
 only
 waiting
 for
 the
 big
 ones
 to
 figure
 it
 out.
 The
 future
 that
 lies

ahead
 can
 only
 be
 the
 peak
 of
 an
 art,
 music
 as
 its
 zenith
 and
 with
 this
 all
 the

opportunities
 that
 come
 around.
 And
 if
 it
 is
 someone’s
 to
 lose,
 it
 is
 definitely
 not
 the

artists’,
 not
 the
 music‐lovers’,
 just
 the
 corporations
 who
 will
 not
 accept
 to
 face
 the

change.


J.
GAVIGNET
–
THE
IMPACT
OF
NEW
TECHNOLOGIES
ON
THE
RECORDING
INDUSTRY
 45

 EXHIBITS

Exhibit
1
­
Flowchart
of
the
standard
record
marketing/manufacturing
process
 ii

Exhibit
2
­
Example
of
income­generating
uses
for
a
song
 iii

Exhibit
3
­
Example
of
a
MySpace
page
 iv

Exhibit
4
­
Example
of
a
Facebook
Page
 v

Exhibit
5
­
Example
of
a
Twitter
proJile
 vi

Exhibit
6
­Twitturm
 vii

Exhibit
7
­
FanBridge
 vii

Exhibit
8
­
BandCamp
 viii

Exhibit
9
­
BandMetrics
 viii

Exhibit
10
­
Description
of
the
Music
Genome
Project
from
www.pandora.com
 ix

Exhibit
11
­
Musicovery
Search
Tool
 x

Exhibit
12
­
Musicovery
Results
Screen
 xi

Exhibit
13
­
AdAge
Top
5
sites
in
16
categories
­
ClassiJieds
and
Social
Networking
 xii

Exhibit
14
­
US
Global
Advertising
Expenditure
by
medium
2008
 xiii

Exhibit
15
­
iTunes
LP
 xiv

Exhibit
16
­
GDP
Growth
in
5
main
countries
for
the
music
industry
 xv

Exhibits
‐
J.
Gavignet


































i
 Exhibit
1
­
Flowchart
of
the
standard
record
marketing/manufacturing
process
Source:
Lathrop,
Ted.
2003.
This
business
of
music
marketing
and
promotion.
New
York:
Billboard

Exhibits
‐
J.
Gavignet


































ii
 Exhibit
2
­
Example
of
income­generating
uses
for
a
song
Source:
Lathrop,
Ted.
2003.
This
business
of
music
marketing
and
promotion.
New
York:
Billboard

Exhibits
‐
J.
Gavignet


































iii
Exhibit
3
­
Example
of
a
MySpace
page

Music
Player

Calendar
to
announce
future
shows

Exhibits
‐
J.
Gavignet


































iv
Exhibit
4
­
Example
of
a
Facebook
Page

Exhibits
‐
J.
Gavignet


































v
Exhibit
5
­
Example
of
a
Twitter
proJile

Exhibits
‐
J.
Gavignet


































vi
Exhibit
6
­Twitturm

Exhibit
7
­
FanBridge

Exhibits
‐
J.
Gavignet


































vii
Exhibit
8
­
BandCamp

Exhibit
9
­
BandMetrics

Exhibits
‐
J.
Gavignet


































viii
Exhibit
10
­
Description
of
the
Music
Genome
Project
from
www.pandora.com

Exhibits
‐
J.
Gavignet


































ix
Exhibit
11
­
Musicovery
Search
Tool

Exhibits
‐
J.
Gavignet


































x
Exhibit
12
­
Musicovery
Results
Screen

Exhibits
‐
J.
Gavignet


































xi
Exhibit
13
­
AdAge
Top
5
sites
in
16
categories
­
ClassiJieds
and
Social
Networking

Exhibits
‐
J.
Gavignet


































xii
Exhibit
14
­
US
Global
Advertising
Expenditure
by
medium
2008
Source:
Zenith
Optimedia

Exhibits
‐
J.
Gavignet


































xiii
Exhibit
15
­
iTunes
LP


Exhibits
‐
J.
Gavignet


































xiv
Exhibit
16
­
GDP
Growth
in
5
main
countries
for
the
music
industry

Exhibits
‐
J.
Gavignet


































xv
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