A Systemic Analysis of Music Distribution Over The Internet

Title: A Systemic Analysis of Digital Music Distribution on the Internet
Table of Contents
Abstract ......................................................................................................................... iv
Glossary ........................................................................................................................ vi
Chapter 1: Introduction ................................................................................................... 1

1.1 Purpose ................................................................................................................. 4
1.3 Target Group......................................................................................................... 4
Chapter 2: Literature Review .......................................................................................... 5

2.1 The Music Industry: An Overview ........................................................................ 5
2.2 How the Traditional Music Industry Works........................................................... 6
2.3 What is an eBusiness Model? ................................................................................ 7
2.4 Changes in the Music Industry’s Value Chain ....................................................... 9
2.5 Growth of Digital Music: A Background ..............................................................12
2.6 The Industry’s Participants ...................................................................................13
2.6.1 Artists ...........................................................................................................14
2.6.2 Record Labels ...............................................................................................14
2.6.3 Digital Music Retailer ...................................................................................15
2.6.4 The Consumers .............................................................................................16
2.7 Challenges in the Digital Music Industry..............................................................17
2.7.1 Revenue Stream and Pricing ..........................................................................17
2.7.1.1 Artist Perspective ...................................................................................17
2.7.1.2 Digital Music Retailer Perspective ..........................................................18
2.7.1.3 Record Label Perspective .......................................................................19
2.7.1.4 Consumer Perspective ............................................................................20
2.7.2 Gaining Value from and Adding Value to the Industry ..................................20
2.7.3 Piracy Perspective .........................................................................................23
2.7.4 Deciding on an Effective Business Model .....................................................26
2.7.5 Copyright and Standards ...............................................................................27
2.8 Current Models and Trends in the Digital Music Industry ....................................30
2.9 Proposed Business Models ...................................................................................34
2.10 Summary of the Industry ....................................................................................35
i
Chapter 3: Methodology ................................................................................................37

3.1 Research Aims .....................................................................................................37
3.2 Data Collection ....................................................................................................37
3.3 Qualitative Vs. Quantitative .................................................................................39
3.4 Hard Systems Vs. Soft Systems............................................................................40
3.5 Methodology Selection ........................................................................................40
3.5.1 Soft Systems Methodology (SSM).................................................................40
3.5.2 General Systems Theory................................................................................42
3.5.3 SSM’s Tools .................................................................................................43
3.5.4 The Checkland Approach ..............................................................................45
3.5.5 The Wilson Approach (Wilson 2001, p.8) .....................................................46
3.5.6 The Customised SSM Approach Adopted for this Study................................46
Chapter 4: Analysis, Evaluation and Learning................................................................49

4.1 Player Profiles ......................................................................................................49
4.1.1 Consumer Profile ..........................................................................................50
4.1.2 Artist Profile .................................................................................................51
4.1.3 Digital Music Retailer Profile ........................................................................51
4.1.4 Record Label Profile .....................................................................................51
4.2 Root Definitions ...................................................................................................52
4.3 Conceptual Models (Issue-based) .........................................................................57
4.4 Monitoring and Control Functions........................................................................63
4.5 Analysis – Exploiting the Models .........................................................................64
4.6 Evaluation ........................................................................................................71
4.7 Learning and Reflection .......................................................................................77
4.8 Future Work.........................................................................................................80
Chapter 5: Conclusions ..................................................................................................83
References .....................................................................................................................86
Websites Mentioned ......................................................................................................93
APPENDICES ...............................................................................................................94
APPENDIX A ...............................................................................................................94
APPENDIX B ............................................................................................................. 105
Appendix B-1 .......................................................................................................... 105
Appendix B-2 .......................................................................................................... 106
Appendix B-3 .......................................................................................................... 106
Appendix B-4 .......................................................................................................... 107
APPENDIX C ............................................................................................................. 108
APPENDIX D ............................................................................................................. 110
Appendix E.................................................................................................................. 112
Appendix F .................................................................................................................. 114
Appendix G ................................................................................................................. 116
ii
Appendix H ................................................................................................................. 117

Appendix I................................................................................................................... 118
Appendix J .................................................................................................................. 120
Appendix K ................................................................................................................. 121
Appendix K-1 .......................................................................................................... 121
Appendix K-2 .......................................................................................................... 122
Appendix K-3 .......................................................................................................... 124
Appendix K-4 .......................................................................................................... 126
Appendix K-5 .......................................................................................................... 127
Appendix K-6 .......................................................................................................... 129
Appendix K-7 .......................................................................................................... 130
Appendix K-8 .......................................................................................................... 132
Appendix K-9 .......................................................................................................... 133
Appendix K-9 .......................................................................................................... 135
iii
Abstract
This dissertation deals with the distribution of digital music on the Internet. The Soft
Systems Methodology (SSM) is used as the framework for the dissertation’s structuring
and the industry’s analysis. SSM’s tools are used to analyse how the industry can be
improved by using the perceptions of its main entities – the artist, record label, consumer
and digital music retailer.
An analytical comparison of the traditional and digital music industry’s supply chains
reveal the dramatic changes that have occurred between the industry’s key players. The
core participants have realised this and have quickly dived in to reap the benefits due to
this disintermediation.
The digital music industry has evolved unsystematically into a chaotic industry with
numerous unresolved issues affecting the creation of effective business models and all the
industry’s participants. On the surface, consumers are concerned with piracy and the
interoperability of music whilst artists contemplate the best possible methods to make
their music heard to the industry’s audience. Record labels are grappling with the notion
of illegal downloads diminishing their profits and digital music retailers strive to create
competitive advantage by creating new business models.
Attempting to solve these problems is impractical. Thinking about and attempting to

resolve conflicting perspectives however is the aim of this study. This dissertation
attempts to untangle the web of uncertainties in the industry of concern to explicitly
present organised thoughts in the form of conceptual models capable of being analysed.
The results of this qualitative analysis are a set of recommendations for the industry’s
participants to follow. The industry in inquiry’s issues are not solved in one fell swoop
but this study certainly provides a launching pad for its participants to speedily
familiarise themselves with this new industry and facilitate innovation.
iv
Acknowledgements
I would like to thank the following persons for their invaluable contribution, which
helped to catalytically deliver this dissertation to my desired satisfaction:
• Mikhaila Burgess, as my supervisor guided me through the project and helped

overcome hurdles faced.
• Brent Work, shared his unique thoughts and suggestions on the domain being
investigated.
• Anas Tawileh, who also had an interest in the project domain, introduced me to
another aspect of the digital music industry and provided some key insights.
v
Glossary
BPR – Business Process Reengineering

CD – Compact Discs
CM – Conceptual Model
CPTM – Consensus Primary Task Model
DMR – Digital Music Retailer
DRM – Digital Rights Management
HAS – Human Activity System
IFPI - International Federation of the Phonographic Industry
ISP – Internet Service Provider
P2P – Peer-to-Peer
RD – Root Definition
RIAA – Recording industry Association of America
OR – Operational Research
SSM – Soft Systems Methodology
vi
List of Figures
Figure 2-1: Main Drivers for Value in the Traditional Recorded Music Value Chain ...... 9
Figure 2-2: Digital Music Product Characteristics ..........................................................10
Figure 2-3: Music Industry Value Chain and Market Structure with Digital Music.........11
Figure 2-4: Initiators of Digital Music Websites.............................................................16
Figure 2-5: Web Comic .................................................................................................30
Figure 3-1: The Customised SSM Approach Illustrated .................................................47
Figure 4-1: The Consumer’s Conceptual Model .............................................................58
Figure 4-2: The Record Label’s Conceptual Model (Promotion Orientation)..................59
Figure 4-3: The Artist’s Conceptual Model ....................................................................60
Figure 4-4: The Digital Music Retailer’s Conceptual Model .........................................61
Figure 4-5: Record Label’s Conceptual Model (Networking Orientation) ......................62
Figure 4 6: An Autopoietic Methodology-Creating System ............................................73
vii
Chapter 1: Introduction
“We have to make buying music easier than stealing music” – EMI Vice President
(Fischbeck, 2000), is this dissertation’s underpinning statement, which strives to analyse
the digital music industry with the intention of thinking about achieving the most suitable
of innovative business models to distribute digital music over the Internet. Crossing over
many subject areas such as strategic marketing, electronic commerce, systems thinking
and strategic management, this project will aim to assist managers of a record label and
digital music retail store to market and distribute their newly signed-on bands in arguably
the most effective and efficient manner.
This project’s motivation is obviously interesting enough to any individual with an

average affinity for music and revolves around my avid interest for musical genres and
musical paraphernalia. Music has been around for thousands of years in various forms
and methods of delivery and we are now in an era capable of making music from one part
of the world easily and instantly heard by an individual in another part of the globe. The
digital music industry achieves that phenomena as well as the inadvertent effect of the
transformation of the traditional music industry.
The music industry has always been my clichéd keen area of interest, which has
unfortunately not been taught in any school programme I have undertaken in the past.
Thus, this was looked at as the perfect opportunity to study the music industry closely,
especially following the evincible rise of the digital music industry. With the sub-areas
being pertinent to the subject areas taught in the MSc programme, the dissertation would
offer a sustainable interest over the allocated time period. The project did not appear very
overly-ambitious and posed a reasonable level of challenge. A cursory background on the
domain revealed copious amounts of available literature along with recurring
controversial issues and speckled perceptions across the digital music industry.
A tailored version of Wilson’s Soft Systems Methodology (SSM) is used as the

framework and approach to fulfil the purpose of this dissertation. Defining the industry’s
problem is itself problematic as it usually depends upon who defines it, and a number of
1
definitions can be stated by the participants. Therefore, SSM starts by defining not a
problem but a situation that is problematic. The project centres on the selected
methodology where SSM is used as a framework from this introduction through to the
Analysis chapter. Using the perceptions of four key participants in the industry, the root
of what they want to achieve in the industry is formulated as a definition and how to
achieve that being modelled conceptually. SSM was also used to plan the activities of the
entire dissertation. Its usage will become clearer as the thesis unfolds.
There have been similar studies carried out to this; albeit, I have not discovered a thesis
concerning the systemic analysis of the digital music industry. This study therefore, aims
to qualitatively analyse the industry by considering the viewpoints of the core players
involved. The current digital music industry is rather chaotic and controversial.
Remedying all these issues is unlikely within the near future; however, thinking about the
implications of adamantly adhering to certain conventions and focusing on what is
imperative for this industry is a start.
With music being a hedonistic product, it is more than an onerous task to find out exactly
what the consumers want in terms of musical tastes, which spans differently amongst
diverse generations of listeners. Information technologies have arguably had a disruptive
effect on the traditional music industry; thus, paving the upcoming digital music industry
on its vestiges. With peer-to-peer file sharing applications being rampant, the fresh
industry has hurriedly being sullied with controversial issues such as digital rights
management, illegal downloads by consumers, illegal downloads being endorsed by
certain artists, unorthodox strategies by digital music retailers and the steady-diminishing
stronghold of the record labels.
This chapter immediately proceeds with the Literature Review, which proves to be the
most critical chapter of this exposition since aside from endowing the reader with an
informative background of the traditional music industry, and the leadings to the digital
music industry, the current research findings and propositions are used to intricately
intertwine with the methodology in Chapters 3 and 4.
2
The exhaustive Literature Review encompasses several sub areas that revolve around the
views of the chosen participants since social conflict is the main reason for the industry’s
state. The digital music retailers, artists and record labels of the digital music industry all
have worldviews that are conflicting.
Beginning with a basic understanding of how the traditional music industry works, there
is a slight digression to the essential elements of an ebusiness model. The review then
realigns itself in the direction of the growth of the digital music industry. Since the
perspectives of the participants are essential ingredients for the industry’s analysis using
SSM, the industry’s challenges such as its revenue sources, copyright and piracy, gaining
value and so forth are spun around the perspectives and finally the review’s closing
stages are presented in the past strategies and current trends. Many issues in this industry
have been hitherto unresolved, making this a suitable starting point.
Chapter 3 presents the reasoning for the selection of the chosen methodology and why a
qualitative method of analysis was preferred over a more quantitative method. The
research aims and methods of data collection are illustrated. Finally, the technicalities and
mechanics of the chosen methodology are specified for a more thorough understanding of
its usage and the analysis it will carry out.
In Chapter 4, a detailed description of the activities undertaken based on the

methodology’s approach is given. The purpose-driven root definitions applicable to the
four persons in the industry along with the interpretation for the formulated root
definitions are stated. The conceptual models, modelled from the root definitions will be
compared and analysed with the findings tabulated. This will yield the most important
deliverable, which is the set of recommendations for the participants in the industry to
follow in order to benefit from the industry. This chapter also concludes with the
evaluation, reflection and learning and potential future work that could be looked into.
Finally, Chapter 5 culminates with a summary of the essential elements of this

dissertation.
3
Linked to the various chapters are the Appendices, which provide reports, cases and
surveys of relevant occurrings in the digital music industry. These findings provided the
ingredients necessary to use the selected methodology, and analyse the findings and
buttress certain findings and statements.
1.1 Purpose
The industry is seen as problematic due to its “soft” social issues that have resulted since
its movement to the fore as a leading and influential industry.
This dissertation’s aim is to holistically analyse the industry by conceptually organising

the purposes of the chosen four key industry participants in order to understand the
industry better, provide recommendations for each participant to further its position by
creating better business models, and accommodate the views of the fellow participants to
benefit both the industry and the participant.
1.2 Objectives
• Identify the industry’s issues from the perspectives of the four key participants
• Create definitions concerning the root of what a participant wants to achieve
• Construct models comprising conceptual activities on how to achieve this
• Exploit the models to generate recommendations for a participant to create an
effective ebusiness model
1.3 Target Group
This exposition will be useful for people involved in the digital music industry, notably
the artists, record labels and digital music retailers who want to understand their role and
further their position. Consumers can use it to gain a comprehensive understanding of
their role in the industry and how important it is for them to participate ethically for its
future to be propitious. Anyone with a liking for music will find this an interesting read,
and that is, a lot of people.
Note: This chapter is Stage 1 of the customised SSM approach.
4
Chapter 2: Literature Review
With the music industry precariously placed as it is, a single player having identified an
effective business model could capture the digital music market and tower over the
currently slumped and failing large record labels, digital retailers and artists. However, a
myriad of online businesses are mushrooming without thinking about a workable and
viable business plan to achieve sustainable competitive advantage and seize the market.
This is largely due to a doing-before-think means of strategy where SSM aims to counter
that type of thinking. This is Stage 2 of the customised SSM approach. Refer Section 3.5
for an overview of SSM and the tailored approach.
This chapter will provide a comprehensive coverage of previous work carried out, current
undertakings, participants’ perspectives and an overview of the digital music industry.
2.1 The Music Industry: An Overview
The broader music industry as a whole is colossal, comprising radio, live acts, portable
digital players, artist merchandise and physical media such as CDs, and vinyls, etc. This
project focuses on the recorded music industry, more specifically the digital pre-recorded
music industry sector.
Initially, there were six large record companies or labels, notably Bertelsmann Music
Group (BMG) (German), PolyGram (the Netherlands), Thorn-EMI together with AOL-
Time Warner (USA), Universal-Vivendi (Canadian), formerly known as MCA and Sony
(Japan) (Janson and Mansell, 1998). Now, subsequent to some mergers, the music
industry is dominated by the “big four” labels – EMI, Universal, Song BMG and Time
Warner, each of which consists of many smaller companies and labels (Cosper, 2007).
Technological changes have affected and transformed the music industry beyond
recognition. Global digital music sales almost doubled in 2006 to around $2 billion
(ITFacts, 2007). Refer Appendix C for more key facts. However, these statistics will be
severely altered in the subsequent years as will be exemplified in the remainder of this
exposition’s literature review.
5
2.2 How the Traditional Music Industry Works
The industry deals with fast-moving, unit-led production, marketing, licensing and
distribution functions. Information such as how much a product will sell, in which areas,
the shipping time, and the stock replenishment cycle, etc. is essential. The Internet and
the Web’s high-speed distribution channel have transformed these traditional activities
into digital content delivery where record companies are no longer in a position to control
the distribution chain (Janson and Mansell, 1998).
A record company’s core activity is creating and exploiting copyright in sound recordings
where a contract is signed with the artist on the condition that that artist agrees to record
exclusively with that label for a stipulated period. In exchange, the artist will receive an
advance of royalties at the start of work on each record album and the record company
will own the copyright in the recordings (Janson and Mansell, 1998).
The artist or musician writes a song and records it in a studio with the help of a record
producer. The record company then reproduces it onto CDs, cassettes or vinyl. The
crucial activity of the record company will then be the marketing and promotion of the
new release and its distribution to retailers. Promotional methods include videos and
interviews, and advertisements in the musical press and other media. For a pop record,
the aim is to ensure that the record is played on the radio to secure a place in the record
charts leading to further exposure and increased sales (Janson and Mansell, 1998).
To exploit new recordings in overseas markets, the record company usually licenses an
overseas company to supply records in a particular country. The major labels perform this
task through the record company’s local affiliate and the independent record companies
often rely on unconnected companies to perform this function. All the major record
companies operate their own distribution businesses whereas music retailers order stock
from several sources (Janson and Mansell, 1998).
The relative low cost of setting up a retail outlet on the Internet enables record companies
to sell products directly to the consumer. Thus, prices of the retailers are undercut and
6
profit margins increased (Janson and Mansell, 1998). Simply using the Web as another
distribution channel may not involve the purveyance of digital music. Thus, a simple e-
commerce strategy is not what this dissertation focuses on but solely the distribution of
digital music.
Some companies such as UK’s HMV, have a physical and Web presence launched called
HMV Digital.
“They can download from an extensive list of songs - either as individual tracks
or whole albums, or they can gain full access to the entire catalogue available on
the system by subscribing each month to ‘HMV Unlimited’.” (HMV Group PLC,
2005)
Thus, HMV has incorporated both digital music and physical music distribution modes.
2.3 What is an eBusiness Model?

As participants search for an effective business model, it is vital to know what the
essential ingredients are and how they can be mixed into an effective model for the player
and its participants to contribute to the betterment of the industry as a whole.
A quandary facing the digital music industry is how to shift a century’s worth of business
models as quickly as digital technology evolves (GartnerG2 and The Berkman Center,
2003). There are many ideas being proposed and currently visualised in the search for the
“holy grail” of ebusiness models ranging from leveraging the decentralised P2P networks
such as Kazaa to a “music anywhere” model.
A business model represents the proposed theory of a business. A business model

provides a systemic explanation of how an organisation should survive and prosper
(Work, 2002). Mahadevan’s Business Models for Internet-Based E-Commerce paper
assists practicing managers understand the notion of a business model in the Internet
context by classifying these business models. These are generic business models
7
comprising templates describing idealised revenue streams, value streams and logistic
streams for a class of models. Mahadevan portrays the Internet business model as a
unique blend of three streams, specifically, the value, revenue and logistics streams,
which are critical to the business (Mahadevan, 2000).
The value stream illustrates how a business can create value out of its model resulting in
the long term viability of the business such as the creation of virtual communities; the
revenue stream describes how profits can be generated resulting in the long-term
sustainability of the business such as with the use of advertising, and the logistical stream
enumerates how the business can position itself at an appropriate level in the supply chain
of the industry (Mahadevan, 2000).
Thomas Eisenmann offers a similar taxonomy of business models that concentrates more
on the value stream as the basis for classification. He offers eight business models with
ways of pursuing value from each proposition (Eisenmann, 2002). Afuah and Tucci use
the revenue stream concept to identify seven different types of e-commerce business
models. However, to complete these business model templates, an extensive amount of
information will have to be provided such as the intended strategy, market segmentation,
industry structure, pricing, basis for competitive advantage, competences and even a
benefits map (Work, 2002) and an analysis of the industry using Porter’s five forces.
This section’s cursory overview of ebusiness models will be important in realising which
propositions and current models will be realistic in terms of their value, revenue and
logistical streams as the remainder of this review will explicate. However, this
dissertation deliberates on the holistic thinking of conceivable realistic models for each
key player and not on the analysis and theoretical mechanics of a model.
8
2.4 Changes in the Music Industry’s Value Chain
Figure 2-1 shows the main drivers for value in the traditional recorded music value chain
including copyright and licensing, production, distribution and inventory, and promotion
and marketing costs (Bockstedt et al., 2004).
Figure 2-1: Main Drivers for Value in the Traditional Recorded Music Value Chain (Bockstedt et al.,
2004)
The record labels appropriate most of the profit and exercise the most control in the
traditional value chain. The digital music formats however, creates opportunities for
changes in the recorded music distribution value chain due to it being cheap to reproduce
and transfer, more portable and easy to store.
The reduction in “distance” between artists and consumers, the massive online
distribution networks, reduced costs of replication and production, and copyright
protection and piracy issues will affect the music market structure. Figure 2-2
summarises how the players in the new industry are affected (Bockstedt et al., 2004).
9
Figure 2-2: Digital Music Product Characteristics (Bockstedt et al., 2004)
Intermediaries are agents that facilitate transactions between suppliers and buyers. Their
role in the new market is changing with physical retailers being replaced by digital music
retailers. Manufactures and distributors are becoming obsolete since record labels,
producers and artists can go directly to digital music retailers without the production of a
physical product. Figure 2-3 sketches a model of the music industry value chain and
market structure with digital music (Bockstedt et al., 2004).
10
Figure 2-3: Music Industry Value Chain and Market Structure with Digital Music (Bockstedt et al.,
2004) 1
Digital music retailers add new value to music through marketing, promotions,
copyrighting and licensing. As a result, the channel power dynamics are altered giving
rise to new incentives as the roles of the players in the value chain are shifted (Bockstedt
et al., 2004).
The above discussion shows that the ability of the Internet to remove cost-adding
activities while retaining those that add value is enormous. Record labels would benefit
from the elimination of cost-adding activities such as CD production and physical music
11
stores while still allowing them to retain control over value-adding activities if an
effective plan is implemented. Peer-to-peer file-sharing technology is however the major
threat to the record labels’ euphoric break in the new industry. As Hammersley observed:
For something that sounds like so much technology jargon and hype, peer-to-peer
technology (P2P) is the fastest growing idea in the history of computing (Graham
et al., 2004).
For the major record labels who dominate the music industry, piracy is a very serious
issue since their profits come from their ability to control the supply chain for music from
artist to consumer. If consumers can download for free and if pirates can copy CDs and
sell them on the street, the major labels will not be able to recover the costs of developing
and promoting artists and recording their music. Based on this, it is quite apparent as to
who the main beneficiary of digital music is - the consumer. Even paying for legal
downloads through a subscription service is cheaper than in the past. It is not just the
structure of the music supply chain which is being transformed, but also the balance of
power in the industry. The major labels are losing some of their influence, the artists have
alternatives to signing with the major labels, and the consumer appears to have more
choice at less cost (Graham et al., 2004).
2.5 Growth of Digital Music: A Background
Since the advent of the MPEG-1 Audio Layer-3 (mp3) format, digital music achieved
unprecedented promulgation. Shawn Fanning, nicknamed Napster by his friends along
with his associate Sean Parker first released the original Napster on June 1, 1999. Napster
was a centralised file sharing service that paved the way for decentralised P2P file-
sharing programs such as Kazaa, Limewire, iMesh, Morpheus and BearShare, which are
now used to download music, pictures, and other files (Wikipedia(a), 2007). The
popularity and repercussions of the first Napster may have inadvertently revolutionised
the entire music industry. This created the online music piracy phenomenon, debated to
this very day and perhaps the digital music industry’s most controversial issue.
12
iMesh, OpenNap, Gnutella, Kazaa, and most recently BitTorrent became widely popular
after Napster’s demise. Although there have been many lawsuits filed against these
networks and their users, P2P usage has been inexorable and in fact increased with
BitTorrent currently accounting for one-third to over half of all Internet traffic.
According to slyck.com, the average number of users logged into P2P networks
worldwide increased from 3.8 million in August 2003 to 9.7 million in January 2006 and
cache-logic estimates that these online users are sharing on the order of 10 petabytes of
data, which is the equivalent of about 2 million full-length DVDs or 230 million CDs
(Krishnan et al., 2006). This vast quantity of file-sharing is mind-boggling demonstrating
the extreme rampancy of digital piracy.
The commercialisation of Napster began a spate of not very well thought out digital
music models. There are now myriad pay-per-download and online subscription services,
including eMusic, Rhapsody, MusicNet and Pressplay. For a fee, these online services
allow consumers to stream or download music, and shift content onto another device in
accordance with some restrictions specific to the provider (GartnerG2 and The Berkman
Center, 2003).
The biggest commercial highlight in the online music distribution space and most
successful to date is Apple’s digital music distribution service which took off on 28 April
2003 (GartnerG2 and The Berkman Center, 2003). Apple have been always known for its
innovative techniques that take the competition off-guard, which they did on this
occasion with the iTunes Music Store, a pay-per-download architecture with many
distinctive features.
2.6 The Industry’s Participants
This section will present an overview of how the four chosen entities are affected by the
new industry.
13
2.6.1 Artists
Artists can distribute music directly to consumers through the Internet, bypassing
intermediaries involved in the production and distribution of physical music media
(Bockstedt et al., 2004).
However, with a tremendous number of aspiring talented bands attempting to break into
the digital music industry, artists are finding it increasingly difficult to make their music
heard, form a relationship with their fans and build a fan base. Nevertheless, if the most
suitable path is taken, artists can now rapidly attain a worldwide audience and awareness
due to virtual community sites such as Facebook, YouTube and MySpace with
significant-financial-gain being the casualty. It does however demonstrate to record
labels that a band has a considerable following, which will be an important factor for the
band’s long term success. The Arctic Monkeys are an example of effectively launching
their career though MySpace (CIM, 2007).
Bockstedt et al. suggest the following industry roles for artists. Refer Appendix B-1 for
mini-cases:
1. Artist-Led Direct Distribution - Due to new incentives more artists will form their
own online direct distribution capabilities.
2. Digitally-Intermediated Distribution - Due to new incentives more artists will contract

with digital music retailers for online distribution of their music.
3. Music Singles Production - Due to new incentives more artists will focus on
producing singles, not bundled music, for online distribution.
2.6.2 Record Labels
Apart from the majors and indies, the digital era has spawned netlabels. Also known as
an online label, web label or MP3 label is a record label that distributes its music
primarily through digital audio format over the Internet. They emphasise on free
14
distribution online, often under licenses that encourage works to be shared such as the
Creative Commons licenses. The artists usually retain copyright and the labels employ
guerrilla marketing to promote their work with few netlabels earning money for
participants (Wikipedia(b), 2008).
Record labels usually invest up to 20 per cent of their revenues to discover and nurture
new talent known as artists and repertoire (A&R) where marketing and A&R are the core
functions of record companies. Although labels are thought to have their power been
greatly diminished, the new communication channels and social networks have increased
the importance of good A&R and marketing (IFPI Digital Music Report, 2008).
Bockstedt et al. suggest the following industry roles for record labels (Bockstedt et al.,
2004):
1. Service Alliances - Record labels will invest in digital distribution services by either:
• Forming alliances with existing digital music retailers or
• By launching their own services
2. Copyright and Promotion - They will add value by focusing more on copyright,
licensing, marketing and promotion services.
Since most labels do not possess the necessary technological infrastructure to enable the
distribution of digital music, they must form joint ventures with Internet Service
Provides, or services with different types of technology. They should embrace the notion
of cooperations, joint ventures, mergers and acquisitions, which will become rather
important for a successful business strategy (Swatman and Krueger, 2006). Refer
Appendix B-2 for mini-cases.
2.6.3 Digital Music Retailer
They are the new intermediary in the digital industry. They have more flexibility where
unbundling and rebundling will be easier, enabling more fine-grained control over the
customer experience and dynamic pricing (Bockstedt et al., 2004). Online retailers will
15
be able to differentiate themselves through specialised services, trust and by perhaps

leveraging the major brand names in the industry such as Virgin, HMV, Fopp, etc.
Bockstedt et al. suggest the following industry roles for digital music retailers:
1. Digital Music Retailer Differentiation - By offering new services, product versions

and extensions, and unique bundles of music.
2. Digital Music Price Dispersion - Digital music retailer differentiation will result in
price dispersion in the online digital music market.
Figure 2-4: Initiators of Digital Music Websites (Swatman and Krueger, 2006)
The digital music retailer will also be concerned with networking unlike the role played
by a physical retailer deciding to build a Web presence. This includes forming
relationships with artists, record labels and consumers. Figure 2-4 illustrates this. Refer
Appendix B-3 for mini-cases.
2.6.4 The Consumers
The consumer is a significant beneficiary with the highest bargaining power. They are
now faced with many options such as purchasing one or more songs from an album, or
the entire album creating customised bundles rather than relying on a record company or
artist to assemble a set of songs.
16
The MP3 format is highly portable allowing the consumer to listen to digital music on
PDAs, laptop computers, desktop computers, and mobile phones. They can also be
converted and burned to CDs for playing on standard CD players.
Unlike other digitized goods, the interface for digital music is the same as for its
physical counterpart. Digital music is experienced through speakers and is
listened to, the same as a physical CD (Bockstedt et al., 2004).
2.7 Challenges in the Digital Music Industry
The industry is faced with a number of challenges due to different individual perceptions
resulting in the constant debating of issues. The challenges will be viewed from the
perspective of each player where pertinent.
2.7.1 Revenue Stream and Pricing
The new industry has ruptured the usual revenue stream for the participants. With
consumers wanting music for free, pricing strategies have become of crucial importance.
There are two basic pricing strategies for digital music distribution: song purchases also
known as a-la-carte downloads and subscription services.
The iTunes Music Store is an example of an a-la-carte download service where users are
charged a set fee for each track or album downloaded. The consumer’s choice is flexible
since the choice is now free from the bundled offers of record labels. Most individual
songs are priced at 99 cents. Differentiation in this market centres on usage rights,
catalogue size, and exclusive content such as pre-releases or promotion tracks (Lin,
2005).
2.7.1.1 Artist Perspective
Artists are currently experimenting with revenue streams and pricing. The band
Radiohead offered downloads of their new album In Rainbows on their website under an
“honesty box” system where fans were given the option to pre-order the album download
at a price of their choosing (minimum charge of £0.45) (IFPI Digital Music Report,
17
2008). Some critics argue that established artists who have benefited from the marketing
machine of major labels should not necessarily stand as an example for emerging artists
to follow (Madden, 2008).
“The only reason we could even get away with this,” Radiohead's lead singer,
Thom Yorke, said recently about selling its album directly to fans, “is that we've
gone through the whole mill of the business in the first place” (Smith, 2008).
Established artists can experiment with different models since they will always have a
following.
British musician Billy Bragg argues that some portion of Bebo’s $850 million sale price
should go to the musicians who uploaded their music to the site. However, the music was
uploaded to the site by artists or their labels that knew they would not receive payments
except free marketing and access to Bebo’s many music loving users (Arrington, 2008).
2.7.1.2 Digital Music Retailer Perspective
New digital music retailers struggle with their revenue stream since they appropriate only
a small portion of the revenue. This is also compounded by the fact that consumers can
turn to an alternative free source or the more popular stores such as the iTunes Store.
Although an ideal strategy would be first-degree price discrimination where music is sold
to every customer at a price which corresponds to his or her maximum willingness to pay,
this is unrealistic in the music industry where it is not possible to detect the willingness to
pay for every single (potential) customer (Buxmann, P. et al., 2005).
The DMR’s fiercest rival is the P2P service where BitTorrent can be seen as using an
implicit pricing mechanism where “prices” are automatically enforced since multiple
people download the same file at the same time whilst uploading pieces of the file to each
other. The basic idea is to make a peer’s download rate proportional with its upload rate
(Krishnan et al., 2006). Perhaps digital music retailers can offer a similar pricing strategy.
18
A study was carried out to examine how far the willingness to pay varies for different
kinds of music. Four categories were created based on novelty and availability, which
were “Current Hits” (songs currently ranked in the charts), “Older Titles” (songs which
are no longer in the charts but have a high availability), “Rarities” (unpublished so far or
being of low availability) and “Newcomer” (releases by new or still unknown artists)
(Buxmann, P. et al., 2005). Therefore, the DMR can differentiate on price based on the
type of music offered.
2.7.1.3 Record Label Perspective
If the record label acts as an etailer as well, the same DMR’s perspectives will apply.
Music companies are now under pressure to look for alternative revenue streams. One
area the record labels have been exploring is to share revenues from tours, performances
on television and in films, and merchandising, which was not the case traditionally.
In the digital era, record companies are licensing music across a multitude of platforms,
different formats and with hundreds of different partners. New revenue streams are
evolving as labels work with social networks, direct-to-consumer sites and brand
partnerships (IFPI Digital Music Report, 2008).
Music for Mobile Phone Internet has a massive market at the moment. With ringtones
sold as mastertones, which have recently became full track downloads to a mobile, marks
an ongoing shift in consumer demand from mobile personalisation features, such as
mastertones and images of artists, to core music consumption over the mobile phone
(IFPI Digital Music Report, 2008). Record labels can tap into this market to promote the
artist and generate loyalties.
Ad-supported services offer consumers free access to streamed or downloaded music

while artists and record companies are compensated by revenues generated by
advertising. Recent deals between some record companies and social networks such as
MySpace, Bebo, YouTube, LastFM and Imeem are examples of this trend (IFPI Digital
Music Report, 2008).
19
The record industry used to be focused on the record and all the rest was
promotions. Now it’s a more balanced business where you have records, TV
shows, merchandise, touring revenues and so on (IFPI Digital Music Report,
2008)
2.7.1.4 Consumer Perspective
Sicker et al. (2007) carried out a research involving college students supporting the claim
that the industry should attempt to capture new market segments by releasing different
quality versions of digital content. Consumers who are unwilling to pay ninety-nine cents
for “superior quality” copies can thus purchase cheaper, “standard quality” downloads
instead. Amongst the students who pirated music, twenty percent were not willing to pay
anything for the music but the remaining 80% were willing to pay from twenty to forty
cents for a legal download pricing model. Thus, it might be possible to capture these
individuals by implementing alternative pricing models (Sicker et al., 2007).
Refer Appendix G for a survey of what consumers are willing to pay.
2.7.2 Gaining Value from and Adding Value to the Industry
Every participant is looking to gain a significant amount of value from the industry.
Value in this context refers to a quality service for the consumers, and a sustainable plan
for the artist, record label and DMR.
According to Sicker et al. (2007) consumer’s consider important characteristics to switch

from pirating to buying - the desire to own content legally, the convenience of being able
to more easily find desired content, and the guarantee of a high-quality product and the
flexibility to move the music onto different media players or to control and access it in
various other ways (Sicker et al., 2007). Consumers generally consider these aspects as
being added value to the digital music.
Digital consumers want not only single tracks, but bundled content as well. The added
value in the form of bonus material bundled with digital albums are helping drive
20
consumer demand for premium products. Premium albums outsell the basic versions in
most cases (IFPI Digital Music Report, 2008).
Whenever we release a premium download as well as a basic album bundle, it’s

usually the higher value product that sells the most, especially within the first
couple of months. The fact that fans choose the expanded version, at an enhanced
price point, demonstrates how much they value that additional content and the
deeper connection with the artist it offers. - Eric Daugan, Vice President, Digital
Business, Warner Music International (IFPI Digital Music Report, 2008).
Nine Inch Nails and Radiohead have proved this.
Amberg and Schroder find that the enlargement of the audio content, focusing on special
interests, more reasonable prices or different pricing concepts, more confidence in the
consumers and better additional services, which support the community of the consumers
could and should increase the acceptance of the legal offer of digital audio content
(Amberg and Schröder, 2007).
Though digital music has advantages over physical formats, the product is generally
viewed as incomplete. Digital music does not include some of the important attributes of
the physical CD, which include artwork, lyrics, liner notes, and additional content found
in enhanced CDs (video games, desktop wallpaper, video clips). In addition, the simple
act of purchasing and possessing a new CD or vinyl stimulates an individual (Janson and
Mansell, 1998).
In the digital album of today, there are a simply a list of tracks and a thumbnail image of
the album cover that cannot be seen properly. According to label sources and pirate
network tracking firms, fans downloading full albums from BitTorrent sites almost
universally choose files that include scans of the CD booklet over those that do not
(Bruno, 2008).
21
Therefore, ways of viewing album art should evolve. Lyrics should be integrated in some
manner and liner notes in the form of behind-the-scenes footage of the producer and band
at work, interviews, Q&A, family photos/video, etc. (Bruno, 2008).
Music sites can enhance the value of a download by providing additional information,
additional songs, discussion forums, cross recommendations and communication
possibilities that can create virtual music communities (Peitz and Waelbroeck, 2004).
“The only bad thing about MySpace is that there are 100,000 bands and no filtering. I try
to find the bands I might like but often I just get tired of looking.” says a 15 year old
student and 1,200,000 is the number of rock acts clamouring to be noticed on MySpace
(IFPI Digital Music Report, 2008). Thus, the record label can add value by ensuring this
student’s needs are met.
Peter Jamieson, BPI chairman, highlighted the industry's investment in new talent,
adding:
The arrival of legal digital music retailers, the increasing use of viral online
promotion and the emergence of social networking sites such as MySpace, Bebo
and Faceparty means that record companies can be highly innovative in
promoting this new talent. (BPI, 2006).
The Internet, with its weblogs, chatrooms, and other fora, enables everyday consumer
gossip to be exchanged on a global scale, generating what social psychologists and
marketeers interchangeably term buzz, hype, viral marketing, and word-of-mouth. The
Arctic Monkeys’ rose from obscurity through these methods and not due to traditional
marketing. Consumption fuels hype, and hype in turn boosts future demand (Croxson,
2007). Record labels should thus understand the dynamics of guerrilla marketing on the
Web, which is now largely becoming a low cost alternative to traditional marketing.
22
Any artist can make and distribute a recording since it is much less expensive to make a
record today, but unfortunately recorded music is going to become less valuable to
everyone over time. The artist’s true nemesis is obscurity since there is a flood of music
out there resulting in abundance and saturation (Future of Music, 2007).
Artists can establish meaningful virtual relationships directly with their audience by
building an online fan base and answering online posts and comments and taking the time
to interact with their fans (Future of Music, 2007).
2.7.3 Piracy Perspective
Before the dawn of digital technology, illegal copies were inferior to the original, thus
making piracy arguably less attractive. Piracy of digital music is most definitely the
largest contributing factor hindering the success of the digital music industry since a
stolen copy is an exact replica of the legal file
David Blackburn proved that as an artist’s work is made more ubiquitous through
pirating, it helps to make the artist more well-known, gathering a following along the
way. He concludes that file sharing relatively reduces sales for well-known artists than
for relatively unknown indie artists who are propitiously affected (Blackburn, 2004).
Napster helped me on this first album because nobody knew about it. It made it
easier for people to know about the music. Once you get successful and you get
another album, you want to start safeguarding it. - Josh Kelley (Lets Sing It,
2006).
Thus, even though an artist might acquire a cult following due to free-downloading,
he/she may hope to profit from subsequent albums, which may also be pirated. Therefore,
some control should exist.
23
Klaus Meine, front man of the German rock band “The Scorpions”, complains about the
serious financial damage due to copyright violations, and the Irish musician Andrea Corr
feels deprived of the result of her creative work and Metallica has been quite vociferous
in their stance against free music (Buxmann et al., 2006).
Piracy is a relative term to the artist. As long as the artist endorses the free sharing of
their music, it is viewed as promotional piracy or sharing. However, if the artist deems
the sharing of music unethical or illegal, it turns into piracy.
Refer Appendix H for an interview with Neil Young and his views on piracy.
Record labels focus most of their efforts trying to coerce the uninterested consumer
groups using threats of lawsuits and other forms of intimidation. Researchers at Harvard
University and the University of North Carolina reported the results of a study of file
sharing, based on a review of the log reports of 1.75 million traded songs over a 17 week
period compared to actual album sales. They concluded that even substantial file sharing
did not appear to have a negative effect on sales, but may have in some cases have had a
positive effect on purchases (Roughly Drafted, 2007).
Record labels have begun to accept that attacking the consumer is not the best course of
action and now usually turn their efforts onto stopping pirating organisations such as
Pirate Bay, the torrent-tracking site. The developers have been indicted for copyright
violations where the record labels seek $2.5 millions in damages (Buskirk, 2008).
Promotional piracy argues that piracy may have helpful promotional effects. Most people
would not buy music due to a lack of awareness. Sampling appears to be important in the
market for recorded music since music is an experience good where horizontal product
differentiation and taste heterogeneity are important (Peitz and Waelbroeck, 2004). Thus,
24
consumers (buyers and pirates) can help plug this information gap, spreading the word in
guerrilla fashion, arguably boosting the digital music retailer’s sales.
Depending on the consumer’s nature, the following views on P2P can be possessed
(Sandulli, 2007):
(i) P2P music is a perfect substitute to CD music
(ii) Just a complementary product
(iii) Substitute or complementary product depending on the specific song or artist
considered
Therefore, it can be concluded that different consumers will have different reasons and
views for pirating music.
Bhattacharjee et al. (2005) carried out a rigorous empirical analysis of the impact of
online sharing on the success of music products and inferred that sharing does not hurt
the survival of top ranked albums but it does have a negative impact on low ranked
albums. However, the P2P systems provide an enhanced environment for users to sample
and experience songs (Bhattacharjee et al., 2005).
“At my current university, students are continually searching for sites that are not blocked
by the university’s network firewall.” (Kunze et al., 2007). This is a clear indication that
the downloaders know about it being illegal and unethical due to the restrictions placed,
but these are college students with little extra money to splurge on digital music or audio
CDs, therefore, resorting to this option.
In Moore’s study, criminal justice majors scored higher to some extent with respect to the
ethics of downloading than the other majors in the social sciences area and that
information systems majors, who are more skilled in the technical aspects of
downloading, download the most (Kunze et al., 2007). A downloader’s background plays
an important part in perceiving the ethics of downloading.
25
Out of the 622 teens in a survey who have tried music downloading, 75% agree with the
statement that, “Music downloading and file-sharing is so easy to do; it’s unrealistic to
expect people not to do it.” Just 23% disagreed with this statement (Madden, 2008).
The Non and Light downloaders appeared to be most ready to adopt the commercial
digital music services whilst he heavy downloaders are set in the their lawless ways and
are the most difficult to tap (Walsh et al., 2003).
2.7.4 Deciding on an Effective Business Model
Amberg, and Schröder identify four categories of ebusiness models (Amberg, and
Schröder, 2007):
1. Category A: ebusiness models based on “pay-per-download” and independent of

the technology of the supplier.
2. Category B: ebusiness models based on “pay-per-download” but are dependent of
the technology of the supplier.
3. Category C: ebusiness models based on a flat rate.
4. Category D: ebusiness models that include commissions for reselling of the
digital audio content, sharing tools or legal offers of digital audio content.
Every new artist, etailer, and record label is anxious to create a model that will excel,
surpass rivals and become world renowned. This requires a comprehensive knowledge of
the current workings of the industry and an innovative plan capable of encompassing all
the industry’s entities and innovations.
However, Andrew Dubber, the Degree Leader for Music Industries at UCE Birmingham,
author of a novel site called New Music Strategies has written numerous articles, book
chapters, and conference presentations about new strategies and technologies. He states
that one of the most common questions asked by musicians and independent music
companies is what the new business model will be. He declares that the idea of one new
model that we will eventually arrive as errant nonsense (New Music Strategies, 2008).
26
Dubber suggests abandoning the search for The New Model to open up the way for
creative and potentially lucrative customised solutions and new music strategies (New
Music Strategies, 2008). Refer Appendix D for his theory.
“There’s no new model. There are only creative ways to adapt. And in order to do that,
we’re going to need a big piece of paper.” (New Music Strategies, 2008) A prophetic
statement as will be seen in the Methodology chapter, Chapter 3 where the problem is not
attempted to be solved in a means-end manner.
2.7.5 Copyright and Standards
In the new environment, copyright is not functioning as well as it once did. The main
problem is the enforcement of these rights since the costs of regulating infringement has
escalated due to copying being rampant and carried out by anonymous offenders. Since
the copied items are almost perfect substitutes for the original good, the act of copying is
practically costless. Copyright therefore loses its effectiveness as a property right in the
digital age (Liebowitz and Watt, 2006).
There has yet to be developed, an interoperable standard content-protection solution for

digital music, in part due to fair use definitions shifting with new technology
introduction. Protecting digital content requires a multifaceted approach comprising
technology, consumer education and the law (GartnerG2 and The Berkman Center,
2003).
Digital Rights Management (DRM) software allows a content provider to “wrap” a set of
rules around content, to define how control can be manipulated and shared by the
purchaser of the copyrighted content. Restrictions such as how many copies of the
original file a user may make, whether the file can be archived or backed up and if the
user can move the content to another device are imposed Sometimes the content is
encrypted and in order to get the decryption key a user must pay money, provide an e-
mail address or agree to use tracking. It is up to content owners to set the conditions
(GartnerG2 and The Berkman Center, 2003).
27
DRM is occasionally known as Down-Right Messy as it can be implemented in the

hardware, in the Operating System and also in the player, which are all provided by
different firms. Thus, there is the issue of setting standards and making sure that all
platforms are compatible (Peitz and Waelbroeck, 2005.
Appendix F provides an overview of the current digital music copyright laws.
Participants of the FSFE suggest that DRM is like a tool, much like a hammer that could
be used to build a house or hit someone over the head. While that may be true from a
certain perspective, from another angle, DRM is more like a hammer that, in order to
allow a few people to build a house, requires to hit everyone on the head (Fellowship of
FSFE, 2006).
The vast majority of artists could never afford tracking down violations of their rights,
and indeed are themselves often victims of the recording companies who will not allow
them to publish songs even if those companies themselves do nothing with them.
(Fellowship of FSFE, 2006).
Stronger Copyright laws and harsher punishments does not help to rectify the situation,
but only tends to make the recording companies stronger, further worsening the state of
the individual artist trying to negotiate deals with them (Fellowship of FSFE, 2006). The
claim that copyright supports the creative basis of a society is said to be empirically
doubtful since it vastly underpins unequal rewards. (Kretschmer, 2005).
Copyright suits music publishers and labels who are incentivised to market and distribute
the works of an artist they exclusively control. Copyright also suits artists with a record
of hits who can extract favourable terms from the record labels and does not assist new
and niche artists who could sign away their “bargaining chips” cheaply (Kretschmer,
2005).
28
Ever since the sale of digital tracks from the major labels began, a valiant attempt was
made to safeguard the tracks from being pirated in the form of DRM and other ways that
made illegal distribution inconvenient.
Record labels are reluctant to offer DRM-free music since they believe they might lose
control. However, after realisation that it caused consumer weariness dawned, UK’s EMI
was the first to offer DRM-free music, which showed early returns from digital music
retailers as positive with reported sales increases for artists on EMI. Coldplay's A Rush of
Blood to the Head has seen a 115 percent increase in sales, paling in comparison to Pink
Floyd's classic Dark Side of the Moon, which are up 272 percent since EMI dropped the
DRM (Bangeman, 2007).
Many business models, particularly based on subscriptions, super-distribution (allowing

fans to share music with their friends) and time-limited downloads (such as those offered
by ad-supported services), cannot exist without DRM (IFPI Digital Music Report, 2008).
Consumers are weary of DRM since certain restrictions are being applied onto the digital
music, absent from the physical media. This is summed up in a Web comic (Figure 2-5).
29
Figure 2-5: Web Comic (Drew, 2007)
A hardcore geeky Internet community exists with their own l33t (elite) language. This
community are also major enthusiasts of digital music and will not ever willingly pay for
digital music due to these restrictions.
Consumers argue that digital music if purchased from a proprietary music store forever
locks them into using music players from that one company. On the flipside, statistical
facts indicate that at the end of 2006, customers purchased a total of 90 million iPods and
2 billion songs from the iTunes store. A few calculations reveal that 97% of the music on
the average iPod was not purchased from the iTunes store so iPod users are clearly not
locked into the iTunes store to acquire their music (Jobs, 2007).
2.8 Current Models and Trends in the Digital Music Industry
The US Supreme Court ruling in the MGM v Grokster case in June 2005 has made
innovativeness more promising by bestowing legitimacy upon models that marry the
power of file sharing (Currah, 2006).
Last.fm is a highly popular and revolutionary digital music business model that connects
random users who share the same music tastes. Last.fm provides free music of some
artists and similar artists according to the user’s preferences with a radio option as well;
30
allowing the user to sample tracks and buy albums as a digital download if satisfied.
(last.fm, 2007). Last.fm launched an on-demand music streaming service in January 2008
where millions of tracks from all four major music labels and indies were made available
for free. This ad-supported music stream has resulted in a 119 percent increase in music
purchases through Amazon. Refer Appendix E for the full report.
This social music site was recently bought by US media giant CBS Corporation for
£140million, the largest-ever UK Web 2.0 acquisition (BBC, 2007). This is symptomatic
of the blurring of lines between the mass media and the digital music industry, which
means that although digital music has on the surface appeared to have shrunk the
recorded music industry and perhaps been relegated to merely a sector, the exact opposite
has occurred.
Rupert Murdoch's News Corp bought social networking site MySpace for £290m Google
paid £883m for YouTube (BBC, 2007). This also indicates a blurring of demarcations
between news, music and television industries.
BurnLounge has adopted a controversial business strategy, which is the digital music
world's equivalent of a pyramid selling scheme. Users can get personally involved on a
number of levels as music retailers and can register and build their own personal etailer,
containing their own personal music preferences and recommendations. The user is then
allowed to recommend their personalised music store to friends and family and get
reward points whenever their referrals buy from the store. Users can also sign up affiliate
retailers where they will get a share of any revenue generated from sales on their
affiliate's stores and a share of the fees that their affiliates pay (Digital Music, 2006).
Mark Cuba believes that music is not just entertainment, but a tool for people to describe
themselves to those around them. Music is used in ringtones, on MySpace pages,
deafening emanations through the windows of cars to let people know something about
who we are. “Technology is now in a position to allow people to broadcast their
31
personalities and positions about themselves as well as enhance music consumption”

(Blog Maverick, 2007).
Anas Tawileh states in his article, Music in the Arab World about an alternative business
model, which involves producing and distributing creative content under the Creative
Commons license. The Creative Commons philosophy counters the copyright regimes
and legislation that is restricting access to intellectual and artistic content (Tawileh,
2007). Reasonable proponents of free and open content do not confuse unauthorised use
of commercial music with “free content,” and have instead sought to create their own
music, movies and other entertainment, and share them under agreements like the
Creative Commons licenses (Roughly Drafted, 2007).
The most successful business model to date is the iTunes Store, which recently
announced selling its 3 billionth song.
The milestone not only marks a major feat for Apple, but also for the digital
music industry as a whole. Its strategy was since it was tied so closely with
Apple's wildly-popular iPod. The continued success of the iTunes Store continues
to reflect growing consumer interest in legal music downloads. (Cheng, 2007).
Microsoft has designed a model to promote emerging music acts across its entire digital
footprint. The program is called Ignition, which makes artists heard to consumers for an
entire month through Microsoft's multiple services such as MSN, Xbox Live and Zune
(Reuters/Billboard, 2007).
Artemis Records has used Kazaa and other file-sharing networks to distribute music files
by artists such as Lisa Loeb, Ricky Lee Jones and Steve Earl. They use a DRM
technology developed by a partner of Kazaa that allows the first uses for free and after
that the downloaders must usually pay 99 cents to purchase the song (Peitz and
Waelbroeck, 2005).
32
Jay-Z and Coke formed an alliance where promotional material was inserted into decoy
files on file-sharing sites, turning P2P networks into an advertising medium for record
labels and other marketers. “The concept here is making the peer-to-peer networks work
for us,” says Jay-Z's attorney, Michael Guido. “While peer-to-peer users are stealing the
intellectual property, they are also the active music audience,” and “"this technology
allows us to market back to them.” (Angwin et al., 2006).
Audioslave, Ice Cube, Yellowcard and other music groups have used decoy files for their
own version of viral marketing where snippets of a song are inserted into the files with
the promise that a stream of the entire song will be “unlocked” once the promotion is
forwarded to enough people. The intention is that this will motivate people to send the
file to many friends (Angwin et al., 2006).
Amazon has decided to abandon DRM and sell tracks in the MP3 format to allow
consumers easily to transfer music among a variety of devices. The other major record
companies Universal Music, Sony-BMG and Warner Music are testing the MP3 format.
However, they are still concerned that dropping copyright protection could increase
piracy or cut into their growing sales of music to users of mobile phones (Chaffin and
Duyn, 2007).
Due to recent efforts to close several major file-sharing servers, the availability of a large
amount of music that was synonymous with P2P networks has diminished. This impact is
verified by research. In November 2007 NPD found that over a third of P2P users (39%)
said they could not find the songs they wanted on P2P networks. The second most
common negative P2P experience was the inability to download from search results
(32%) (IFPI Digital Music Report, 2008) Refer Appendix J for the hidden costs of
downloading.
The industry new buzzword is 360, denoting a 360-degree record deal where labels sign
artists to contracts that include a cut of not only album sales, but also their merchandise,
touring and other revenue that was historically not the case for labels. This continued
overlap among entities will ultimately change the industry landscape (Bruno, 2007).
33
2.9 Proposed Business Models
Currah suggests harnessing P2P file sharing in a legalised and secure form using DRM in
the P2P’s network distribution. The file can then be freely shared over the Internet but
will remain locked until a usage license is purchased. He however states that there should
be a balance between the interests of the artists, consumers and corporations, which
would require a less intrusive and inflexible form of DRM he titles “thin” DRM (Currah,
2006).
The benefits of this model would be tremendous due to the distributed and scalable
structure of P2P networks resulting in more cost-efficient storage and deliverance of large
digital files unlike the traditional centralised server-client architectures where costs
increase in proportion to the number of consumers accessing. In addition, the consumers
will be rewarded for their role in the transactions making them “citizens” rather than
“leeches” (Currah, 2006).
Brian Fischbeck suggests a few models that will not work such as the Ad-Supported
Model and An Interim Model (Napster for a Monthly Fee). This model involves the
wrapping of advertisements around copyrighted content that the user would have to see
or hear when accessing the content. The problem with this model is it resembles radio;
albeit a radio station where you control the music programming, which is currently
available for free and known as Pandora.com (Pandora, 2007). This will seem intrusive to
consumers who will still prefer to steal (Fischbeck, 2000).
He then suggests a model that may have a chance -The Streaming Subscription, “Music
Locker” Model. He proposes that the major labels turn into service companies. To
integrate a consumer’s music into an “available anywhere” collection where they will
have to pay to add it to their MusicBank music locker (Fischbeck, 2000).
In his Stealing [from] the Music Industry paper, Naveen Sastry proposes an open content
business model by leveraging the ubiquity of the current P2P phenomenon. He suggests
34
that the major record labels will have to form partnerships with technology companies to
engage in promotion. This model helps the smaller bands gain a foothold since an
undiscovered band can be critiqued by consumers based on their musical prowess or
catchiness (Sastry, 2005).
Paula M.C. Swatman and Cornelia Krueger provide an empirically based analysis and
evaluation of the existing and possible future evolution of Internet business models
within the digital content market, focusing on the possibilities for cooperation and
competition within this market-space (Swatman and Krueger, 2006). They propose that
linking companies and technologies in ways such as value webs or
cooperative/cooperative networks are successful strategies.
Online retailers can develop their offerings. For example, personalised news services or
creative advertising targeting an individual, develop a competitive pricing strategy, and
provide easy access for their consumers, offering an always-accessible website.
(Swatman and Krueger, 2006).
Krishnan et al. (2006) explores the possibility of harnessing the raw power of the highly
scalable and robust P2P networks. They postulate a pricing solution where it might be
possible to stimulate individuals to contribute to P2P networks through reputation based
mechanisms (Krishnan et al., 2006).
2.10 Summary of the Industry
The literature above, albeit exhaustive, requires a rationalisation of this cascade of

information, which is indubitably the most arduous task. This will be carried out in
Chapter 4. The lessons learned from past endeavours, proposed promising models, and
the current accomplishments in the industry and where it appears to be heading should be
analysed as to how a stakeholder can appropriate significant value from it.
35
Online music distribution can be viewed as a device for consumers to test and find out
about new music, an advertising tool, a door to open the market to small artists, a source
of information for market research and a tool to manage customers.
Innovative concepts are necessary to establish profitable ebusiness models and the
already existing theoretical findings should be taken into consideration while
implementing an ebusiness model (Amberg, and Schröder, 2007).
“The record-label system is built on 100% control,” says Leonhard, and major labels
“have lost that” (Smith, 2008). Saying yes to rehab is a start, but returning to health is
going to take a sustained dose of discipline and imagination (Smith, 2008).
Note: The research for the literature review ended in May 2008.
36
Chapter 3: Methodology
“But I try to get my head clear, it's too full of ideas that I haven't thought of yet” –
Weather Reports by Bright Eyes.
The methodology in this context is taken to be a structured approach to thinking about the
problematic situation; “what” is wanted to be achieved and “how” that “what” can be
achieved. Thus, to gain a background understanding of the digital music industry domain,
information was initially collected from various sources focusing on the key four players
and their perspectives, which was furnished and explicated and critically evaluated in
Chapter 2, the Literature Review.
3.1 Research Aims
The research carried out in this dissertation was performed in Chapter 2 and is aimed at
analysing the digital music industry to eventually improve the position of each entity in
the real world. With there being four key players in the industry, the worldviews of these
four were researched on. By noting the successes, failures and predictable failures based
on past trends and opinions of industry authorities from journal articles and from all
aspects of the industry as a whole; a holistic approach taken should ideally result in a set
of recommendations that accommodate the views of all the selected participants.
3.2 Data Collection
Data collection is predominantly divided into secondary data and primary data where
secondary data is categorised as information that has already been assembled, having
been collected for some other purpose with sources including census reports, trade
publications, and subscription services (Ghauri and Gronhaug, 2002). Primary data refers
to data obtained for the first time and used specifically for the particular problem or issue
under study. Primary data was not used in this dissertation due to the enormity and type
of the information that has to be gathered within limited time constraints. Only secondary
data was used.
37
Secondary data allows for better informed decision making, cheaply and speedily. The
drawbacks of using only secondary data might be that the definitions used, scope,
coverage, frequency, timeliness and accuracy may all be inappropriate for the needs of
the current research since such data may have been designed for a different or general
purpose (Ghauri and Gronhaug, 2002). Therefore, secondary data should be checked for
suitability to ensure its contextual nature.
Although the collection of primary data through observations, experiments, surveys

(questionnaires) and interviews would have provided more tailored information elements
to this dissertation, gathering information from record labels, artists and digital music
retailers is possible but seemed a highly unlikely probability of them actually taking the
time to respond. The data collection process can be costly and time-consuming with only
a sparse few if any who are willing to cooperate since the respondents’ unwillingness to
partake maybe due to lack of time, lack of incentive, waste of their valuable time, and
risk in sharing confidential information (Ghauri and Gronhaug, 2002).
There are two types of secondary data known as internal and external. However, since the
analysis is of an industry and not particular organisations, only external secondary data
was considered. External sources constitute general statistics, industry statistics, annual
accounts and research reports, etc. (Ghauri and Gronhaug, 2002).
The digital music industry being an intensely discussed about and controversial topic at
the moment was researched mainly through the World Wide Web’s sources. Journals,
websites, white papers, working papers, industry authority opinions, e-books, case studies
and relevant blogs were the secondary sources of information. Copious amounts of
surveys, interviews and reports have been carried out in reference to the digital music
industry. Appendix A provides statistical evidence in the form of graphs and charts and
surveys carried out in 2007 and 2008. Therefore, it was unnecessary to personally carry
out questionnaires and interviews to gather data from artists, digital music retailers,
record labels and consumers as the analysis being holistic, requires views from all these
participants, which would involve an enormous amount of time and resources. It would
38
also be extremely difficult to contact record labels, artists and digital music retailers since
they are not easily accessible depending on their popularity and status in society and it
would mostly resemble the currently conducted research but probably to a lesser accuracy
and detail. Thus, it would have been highly unproductive.
3.3 Qualitative Vs. Quantitative
Qualitative research is one of the two major methods of inquiry in social sciences.
Qualitative research involves an in-depth understanding of human behaviour and the
reasons that govern human behaviour. Essentially, it investigates the why and how of
decision making, as compared to what, where, and when of quantitative research.
Qualitative research involves the use of qualitative data, such as interviews, documents,
and participant observation data, to understand and explain social phenomena
(Wikipedia(c), 2007).
Quantitative methodologies can be quite complex requiring considerable time and effort
for proper understanding and use. Community members such as undergraduates,
postgraduates, etc. may "tune out" elaborate statistics, creating difficulties in the
utilisation of the products of research (Kruger, 2003). However, this depends on the
background of the analyst. An engineer may prefer quantitative methods whereas an arts
or purely business and information systems individual may prefer a qualitative method.
What should be considered most significant is the appropriateness of the selection.

Clearly, the digital music industry revolves around social, political and legal issues.
While a quantitative method of analysis can be applied to a file-sharing oriented
hypothesis, attempting to improve an industry holistically based on the perceptions of its
incumbents most definitely requires a qualitative method of analysis.
The book Surviving your Dissertation mentions A Holistic View approach. The holistic
view stresses that the whole is different than the sum of its parts. Consequently,
qualitative methods seek to understand phenomena in their entirety in order to develop a
complete understanding of a person, program or situation as is the case in this thesis
(Rudestam et al., 2001).
39
3.4 Hard Systems Vs. Soft Systems
Hard systems thinking is goal-oriented where a study begins with the definition of the
desirable goal to be achieved. The question asked is, what system will meet his or her
need to solve the problem? It takes the problem or need as a given, which allows
completely unexpected answers to emerge at later stages (Checkland, 1981).
What is required is not problematical in hard systems, it is only how to achieve it that is
the problem. At the soft end, what to do is problematical as well as how to do it (Wilson
2001, p.8). Questions such as “can such systems be improved, modified or designed and
if so, how?” are asked.
The digital music industry most definitely requires a soft approach since the problem
cannot be defined; rather it is a problematic situation, which can be improved.
3.5 Methodology Selection
The main problem apparent in the digital music distribution industry is the conflict of
opinions amongst the main entities. Realising innovation does not seem to be an issue but
standardisation affecting interoperability does. Lack of understanding of consumer and
artist needs by the record labels, and vice-versa. What has caused the industry’s disarray
is not a dearth of any raw material, technology or an economic crisis but simply social
conflict due to a lack of understanding and awareness. The problematic situation is fuzzy
and related to social constructs
The methodology selected to analyse the digital music industry is the Soft Systems
Methodology (SSM). This was the methodology advocated and taught throughout the
MSc Strategic Information Systems course, but more importantly is veritably suitable for
the problematic situation in question.
3.5.1 Soft Systems Methodology (SSM)
SSM is an interpretive-based systemic theory with the establishment of principles for

action in ill-structured problem contexts. SSM provides an explicit, organised and
40
defensible way of reconciling different and/or conflicting perspectives. It comprises a set

of concepts that can be applied to any situation being analysed and is more useful in
“soft” situations. The unique feature of SSM is that it takes seriously the multiple
perceptions of the people in the situation together with the ability to model potential
future scenarios. It provides a mechanism for constructing models pertinent to those
perceptions, which are unique to that situation. Since it is a participative approach, SSM
essentially provides the structure for the analysis.
SSM recognises that different individuals will have different perceptions of the situation
and different preferable outcomes, and it explicitly takes these into account from the
beginning to ensure that the results of the analysis are accepted by all the participants. It
does not define a single right method of action, but through an iterative process, defines
an acceptable improved path of action. (Presley et al., 2000).
The perceptions of the main participants in the industry are crucial and should be highly
regarded if the industry is to progress healthily. Each participant would want to further
their position in the industry but should consider the views of the other participants in the
industry as well to ensure sustainability. Therefore, the perspectives of all the involved
persons such as the artists, record label/producers, digital music retailers and consumers
can be used to think about the significant problem the industry is facing and resolve these
issues through a process of accommodation since SSM deals with resolving conflicting
views of problems and requirements between users (Wilson, 2001).
Brian Wilson describes a methodology as a set of guidelines which stimulate the

intellectual process of analysis. The problem in inquiry is “soft” since the needs as
specified by the users in the industry are argumentative with those required to support the
business and the business requirements themselves are problematical (Wilson, 2001). The
perceived reality is problematic and inquiry is systemic.
The digital music industry spans many subject areas and deals with many controversial
issues involving the perceptions and attitudes of different key industry persons. Although,
it is not impossible to analyse the industry using quantitative methods, it is quite difficult
41
to analyse it holistically. There have been many quantitative studies on the effects of file-
sharing or consumer purchase patterns but these analyses only focus on one aspect of the
industry. How it fits into the whole is often difficult to visualise. A qualitative method
will focus on the perceptions of for example an artist, where one may want to profit from
sharing music on social networks and another may want to simply propagate their image
and tunes through the virtual community of music listeners. They are both equally correct
in their own right. Therefore, “softness” and holistic nature of this industry’s quandary
makes it highly suitable for analysis by the SSM methodology.
The SSM methodology was developed from earlier systems engineering approaches by
Professor Peter Checkland and colleagues Dr. Brian Wilson at the University of
Lancaster. The Wilson approach will be used as the basis for the methodology in this
study.
In planning this dissertation, SSM was also used to present the plan and proposal to
supervisor, Mikhaila Burgess.
3.5.2 General Systems Theory
SSM is based on systems theory. A system can be defined as:
An organised, unitary whole composed of two or more interdependent parts,

components or subsystems and delineated by identifiable boundaries from its
environmental supersystem (Kast and Rozenweig 1985, cited in Ingram, 2000).
A system must be bounded and contain parts which are known as subsystems.
Systems interact with their environment by taking in and producing an output of
substances, people or things such as in the human body (Ingram, 2000).
General Systems Theory is a name which has come into use to describe a level of
theoretical model-building which lies somewhere between the highly generalised
constructions of pure mathematics and the specific theories of the specialised
disciplines (Boulding, 2004). .
42
3.5.3 SSM’s Tools
An overview of SSM’s tools will be presented to comprehend how they can and will be
applied to analyse the problematic situation.
Root Definitions and Conceptual Models

The Root Definition and Conceptual Model assembly are the building blocks of the
intellectual constructs in the SSM approach. The root definition captures the purpose
taken to be relevant and the conceptual model represents those structured activities that
must take places if the purpose is to be achieved. Thus the RD defines what the system is
and the CM describes what the systems must do to be the one defined (Wilson, 2001).
The RD is a sentence expressed in natural language, consisting of elements in accordance

with the mnemonic CATWOE (Wilson 2001, p.23).
• Customer: the recipient of the output of the transformation process, with the
victim or the beneficiary.
• Actor: those individuals who would do the activities in the resultant conceptual
model if they were to map onto reality
• Transformation process: transformation process
• Weltanschauung: The German expression for worldview. Practically interpreted
as the statement of belief within the RD
• Owner: a wider-system decision taker with authority over the system defined,
with a concern for the performance of the system.
• Environmental constraints: Those features external to the system defined, which
are taken to be significant.
There are two types of root definitions:

1. Primary tasks root definitions, which focus on officially declared tasks of the
system.
2. Issue-based root definitions, which focus on problem issues, which would lead to
systems that are not likely to be institutionalized in the real world.
43
This study will incorporate the formulation of issue-based root definitions and their
conceptual models.
Wilson’s Conceptual Model rules (Wilson 2001, p.28):
• The CM must be constructed from the words in the RD without recourse to the
specific situation. Thus the inclusion of activities and/or sets of activities within
the CM must be defended against specific words or phrases within the RD.
• Since each activity in the CM could be the source of a RD for expansion to a
more detailed level, sufficient words should be used within the activity to be
precise about the transformation process it describes
• The CM should be defensible against the FSM, which means that there should be
adequate connectivity, reference to resourcing and at least one monitor and
control subsystem within the CM.
• Arrows within a CM are essentially logical dependencies and should have a
consistent format. Double-headed arrows are not permissible.
The conceptual models are accounts of concepts of purposeful activity based on declared
worldviews, which is used to stimulate cogent questions to facilitate debating about the
real situation and the improving it by implementing desirable changes to it. The models
can thus be viewed as devices to stimulate, feed and structure the debate about the
situation perceived as problematical (Ö Pala1 et al., 2003).
The assumption upon which SSM is based is that whatever the nature of the organisation
(in this case, the industry), assume that the individuals within it are pursuing purposeful
activity (Wilson, 2001).
The set of possible purposes stated for the digital music industry could all be legitimate
definitions. With the purpose defined, an RD could be formulated relevant to that
purpose. However, these single statements of purpose are not a description of the real-
world industry but a particular perception of it. Thus, the definitions and the resulting
model can be seen as a concept relevant to the organisation, which can be used in
44
thinking about the organisation. These concepts are called Human Activity Systems
(HAS). They are systems because they represent a set of purposeful activities together
with the relationships (logical) between them. The activities could be undertaken by
human resources if the system were to map onto reality (Wilson 2001, p.9).
Both Wilson’s and Checkland’s approach are not prescriptive in nature. It is a pure
flexible methodological framework. Thus, as long as sufficient structure and rigour is
applied to the framework, the reflective practitioner can approach the problematic
situation in the most befitting and logical manner.
The situation in the industry was problematic because the definition of the problem and
action to improve the situation differed between the entities. SSM was developed for
situations that are ill-defined, and comprise a number of interrelated problems and are
viewed differently by people in the situation.
In this dissertation, I am the problem-owner analysing the industry. However, any of the
selected stakeholders can analyse the industry from their point of view. Using this
method, the problem owners will learn about, debate and define action in order to
improve the industry situation.
3.5.4 The Checkland Approach
The seven stages are: (Checkland, 1981):
1. Find out about the situation

2. Express the situation
3. Define some Root Definitions relevant to the situation
4. Develop Conceptual Models
5. Compare Conceptual Models with reality
6. Define feasible and desirable changes
7. Take action to improve the problem situation
45
Stages (1), (2), (5), (6) and (7) can be regarded as working in the real world, while stages
(3) and (4) can be considered to be systems thinking about the real world.
3.5.5 The Wilson Approach (Wilson 2001, p.8)
1. Find out about the situation

3. Define potential PT Root Definitions relevant to the organisation or unit under
review
4. Develop Conceptual Models
5. Compare to achieve an accommodation of views
6. Map organisation structure
7. Define information categories
8. Map activity-to-activity information flows
9. Map current information provision and compare against requirements
The above is mainly used for information requirements analysis.
3.5.6 The Customised SSM Approach Adopted for this Study
Wilson’s approach from Stages 1 to 5 will be tailored to suit this study. The stages
beyond that are more organisation oriented and beyond the scope of this study.
46
1. System definition 8. Take Action
7. Present results
2. Find out about the

situation
6. Compare to achieve an
accommodation of views and
recommendations
REAL WORLD
ITERATE SYSTEMS THINKING

ABOUT THE
REAL WORLD
5. Develop Conceptual
Models
4. Create Root Definitions
Figure 3-1: The Customised SSM Approach Illustrated
1. System definition. The problem situation to be intervened is identified since a

number of people are uncomfortable with the situation. An exploration is required
with possible methods of improvement. This was Chapter 1, the Introduction.
2. Carry out a comprehensive background research focusing on the perspectives and

opinions of the four key participants. This was carried out in Chapter 2, the
Literature Review where the industry’s issues revolved around the perspectives of
the four key chosen entities.
3. Create profiles. The situation will be expressed where profiles will be created for
each of the selected industry players. These profiles will be mainly based on the
literature review with the orientation stated. This will be carried out in Chapter 4.
4. Create Root Definitions. This stage will involve systemic thinking about the real
world where Human Activity Systems (HAS) will be created Based on the
profiles, Root Definitions (RDs) will be formulated around the worldview for
each participant. The essence of each entity’s profile will be the material used to
construct the RD for each entity. This will result in four root definitions.
47
However, two orientations for the record label will be taken. Therefore, five RDs
will be developed. This will be carried out in Chapter 4.
5. Construct Conceptual Models. The RDs will be conceptualised. Each RD will

then be modelled according to Brian Wilson’s approach in the form of conceptual
models, resulting in five complete conceptual models. This will be carried out in
Chapter 4.
6. Compare to achieve an accommodation of views. Some activities in each CM will

be compared and contrasted across all the four models with potential inferences as
to the discrepancies and similarities stated. This will be carried out in Chapter 4.
7. Present results. The results of the analysis will be presented, which will be the
recommendations for participants to follow, aiming towards an accommodation of
worldviews, which will be essential for the industry to prosper and sustain itself
harmoniously. This will be carried out in Chapter 4.
8. Take action. The output of the analysis will be used to improve the real-world
situation. Even though this stage will not be carried out in this dissertation, it
represents the iterative nature of the methodology where following the action
taken, new changes in the environment can be taken into consideration to once
again redefine the system and restart the SSM cycle.
48
Chapter 4: Analysis, Evaluation and Learning
This chapter uses the customised approach illustrated in the previous chapter to
qualitatively analyse the intellectual constructs and present the findings. In this chapter,
profiles will be created, root definitions will be formulated and conceptual models will be
constructed all based on the four core selected entities. Finally, the evident shortcomings,
evaluation, reflection and future work will be highlighted.
Five profiles will be presented in the next section. These are limited to my interpretation
of the participants’ perspectives and is based on the literature review.
The literature review revealed a slew of different perceptions on different aspects in the
industry. An orientation, it was realized, mainly depends on the state of the participant in
the industry spectrum from “starting-off” to “well-established”. An artist just starting-off
may not be too concerned with profit making as long as he/she is able to gather a
following but an artist having gathered a following will then want to make a profit in
order to earn a living.
Hence, a participant should be aware of its position in the industry as well as the position
and purposes of the other participants if the participant is to gain and provide value to the
industry and alleviate strife. It can be assumed that no one individual is 100% committed
to a single perception. A networking-oriented record label would be promoting artists
whilst the promotion-oriented record label would be networking with other businesses.
4.1 Player Profiles
This is Stage 3 of the customised SSM approach. The reason for creating a profile for
each player is due to the fact that different individuals under a certain player category
will undoubtedly have a different worldview based on their position and orientation,
which in this case means general inclination. For example, a new indie artist just wanting
to be heard through any method compared to a relatively established artist wanting to
profit from distribution. Or a new indie label solely carrying out promotion though
49
guerrilla marketing methods for a signed or unsigned artist compared to an established

label focusing on profitability and promoting a signed artist.
4.1.1 Consumer Profile
A light and ethical downloader who downloads a small amount of music illegally and
some legally as well is the orientation selected for the consumer since this segment is the
most likely to embrace a digital music service and as research has indicated, is the most
profitable target market.
A study by Walsh et al. found that the level of music downloading a person has been
exposed to had a direct effect on their consumption behaviour. Regular downloaders
showed a greater support for a subscription model than for the pay-per-download
approach, which was favoured by light downloaders. Hence, the downloading stage the
consumer is in will influence his/her digital downloads (Walsh et al., 2003).
The five risks that the respondents felt most strongly influenced their downloading
decisions were:
(i) Sound quality of the downloadable files
(ii) Quick, easy-to-use search tools
(iii) Security of personal information
(iv) Broad range of artists from different labels
(v) Ability to freely make copies of downloaded music
Orientation - Non and Light Downloader

This consumer persona would prefer to listen to licensed music at any time from a broad
range of genres and all the major record labels and a lot of indie labels. He/she would
welcome sound quality options and different formats at reasonable prices. The security
should be high as non-downloaders are weary of security threats and carrying out
transactions over the Internet. Flexible usage of the downloaded tracks would be a
requirement. Some would also prefer a streaming service to bypass storage issues.
50
4.1.2 Artist Profile
Orientation – Exposure-seeking new indie artist. This orientation was chosen since this
type of artist is the most likely to benefit from the new industry if its potential is properly
understood in order to reap the benefits. This type of artist is arguably able to benefit
more from the digital than the traditional industry.
The artist’s persona stems from a talented indie artist looking to start a career in music in
the new industry. He/she needs to know the methods of low-cost distribution on the latest
vehicle of distribution – the Internet. They want their music to be heard by anyone and
everyone interested in music in order to gather a following of listeners in quick time.
They want this to be done legally and in an efficient manner. Eventually, if their music
has gathered a substantial audience, money can be made from concert tours, merchandise,
digital music tracks and CDs or vinyls.
4.1.3 Digital Music Retailer Profile
Orientation – general start-up etailer. This orientation was selected instead of an etailer
with the backing of a big brand or experience since a new etailer can speedily rise in the
new industry if the most suitable approach is taken.
A digital music retailer has the responsibility of satisfying different types of consumers
by offering a service different to the services currently offered that seem to be lacking
something. They should ensure that their service is very reliable, legal and user-friendly
to rival the threat of P2P services. By offering digipacks comprising added artist material
and other innovative offers to differentiate their service, the consumer would turn
towards this legal service.
4.1.4 Record Label Profile
Two record label profiles were selected since different labels appear to posses more
contrasting purposes and to also demonstrate that a participant category can have more
than one purposeful definition.
51
Orientation – Artist-focused Promotion

This orientation is related to the new industry’s more economic form of promotion where
labels solely promote on the Internet to reduce cost and target Internet users. Therefore,
this orientation was chosen to demonstrate the changing nature of the record labels.
This persona bends more towards an indie label wanting to know about as many indie
artists trying to get themselves heard. Through the process of filtering, bands that the
label sees potential in can be promoted through low-cost methods over the Internet. In
order to be more influential, the label would prefer to work with other participants in the
industry such as review sites, DMRs and artists.
Orientation – Networking-focused
The traditional big labels have always believed in being influential and having artists
approach them for support. The new industry has however changed how the labels can
wield their power and benefit from it, which is the reason for this orientation’s selection.
This persona wants to become a highly influential label by collaborating with other
entities from different industries such as the telecommunication, digital device
manufacturing, mobile phone, the retailers and etailers and internet companies. They can
therefore exert more power and hope to shift the balance back in their favour.
4.2 Root Definitions
This is Stage 4 of the customised SSM approach.
The following question is been answered in order to understand the purpose of the
created Root Definitions: What is your purpose in the digital music industry and how do
you believe you can achieve this?
SSM was also used for the planning and proposal stage of the project. Refer Appendix I
for the Root Definition and Conceptual Model.
52
Root Definitions for the Problematic Situation in Inquiry
Based on the five profiles created in the previous section, five Root Definitions will be
modelled in this section. The core requirements of the record label, artist, consumer and
digital music retailer will be streamlined and drafted as separate root definitions.
Wilson specifies a few rules that should be followed when formulating RDs. These rules
will ensure RD consistency and the proper construction of the conceptual models.
Example of an RD: A system to download music.

• What must be done to acquire the input?
• What must then be done to reach the output?
• What must then be done to make the output available?
The answers to these are derived from logic.
The CATWOE mnemonic provides a mechanism for testing the RD and ensuring that the
words chosen are as precise as possible since English is usually used too casually. It is
also a test of the structure and words chosen in the RD and a logical defensible
intermediary between the RD and the CM (Wilson 2001, p.23).
It is not legitimate to include word and/or phrases in CATWOE that do not appear in the
RD (Wilson, 2001).
Consumer - Non/Light and legal/ethical downloader Orientation
A music provider owned system, operated by a consumer to listen on-demand to any

preferred type and quality of legal music with flexible usage and without any risk
involved by easily accessing licensed music from a range of labels and self-distributing
artists at any time with the selection of preferred format and preferred quality options
along with secure payment methods in order to satisfy the needs of the consumer within
copyright laws, suitable pricing and technological constraints.
C – consumer
A – consumer
T – to listen on-demand to any preferred type and quality of legal music with flexible
usage and without any risk involved
W – easily accessing licensed music from a range of labels and self-distributing artists at
any time will ensure music is listened to on-demand
53
O – music provider
E – copyright laws, financial and technological constraints
Reasoning:
Since the target consumers are mainly the legal digital music downloaders and the CD-
purchasing market, they would want to download music in their preferred format, when
they feel like downloading, and from a wide range. The inclusion of legal constraints is
implicit of the fact that these consumers are believed to be ethical downloaders of music
and concerned with copyright laws. Suitable pricing and technology are constraints since
they set limits on all the extra music options.
The actor in this case is the consumer since he or she will be the person purchasing and
downloading the music. The owner is a digital music provider, who is anyone capable of
providing this service to the consumer. Refer Figure 4-1 for the Conceptual Model.
Artist – Indie/Do-it-yourself Orientation
An artist owned system, operated by the artist to capture the time and attention of a
consumer quickly and economically by sharing and distributing music on the latest
potential digital music distribution sub-channels such as virtual communities, file-sharing
applications and digital music retailers in terms of cost, popularity and suitability, and
interacting with the appropriate labels to satisfy the musical desires of the consumer
within financial, legal and technological constraints.
C – consumer
A – artist
T – to capture the time and attention of a consumer quickly, economically
W – sharing, interacting and distributing music on the latest potential digital music
distribution sub-channels and digital music influencing media will capture the time and
attention of a consumer quickly and economically
O – artist
E – financial, legal and technological constraints
Reasoning:
Latest potential sub-channels are what the artist deems suitable, economical and popular
enough for consumers to access and sample their music. Thus, the consumer can make a
decision based on what is heard rather than what is reviewed and promoted by others.
Refer Figure 4-3 for the Conceptual Model.
54
Digital Music Retailer – A start-up etailer Orientation
A digital music retailer owned system, operated by digital music retailer staff to provide a
differentiated service of licensed music by distributing music through a smooth running
and easy-to-use piece of software and/or website along with an interactive consumer
experience that could include virtual communities of both fans and artists, bundling and
packaging music in new ways, offering innovative pricing schemes and other artist-
related value added material in order to satisfy the digital music consumer within
financial, legal and current technological constraints and available budget.
C – consumer
A – digital music retailer staff
T – to provide a differentiated service of licensed music
W – distributing music through a smooth running and easy-to-use piece of software
and/or web service along with an interactive consumer experience will provide a
differentiated service of licensed music
O – digital music retailer
E – financial, legal and current technological constraints and available budget
Reasoning:
An easy-to-use user interface is necessary to rival the P2P file sharing applications, which
are relatively complex to the uninitiated user. Effectively distributing the music through a
differentiated service would mean that the consumer would prefer to download the music
through the DMR’s service rather than off file-sharing programs, physical retailers, and
other competitive digital music retailers since differentiated would mean that the DMR
would have an edge over its competitors. Legal and technological constraints could
include DRM since the artist and/or record label will specify these terms. Refer Figure 4-
4 for the Conceptual Model.
Record Label – Promotion Orientation
A record label owned system, operated by record label staff, to proliferate a potential
artist speedily and economically throughout the Internet by implementing innovative and
artist-appropriate guerrilla marketing strategies known as viral marketing and other
innovative schemes on digital music influencing sub-channels such as digital music
retailers, blogs, relevant forums and music review sites in order to satisfy the artist within
the constraints of the artist contract, current technology, the record label type and
available budget.
C – artist
A – record label staff
55
T – to proliferate a potential artist speedily and economically throughout the Internet

W – implementing innovative and appropriate guerrilla marketing strategies on popular
virtual communities and other online digital music influencing media will proliferate a
potential artist speedily and economically throughout the Internet
O – record label
E – artist contract, current technology, the record label type and available budget
Reasoning:
With the digital music industry altering their role in the traditional supply chain, the
record labels now have to seek online reputation. They want to promote artists in a
profitable manner. This can be achieved by implementing innovative marketing
approaches that will benefit both the record label and the artist. By analysing the latest
fads and trends in the industry, the record label can focus on making the artist heard
through these sources such as community sites (facebook, myspace, etc.) and record
reviewing sites (allmusc, rateyourmusc and pitchformedia). Consumers frequent these
sites to find out what’s new and popular or what their friends are listening to. Thus, using
network externalities, the record label can promote the artist within the artist contract and
label type and financial constraints. Refer Figure 4-2 for the Conceptual Model.
Record Label – Networking Orientation
A record label owned system, operated by record label staff, to become a highly
influential connected entity across businesses that can be used to promote digital music
by analysing and exploiting current developments and trends in technology and media
industries, notably networking with information technology (IT) providers, liaising with
audio device and mobile phone manufacturers and collaborating with digital music
retailers, artists, digital music authorities and popular social networking communities in
order to satisfy the record label’s management within the constraints of current
technology, the record label type and available budget.
C – record label’s management

A – record label staff
T – to become a highly influential connected entity across businesses that can be used to
promote digital music
W – analysing and exploiting current developments and trends in technology and media
industries will make the record label a highly influential connected entity across
businesses
O – record label
E – current technology, the record label type and available budget
56
Reasoning:
This is the orientation of a traditional label attempting to re-establish their diminished
power in the new industry by allying with the entities involved in the distribution of
digital music. Thus, becoming a highly influential connected entity means that the label
will be recognised by artists and other entities increasing its profits in the long-term. The
record label’s staff will carry out these activities to satisfy the label’s management. Refer
Figure 4-5 for the Conceptual Model.
4.3 Conceptual Models (Issue-based)
The Conceptual Model is an intellectual construction of logically related activities. It is a

modelling of what needs to be done as stated in the RD. It is not a representation of
reality but simply what the RD states. By following Wilson’s general principles and
modelling rules, the conceptual models were constructed.
The arrow emanating from one activity and pointing to another, indicates that the second
activity is logically dependent on the first activity having been completed. The various
activities in the system are being continually performed.
Using the Formal Systems Model (FSM), the model can be validated as to ensure its
accuracy by answering the questions:
Does the model derived achieve the purpose defined? – If there are activities within the
model which are not logically derivable from the words in the RD they should not be
included. Similarly, if there are words or phrases in the RD that are not represented in the
model, then the model is incomplete. The purpose of the Formal Systems Models is to
ensure that the CM produced is a defensible model of a HAS.
It is the interpretation of the analyst (myself) to view the situation as an HAS and model
the perceptions as logical constructs. The five models follow.
57
MSc Strategic Information Systems Dissertation 2007
Title: A Systemic Analysis of Digital Music Distribution
Figure 4-1: The Consumer’s Conceptual Model
58
Define the record

label’s actors Allocate activities to
Assemble information on Define sub-channel the record label’s
potential artist actors
Define artist Assess their
respective
Determine the capability
capabiltities
required of each activity
Assemble information on Take control action to

Assemble intelligence on digital
blogs match capabilities to
music influencing sub-channels Monitor the match of H.R. activity
capabilities to performance requirements
requirements info
Assemble information on forums C.A.
and music review sites C
Assemble information on Monitor system Take control action to
digital music retailers performance achieve expectations
Assemble information on
guerilla marketing strategies Monitor the selection of System C.A.
Evaluate strategies in
Develop strategies strategies performance
terms of popularity and C
info Determine
cost
performance
measures
Determine Select strategies Determine record
appropriateness of sub- label’s performance
Assemble information channel to artist Determine the artist contract, current expectations
on viral marketing Take control action to technology, record label type and
ensure strategies are available budget constraints
innovative and artist-
Evaluate distribution Implement selected
appropriate
sub-channel strategies on sub-channel
Assess the impact on

C C.A. each activity Decide how to
Select distribution react
sub-channel Monitor
implementation of
selected strategies
Activity info.
Notify each C
controller
Take control action to ensure the artist is
speedily and economically proliferated Monitor
throughout the Internet due to the implemented conformance
strategies Assemble activity Take control action to
constraint information ensure conformance
C.A.
C.A.
C Activity info. C
Figure 4-2: The Record Label’s Conceptual Model (Promotion Orientation)
59
Figure 4-3: The Artist’s Conceptual Model
60
Define the DMR’s

actors Allocate activities to the
Determine the characteristics of a DMR’s actors
smooth running software or website Assess their
respective
Determine the capability
Decide how to make the capabiltities
required of each activity
software or website smooth
running and easy-to-use
Provide a smooth running and Take control action to
Define smooth easy-to-use piece of software or Monitor the match of match capabilities to
H.R. activity
running website capabilities to requirements
performance
requirements info
C.A.
C
Define differentiated Determine the Monitor system
characteristics of a performance Take control action to
Define interactive differentiated service achieve expectations
consumer experience System
Monitor the provision of a performance C.A.
smooth running and easy-to- info C
use software and/or website Determine
performance
measures
Assemble information on Take control action to ensure the
current digital music services software and/or website is easy-to- Determine DMR’s
use and smooth running performance
Develop a service that is Determine the legal, expectations
interactive and different to financial and technological
current pricing schemes
the current offerings constraints
bundling and packaging C C.A.
music
Know about artist-related value- Assess the impact on
added material currently offered each activity Decide how to
Assemble information on Distribute music with an react
music networking interactive consumer
communities experience
Notify each C
controller
Determine music that can
be legally distributed
Take control action to ensure the Monitor
music service is licensed and Monitor the distribution of conformance
differentiated music with an interactive Assemble activity Take control action to
Assemble information on constraint information
consumer experience ensure conformance
licensed music
C C.A.
C.A. Activity info. C
Figure 4-4: The Digital Music Retailer’s Conceptual Model
61
Figure 4-5: Record Label’s Conceptual Model (Networking Orientation)
62
4.4 Monitoring and Control Functions
The conceptual models contain monitoring and control activities for certain activities as
depicted in the models above. The following questions are asked:
• The effectiveness of the system (Is this the right thing to do?)
• The efficacy of the system (Does it work?)
• The efficiency of the system (Does it use the minimum resources necessary?)
Essentially, each activity present in the conceptual model is monitored with certain
control action taken if the monitored activity does not perform according to the set
expectations and standards imposed. The aim of this activity is to monitor relevant
activities and compare them with predetermined performance criteria, and to take
appropriate control action if the activities deviate from the required criteria so as to
ensure the achievement of the stated purpose (Patel, 1995).
For example, taking the activity “monitor the provision of a smooth running and easy-to-
use software and/or website”, which is followed by the “take control action to ensure that
the software and/or website is smooth running and easy-to-use” activity, the downloads
could be monitored or the website could be checked for hits and if the results return from
between zero to an insignificant number, the efficacy of the system can be realised. Also,
a feedback form for the consumers could check the smoothness and ease of use. The
effectiveness of the system could be monitored by declaring a certain goal that should be
reached within a certain period of time such as 5000 downloads or 50,000 web hits within
24hours. The efficiency of the activity will actually depend on the method in which the
process is implemented in the real world by measuring the inputs (the number of servers
and other resources necessary) to provide the service with useful output. Essentially, the
ratio of the effective or useful output to the total input in any system i.e. the minimum
resources should be used to reap the maximum efficiency.
63
4.5 Analysis – Exploiting the Models
Wilson advocates the creation of a Consensus Primary Task Model (CPTM), which is an
amalgamation of all the activities selected from the constructed models, which most of
the people in the problem situation agree are fundamental to achieving its purpose
holistically.
W-decomposition is a method for constructing a CPTM and is concerned with developing

a single concept for a company while recognising the multiple perception spectra of the
managers concerned.
Wilson describes this process as quite complex and more inclined towards the purpose of
a single establishment. The problem in inquiry is complicated by the fact that there are
perceptions within perceptions since an industry is being intervened. A record label
would have a number of perceptions concerning its purpose in the industry and so will the
artist, digital music retailer and consumer. Therefore, four CPTMs will have be created
with each CPTM being derived from 3 to 12 root definitions and models, which is
unrealistic for a limited scope and time dissertation as this. Therefore, a variation of
Wilson’s CPTM method will be adopted for the analysis.
In this section, the activities of the five models will be compared and contrasted.
Essentially, the models will be analysed by drawing out the common and disparate
elements; providing a reasoning for the commonalities and differences and producing the
findings. In addition, the activities will be compared with reference to real-world
activities and situations.
The reasons for comparing some activities across the models:
• Comparing all activities would make little sense mainly due to relevance and time
constraints. Only the pertinent activities are selected.
64
• Similar activities are compared with each other to tease out the differences and create
recommendations with accommodating activities
• Wilson states that the desirability of activities is determined in discussion with the
group of managers or others who the analyst judges to be the group most concerned
with the output of the analysis being undertaken (Wilson 2001, p.84). Since this is not
possible, the activities are chosen at my discretion.
Refer Appendix K for the comparison for the comparison of activities.
Artist Vs. Consumer
The consumer is willing to pay for downloads if the added value options are reasonably
priced and they also have the ethical satisfaction of paying for downloads. The artist in
this case does not want to be rewarded in terms of monetary value but is satisfied if the
consumer will devote time and attention to the artist. This means that the consumer
should have free and easy access to the music. However, with the flood of bands that are
attempting this, the average consumer will not have the opportunity or time or the
patience to sample bands simply offering free music. There has to be some backing from
a known band or recommendations on review sites, etc.
There is a conflict of interest here, since the artist adopting a do-it-yourself approach and
not charging for music is not in the interest of the consumer. This type of consumer is
interested in the quality and added features offered by the music provider and mostly the
type of music the consumer is interested in and perhaps recommended music by the
provider.
Refer Appendix K-1 for the table comparison.
Recommendations:
The consumer should realise that there are many artists vying for their attention so they
should take the time to listen to free music from different sources instead of taking the
time to steal.
65
The artist should realise that the consumers are willing to pay if the music can be easily
accessed with the right options available.
As long as the artist makes their music available according to the consumers’
requirements, the consumers that take a liking to the artists’ music will certainly become
fans and follow the artist, which will no doubt increase the artists’ profitability in the
long-term when releasing new material and performing at live shows.
Refer Appendix A for consumer statistics on why consumers will download digital
music.
Artist Vs. DMR
Recommendations:
Artists should approach digital music retailers as an intermediary to make themselves
heard to a wider audience and thus have a better chance of capturing the time and
attention of a consumer.
Digital music retailers should take artists’ needs into consideration by offering a platform
for their music distribution.
The artist and DMR have complementary requirements. If the DMR provides music from
both signed an unsigned artists to the public, the artist will attain a following if liked by
the consumers and in turn so will the DMR.
66
Artist Vs. Networking Record Label
Recommendations:
Artists should sign onto a record label to ensure a better reach in capturing the time and
attention of a consumer.
The record label should use its influence to provide more opportunities for the artist to
acquire the time and attention of a consumer.
Artist Vs. Promotion Record Label
Recommendations:
The artist should link up with the label instead of a DIY approach if he/she would like to
acquire the time and attention of a consumer quickly.
The record label and artist have similar requirements. The artist has to identify potential
online channels to distribute their music and the record label will do this for them by
coming up with innovative online marketing approaches to distribute the artists’ music.
Both the record label and the artists aim to increase the awareness of the artist’s online
presence. Refer Appendix A for surveys of potential online channels.
The artist wants the attainment of a following, which will benefit both label and artist
them in the long term.
67
Consumer Vs. DMR
Recommendations:
The consumer should purchase music if the right ingredients are provided by the digital
music retailer instead of stealing.
The DMR should ensure the consumer’s needs are met by providing a customised and
personalised service.
The consumers want the essentials to listen to music and the DMR should provide these
basics plus added features to differentiate themselves from others and achieve
competitive advantage.
The difference here is that the “what” that the consumer wants to achieve is in the
worldview of the DMR. Thus, the two should complement the requirements of each other
and provide for a successful business plan for the DMR.
Consumer Vs. Networking Record Label
Recommendations:
The consumer should appreciate the label that is influencing the consumer as to what
filtered artists are out there.
The record label should influence consumer purchasing decisions based on its image and
type and not see the consumer as a threat to its position.
68
Consumer Vs. Promotion Record Label
Recommendations:
The consumer should take note of the artists being promoted by the label.
The label should promote the artists on the sources the consumers mostly hears about
artists from. Generally, the digital music purchasing consumer is on a social networking
site and regularly frequents record review sites such as allmusic and pitchforkmedia.
Based on these sites, the consumers will follow a recommended artist in their favourite
music genre and will require these essentials elements to acquire them.
Refer Appendix A for community site surveys.
DMR Vs. Networking Record Label
Recommendations:
The record label should approach digital music retailers to promote artists.
The digital music retailers should ally with record labels if they are to expand their
catalogue of digital music.
69
DMR Vs. Promotion Record Label
Recommendations:
The DMR and label can work together to promote the artist. The DMR’s differentiated
service and the label innovative marketing approaches to promote the artists will
eventually lead to significant sales and artist awareness.
It is also possible for the record label to take on the role of a DMR as well.
Networking Record Label Vs. Promotion Record Label
Recommendations:
The comparison of two different orientations for the same entity revealed that an
accommodation of views can be reached to resolve conflict and achieve the label’s
objectives effectively.
The networking label should realise that becoming influential is about wielding power
with responsibility. Therefore, the aim should be to help support artists and develop their
career.
The promotion label wants to promote artists economically and speedily on the Internet.
However, if their efforts are combined with the influential label, the artist’s reach can be
widened by several folds since there are many consumers willing to buy digital music
with no time to spend on Internet reviews but perhaps they can hear about artists though
other media such as radio and television.
An ideal logical construct with the accommodations of views
A non-contentious or more accurately, an accommodation of activities must be adopted

for the players in the industry to operate effectively in harmony. The requirements and
beliefs of the industry participants are at times complementary and thus require an
70
understanding and compromise on the role of the other players in the digital music
industry in order to achieve any significant growth in the industry. The Appendices and
other sources provide support for the derived results proving that they are in fact logical
and commonsensical.
In an ideal world:
“An artist will capture the time and attention of a consumer who will have heard about
the artist due to the promotion and influential nature of a record label where the consumer
listened to the music off a digital music retailer collaborating with a record label and
providing a differentiated service with consumer-enticing options that attracted the
consumer.”
4.6 Evaluation
This section involves the assessment of the strengths and weaknesses of the
methodological approach taken towards the carrying out of this thesis and provides
insight into the limitations of the project as a whole.
Using only secondary information can be seen as a limitation as the perceptions taken
according to my interpretation can be said to be “watered down”. Carrying out interviews
with the participants would have led to a more accurate interpretation of their
worldviews.
The created root definitions managed to present the purposeful essence of each
participant from the exhaustive literature review in a sentence, which proves its technical
potency. However, they only presented a single worldview of each of the four persons of
the digital music industry except in the case of the record label where two worldviews
were presented. If several orientations were selected for each participant, a more holistic
view and analysis would have resulted. Unfortunately, time constraints and scope
prevented this.
71
The stage of conceptual modelling was a valuable intellectual exercise. It enabled
clarification to take place of what needs to be done to achieve certain objectives
(purposes) where in a pressurised real world situations, often getting the thing done is
more important than stopping to think exactly what is being done and why (Patel, 1995).
This was seen when modelling during the project. A lot of thought was given as to how to
achieve the purpose stated in each RD. The activities in the models are continually being
performed, which is essential in the case of this dynamic industry where technology and
ideas are constantly changing.
The validation of the models was carried out as the models were competently built using
Wilson’s validation techniques. However, their relevance is not known. A comprehensive
validation was not possible due to time constraints and feasibility since the ideal way
would have been to demonstrate the models to industry authorities to acquire feedback.
The only realistic method was through facts, statistics, opinions and interviews. The
information collected however was deemed accurate and relevant from sources such as
the International Federation of the Phonographic Industry (IFPI) and
EntertainmentMediaResearch. The validation of the Root Definition was preformed using
CATWOE. This was fairly straightforward and commonsensical.
Lane and Oliva postulate that the proposed changes are aligned in the sense that they
have the social belief and support of the team and there can be no assurance that they are
consistent outside the judgment of the analyst’s limited cognitive capabilities: “changes
may implicitly be contradictory, conflicting, self-defeating, or ineffective when
implemented in a setting with detailed and dynamic complexity” (Lane and Oliva, 1998).
This is very true, since SSM is limited to the inquirer’s (my) cognitive capability i.e. how
I interpret the perceptions of the people involved. Therefore, the recommendations may
not be effective when applied to the real-world.
Although SSM is a learning system, it was not possible to know for certain whether or
not the formulated root definitions and models are relevant. So there was no real
experiential learning in a double-loop learning fashion unless time permitted the contact
72
of the industry players for verification and validation since one of the main intentions of
using SSM is to improve the problematic situation in some way. Question such as did the
record labels benefit from implementing innovative marketing approaches? Did the
digital music retailers benefit from offering a differentiate service for digital music? Also,
assessing whether the improved situation was due to the organised SSM thinking or
whether it was a case of evolution will be quite cumbersome to prove. Thus, it is difficult
to know whether the actions will improve the situation or not if and when implemented in
the real-world.
Figure 4 6: An Autopoietic Methodology-Creating System (Ledington and Ledington, 1999)
Figure 4-6 shows SSM in terms of an antipoetic methodology creating system. In such a
system, the use of systems methodology leads to the recognition of learning about that
use which in turn leads to the methodology being redefined in the light of the learning
that has arisen from practice (Ledington and Ledington, 1999).
Little is said about the accommodation or consensus process. Simply because a consensus
model is created, can we presume that the participants in the real world would reach a
consensus and agreement in a similar manner? The analysis is limited to my perception of
what I felt is important to a participant since there was no interview carried out with
them. I had to ask myself “what W must be implied by the aspects emphasised in the
literature?”
73
The approach taken to carrying out the project was selected and tailored according to the
time constraints and requirements of a Masters dissertation. As a novice user of SSM,
only the core thinking tools and techniques were used. The tailored approach ensured the
proper usage of the methodology and left an audit trail, which contributed to a rigorous
and structured approach to tackling the problematic situation. This proved to be very
powerful as an entire industry was capable of being analysed. Delving deeper into
Wilson’s methodology, more tools such as the Maltese Cross could be used for
information analysis which will require more time and effort to internalise. If the core of
the methodology is grasped as applied in this dissertation, it would be an interesting
experience to apply an approach in full to a problematic situation.
SSM was also be used as a meta-methodology to plan the use of SSM for the project.
Essentially, the project planning phase. It was used not only to analyse the problem
situation but also the carrying out of the inquiry itself. Thus, SSM can be used just as
easily for intervening a large company’s complex problem or a simple mini-project.
The distinction between the real world and intellectual process was successfully
achieved. It was realised that the models are not descriptions of the real world but are
description of ways of thinking about the real world. Thus, to prevent the process from
becoming woolly, and to ensure rigour and discipline, strict formality was maintained
during the formulation of the RDs and the construction of the CMs based on Wilson’s
principles and rules. The intellectual process was explicitly described leaving an audit
trail for the purpose of defensibility. The essence of using a methodology was realised
and not taken for granted such as in the hard methodologies. The right amount of
flexibility and rigour is required. The lack of strict imposition of rigidity does not mean it
can be used without rigour as was realised.
The usage of SSM for the particular problematic situation was justified more and more as
the project progressed. Due to the continual changing nature of the industry’s
environment being in a continual state of adaptation, SSM is well-suited for the analysis
of such a situation. In addition, SSM thrives on the main problems being social conflict
74
due to different Weltanschauungen, the messiness, and the wide variety of different
orientations of participants present in the industry. As a result of using SSM, more insight
was gained into the digital music industry’s participants. The reasons for the strife
became clearer and ways of alleviating this strife was seen.
A few issues concerning the ambiguity of CATWOE’s elements were experienced in the
project and similar concerns in secondary literature. Since it was Wilson’s approach that
was followed, his proposed CATWOE definitions were used. It was noticed that there are
slight discrepancies between Checkland’s and Wilson’s CATWOE expansion such as in
the Actor, which is defined as those who would do T by Checkland. Wilson (2001, p. 23)
defines the term as: “those individuals who would do the activities in the resultant
conceptual model if they were to map onto reality,” giving it more specificity. He also
addresses the need to give attention to the competence of the Actors.
Checkland suggests using W1, W2 and W3 where there is a difficulty in separating them
practically even when the analyst fully understands the difference between them. (Basden
and Wood-Harper, 2006) Wilson only advocates the use of one W, similar to W1 so it
was not an issue during the root definition creation. W is merely a perception of an
industry participant where SSM does not offer any method to evaluate how realistic this
perception is. It is simply left to the judgment of the inquirer, his worldview, to pick the
best worldviews. Wilson simply states it should make T meaningful.
Mingers 1992 cited in Basden and Wood-Harper, 2006 believes that too little attention is
given to E where frequently, important constraints are overlooked during analysis.
Usually there is a tendency to focus on very general constraints such as cost and time,
which hinders the generation of fresh insights. It is sometimes difficult to differentiate
between constraints that should be accepted and those that might be changed, mostly in
situations with where the environment is changing.
Basden and Wood-Harper (2006) suggest it would be useful to differentiate determinative

constraints such as the law of gravity from normative constraints, which are often socially
75
constructed. Examples of well-written and thus more important would be “high
bargaining power of suppliers” and “loss of confidence of customers” (Ferrari et al.,
2002, p. 61 cited in Bergvall-Kåreborn et al., 2004). This is quite insightful as E was not
given much than cursory thought in this project since general constraints are usually cited
as adequate in the literature.
The only deliverable that can be considered most useful in the real world is the derived
set of recommendations. These will be highly useful for the selected participants to
follow and understand the new industry they are adapting in. What is most advantageous
in the case of this qualitative analysis is that any of the participants can trace back and
quickly understand as to how the recommendations were derived instead of a more
statistical method in a quantitative analysis which would require specific expertise to
grasp.
The tools and methods used are simplistic if properly understood and highly potent for
the problematic situation in inquiry. The building of conceptual models of human activity
systems and the root definition formulation was a highly creative process. This process
allows individuals to move out of their real-world comfort, and into a world of
possibilities (Molineux and Haslett, 2007).
Research indicated that the experience of a facilitator in using SSM improves its
flexibility and performance as a methodology (Molineux and Haslett, 2007). Bjorkman
(2004) cited in Molineux and Haslett (2007) finds that the skills of the facilitator in
engaging participants is one of the key factors in the success of a group creativity
process, including the ability to control any negative factors such as social loafing and
groupthink. SSM, it was realised will be much more powerful if the main people of
concern in the problematic situation would participate in the inquiry.
The comparison of the CM with reference to the real world area of concern can reveal
hitherto unrecognised issues since when an activity is compared with the real world it can
76
be found that no formal procedures exist to provide such information. This can be carried
out in this thesis’ future work.
One of the objectives of this dissertation was to use the recommendations generated from
the conceptual models to create business models for each participant. Delving into the
creation of ebusiness models based on the recommendations will require further research
and analysis, which can be carried out in the future.
4.7 Learning and Reflection
This sub-section will represent a reflection on all the significant learning, academic and
practical gained from the carrying out of this dissertation.
Although Wilson’s approach is used in this dissertation, Checkland’s background

literature is the most comprehensive and deemed required reading since little literature on
Wilson’s approach was found. Checkland’s approach has been criticised and evaluated
with suggestions made for enrichment and better usability. This was helpful for the usage
of the methodology but required the right balance of details between Wilson’s and
Checkland’s approach.
It was noticed that SSM’s secondary literature is becoming more influential for
practitioners since they contain new insights. Unfortunately, there are sometimes errors in
the secondary sources, which are repeated subsequently.
It was found that the stage at which the participant is in the music industry had an effect
on the orientation and hence the Weltanschauung. For example, an artist just beginning a
career will prefer to make their music heard to the masses and in turn capture an audience
by sacrificing revenue but a more established artist would be more concerned with
copyright and revenue since they already have a large following and are capable of
churning out any new model since it will most likely work. The same can be said for
consumers, DMRs and record labels.
77
SSM is akin to thinking out loud with the thinking process being transcribed. Thus,
rigour is added to the mental processes, which can be followed in retrospect by a
concerned individual and will facilitate an organised learning environment. The learning
was not only of the problematic situation but of the intervention itself. Special care had to
be taken to not allow it to be used loosely, which will have little effect on the analysis.
However, SSM will become more flexible when the principles are internalised after
repeated use and experience with different situations.
The project proved to be an instructor where learning became a compulsory part of the
process where skills on SSM’s usage was honed and both the workings of the traditional
and digital music industry’s knowledge improved. The significance of a systemic study
was wholly understood in part due to the challenges posed by the project and its
reverberating theme throughout the taught modules.
By not viewing the industry’s problems holistically, simply creating more sophisticated
protection, suing users, and even liaising with ISPs are temporary measures. The way the
industry has drastically being transformed requires a rethinking of even the more
fundamental aspects that we take for granted as stated in New Music Strategies. Refer
Appendix D for a theory on first principles.
An unconventional form of research had to be adopted for this study since the domain
involved the latest happenings in the digital industry. The availability of published books
are few and mostly unavailable at the school libraries. Fortunately, there was a significant
number of peer reviewed electronic journals scrutinising the problematic situation and
various websites, case studies, newspaper articles, and blogs by prominent figures in the
industry presenting their views and theories concerning the new industry. This was a new
learning experience as previous projects mostly involved the usage of books and sheaves
of journals and less on the opinions of pundits in the field perhaps also signifying that the
nature of research is also changing.
Time management, and the importance of scope was learned pragmatically; thus,
ensuring that project management in the real-word will be an even more tedious task
78
especially when dealing with a diverse team. SSM being a cyclic learning methodology
makes time-keeping a more difficult task if its flexibility is exploited loosely. Not having
to be able to work in a group or for an actual company in the course is unfortunate since
that would have offered a better preparation for real-world facing scenarios.
The deeper, more philosophical aspect although not wholly understood of SSM was
realised. The thinking process undertaken was vastly different from that carried out on
previous projects at work and undergraduate level. This method and level of thinking can
be now used for the future solving of problematic situations.
The use of SSM for the analysis of my field of ardour is in retrospect considered highly
appropriate since among other reasons, it is an area of passion for which structure is now
required. Checkland is touted as a person with a love for English Literature, jazz and rock
climbing where jazz and rock climbing involve passion and structure, which are two key
ingredients of SSM (Flood, 2000).
There being very little literature on Wilson’s approach did not facilitate the usage of SSM
but did not impede it as well. As it was realised as an intellectual process with rigour and
structure, little assistance was needed if all the steps and decisions carried out was made
explicit with justification. It would have however been interesting to discover the
experiences and views of other users of Wilson’s methodology.
A similar methodological approach as used in this dissertation can be used to analyse

similar areas of problematic concern such as the digital film industry or any other
industry facing a similar problem. The approach taken for the analysis should give
decision makers in different player entities a structured support for a more informed
decision, regarding the implementation of a business model.
The finding out phase is poorly documented in the SSM literature. Most proponents
advocate the rich picture but this is rather ambiguous as all the elements cannot certainly
be included in one picture. However, after considerable thought, a structured literature
79
review was considered the best method to illustrate the finding out phase. After a few
iterations, the final literature review revolved around the perspectives of the participants,
which represents the iterative nature of SSM.
The methodology has some immanent problems from a philosophical point of view,
which is usually the subject of debate in the secondary literature. However, philosophy is
a rather wide area with several different interpretations and beliefs. If SSM can be used
by a rational thinker with a proper understanding of the problematic situation and the
methodology itself, it would by far be the most potent methodology as the most powerful
thinking tool is used – the mind.
The literature review spans roughly ten years indicating that the digital music industry
phenomenon has been recognised as a problematic situation of concern for a considerably
long time.
4.8 Future Work
There is no dearth of future research that can be carried out in this most mercurial of
domains. The ever-changing and evolving nature of the digital music industry made for a
very intriguing research but there are many aspects that have not been focused upon in
this study due to time constraints, lack of knowledge and MSc scope restrictions.
The main deliverable of this thesis was the list of recommendations. How these
recommendations can be used to take action and thus complete the cyclic nature of SSM
as indicated in figure 3-1 was not done due to time constraints and scope. This can thus
be carried on to be done as future work. Since the conceptual models helped recommend
how to achieve a participant’s desired state in the real-world, an appreciation of how this
can be leveraged by a business to yield a significantly high value and revenue, and the
intended strategy can be speedily formulated. Thus, an ebusiness model can be created
for each participant based on the results yielded from the analysis.
80
Since there was no measures of performance for the activities in the conceptual model
carried out in this dissertation due to there being no real world interaction, this could be
performed in the future since Wilson suggests a comparison of the activities in the
conceptual models with the current activities in practice. Each activity can be questioned
in terms of how well it is done, by whom and what measures of performance would be
used to assess how well it was done (Wilson p.69, 2001).
Another area of interest for future researchers could be a thorough analysis of Digital
Rights Management with a solution proposed for this hindrance to the industry’s
interoperability.
It can be argued that if anyone can produce music, how can the music be judged a hit?
The mechanics of tracking the quality and popularity of the track can be explored. Users
from any part of the world can mix or splice together small bits from other records, which
can be argued as breaching copyright laws and churning out music with little or no
authentic talent. In essence, is the nature of music itself changing and is this another
inadvertent side-effect of digital music distribution on the Internet?
Alternative models based on the Creative Commons licensing strategy is another research
area that can be looked into. The digital music industry in this dissertation focuses mainly
on western music and western ideologies of creating and distributing music; mostly
contemporary music. Digital music however should theoretically enable the music of
every part of the world to be listened to by any person in any part of the world. With
music’s origins from the tribes of Africa, a music connoisseur or even a curious casual
listener will be greatly intrigued by the music of different eras - the medieval,
renaissance, baroque, classical, and romantic and 20th century classical epochs. Business
models targeting the music of these periods will undeniably capture a large consumer
base as digital music matures and becomes more pervasive.
As exemplified in the Literature Review Chapter, the digital music value chain has
experience a radical restructuring, which is a key feature of Business Process
81
Reengineering (BPR). For a record label and/or a digital music retailer currently
operating in accordance with the traditional music industry, a radical restructuring will
need to take place in order to transform their core process to that of the digital music
industry. This is a digression from the project at hand and is suitable for the future
research since SSM’s strength lies in managing change.
The software tool suggested by Wilson, which does not have much literature widely
available known as MooD can be investigated to prove whether it can facilitate the
analytical process and the methodology as a whole just as Rational Rose has been proven
to do for use cases, sequence and activity diagrams.
Some researchers believe that the Internet ethics training can be more successful if begun
in elementary schools or by encouraging parents to become involved. New ethics
education programmes need to teach students that copyright laws should be the primary
and not a secondary consideration when acquiring digital media. A study can be carried
out to spread this awareness.
82
Chapter 5: Conclusions
The findings reveal that there is no one true effective business model but using the Soft
Systems Methodology to think about what the key players in the industry really want to
achieve and the most acceptable “how” of achieving that purpose is a positive start to
optimising the roles of the key players and the industry as a whole.
Another discovery is that it is highly unlikely for a successful business model to succeed
in isolation. In order to survive, and contrary to the “survival of the fittest” theory,
survivors in the digital music industry will be those that form strategic alliances with the
appropriate intermediaries and main participants. Intermediaries that collect and
distribute revenues to artists, publishers, composers and producers and those that possess
extensive databases about artists, composers and works. They can offer new platforms
through which creators of music can directly access users.
P2P file sharing is loved by a colossal number of music enthusiasts who will indefinitely
continue to pirate music. However, these consumers do not form the target “sweet spot”
of the digital music industry. It is the ethical CD-buying consumer that should be first
targeted and then the P2P people by convincing them that digital downloads are a better
option by exploiting P2P’s limitations. Therefore, market segmentation is of high
importance. Proponents argue that the digital music industry should not focus on
penalising those who attempt to use file-sharing but instead support, simplify and
leverage file sharing as an attractive alternative to the illegal P2P offerings. This is
decidedly challenging but will undoubtedly act as an impetus to keep the industry players
on its edge.
DRM is the most controversial issue with opiniated musings sprinkled by prominent
industry contributors such as Steve Jobs who claims that DRM-free music will create a
truly interoperable music marketplace but as soon a new protection technology is
developed and appears in the market, hackers will try to crack it.
83
Strategy and management is of prime significance in the digital music market.
Understanding the new flexible value chain and realising the shifts in power is the
foundation required for a good business model. Artists, consumers, and digital music
retailers are gaining more control. This leads to several strategic opportunities for the
players in the music industry.
Successful future business models cannot simply look into the past for inspiration to
assess and develop a model with sustainable competitive advantage but will have to think
about and predict how future technology changes and trends could benefit them. The
highly reputable companies such as Microsoft, Apple and Yahoo will be leveraging their
brand to diversify into the industry and create and churn out a relatively sound business
model. However, the prepossessing quality of the digital music industry is that in
actuality, any unheard of new entrant is capable of contending with and dominating the
industry in a short span of time and will hopefully be assisted by this study in creating a
healthy industry.
A comprehensive review of the digital music industry was presented in this dissertation
focusing more on the technology, current trends, present models, proposed models and
numerous pertinent perspectives. The resonating premise expressed in the Literature
Review, is the holistic outcome of the digital music industry where the roles of all the key
players have been altered. The amount of disintermediation that can take place is
dependent on each actor. The other revelation is the belief that network based models are
the way forward. This includes many different intermediaries from the traditional music
industry and although they have differing perspectives, they have to all work towards a
particular goal in order for the business model to succeed as was indicated in the derived
set of recommendations.
This exposition is relevant to information systems and marketing researchers and

practitioners and managerial audiences. It provides the perspectives of the industry
participants; therefore, they will be able to create a model to their satisfaction in order to
appropriate a significant profit from the industry. They can also identify potential drivers
84
for value creation. The study is also applicable to similar industries such as the digital
movie downloading industry.
The usage of SSM enhanced the appealing nature of this project since the methodology
was fitting for the problematic situation in inquiry. The chosen methodology was made
explicit in order to provide a defensible audit trail from recommendations back to initial
assumptions and judgments, which is really the essence of a methodology’s usage. A
particular solution was not reached but rather an understanding of the situation and how
the real-world industry could be potentially improved. Due to continued fragmentation in
the distribution and consumption of music, additional developments can be continuously
added using SSM’s flexibility and continual learning nature to improve the digital music
industry.
The limitations and evaluation in its entirety was reflected upon in the fourth chapter. The
main achievements of the project include the learning acquired when carrying out the
project along with the feedback provided by my supervisor at regular intervals. The
scoping and main objectives of the project were vital due to the laborious sifting and
refinement of the overload of domain material available and the ramping-up of SSM
required.
In conclusion, the key now is to create a culture where all the industry’s participants
mutually benefit from each others’ actions and help steer the majority of society towards
models in which the value of recorded music will not be destroyed.
Eric Nicoli, CEO, EMI Group sums it up by saying “It hasn’t been easy, and we must
certainly continue to fight piracy in all its forms. But there can be no doubt that with even
greater commitment to innovation, and a true focus on the consumer, digital distribution
is becoming the best thing that ever happened to the music business and the music fan.”
(Velez, 2007).
85
References
Afuah, A. and Tucci, A.L. 2003. Internet. Business Models and Strategies. Text and
Cases. Second Edition. McGraw-Hill.
Amberg, M. and Schröder, M. 2007. E-business Models and Consumer Expectations for
Digital Audio Distribution. Journal of Enterprise information Management. 20(3) pp.
291-303. [Online] Available at: http://www.emeraldinsight.com/1741-0398.htm
[Accessed: 15 April 2008].
Angwin, J., McBride, S., Smith, E. 2006. Record Labels Turn Piracy Into a Marketing
Opportunity. The Wall Street Journal. [Online] Available at:
http://proquest.umi.com/pqdweb?did=1147110991&Fmt=4&clientId=13939&RQT=309
&VName=PQD [Accessed: 15 April 2008].
Arrington, M. 2008. These Crazy Musicians Still Think they Should Get Paid for
Recorded Music. Available at: http://www.techcrunch.com/2008/03/22/these-crazy-
musicians-still-think-they-should-get-paid-for-recorded-music/#comments [Accessed: 15
April 2008].
Bangeman, E. 2007. Digital Sales Exploding as Apple Muscles to the Number Three Spot
in Music Sales. [Online] Available at: http://arstechnica.com/news.ars/post/20070624-
apple-muscles-past-amazon-to-number-three-position-in-music-sales.html [Accessed: 21
June 2007]
Basden, A. Wood-Harper, A. T. 2006. A philosophical discussion of the root definition in

soft systems thinking: an enrichment of CATWOE. Systems Research and Behavioral
Science. 23(1). pp. 61-87. [Online] Available at:
http://www3.interscience.wiley.com/journal/112230361/abstract [Accessed: 12 April
2008].
BBC. 2007. Music site Last.fm bought by CBS. [Online] Available at:
http://news.bbc.co.uk/1/hi/technology/6701863.stm [Accessed: 07 July 2007]
Bergvall-Kåreborn, B., Mirijamdotter, A., Basden A. 2004. Basic Principles of SSM

Modeling: An Examination of CATWOE from a Soft Perspective. Systemic Practice and
Action Research. 17(2) pp. 55-73. [Online] Available at: [Accessed: 15 April 2008].
Bhattacharjee, S., Gopal, R.D., Lertwachara, K., Marsden, J.R. and Telang, R. 2005.
The Effect of Digital Sharing Technologies on Music Markets: A Survival Analysis of
Albums on Ranking Charts. [Online] Available at:
http://www.heinz.cmu.edu/~rtelang/survival.pdf [Accessed: 21 June 2007]
Blackburn, D. December 2004. On-line Piracy and Recorded Music Sales. [Online]
Available at: http://arstechnica.com/news.ars/post/20070624-apple-muscles-past-amazon-
to-number-three-position-in-music-sales.html [Accessed: 21 June 2007]
86
Blog Maverick. 2007. Some Quick Thoughts on Music. [Online] Available at:
http://www.blogmaverick.com/2007/04/01/some-quick-thoughts-on-the-music-business/
[Accessed: 10 July 2007]
Bockstedt, J.C., Kauffman, R.J., and Riggins, F.J. 2004. The Move to Artist-led Online
Music Distribution: Explaining Structural Changes in the Digital Music Market. [Online]
Available at: http://misrc.umn.edu/workingpapers/fullpapers/2004/0422_091204.pdf
Boulding, K.E. 2004. General Systems Theory: The Skeleton of Science. E:CO Special
Double Issue. 6(1) pp. 127-139. [Online] Available at:
http://www.emergence.org/ECO_site/ECO_Archive/Issue_6_1-2/Boulding.pdf
[Accessed: April 12 2008].
BPI. 2006. New British talent enjoys its best run in the charts since 1996. [Online]
Available at:
http://www.bpi.co.uk/index.asp?Page=news/press/news_content_file_1018.shtml
Bruno, Antony. 2008. Mal-contented: digital album art, lyrics, extras should emerge
stronger in '08. [Online] Available at: Expanded Academic ASAP. Gale. Cardiff
University [Accessed: 23 April 2008].
Buskirk, E.V. 2008. Record Labels Seek $2.5 Million in Damages From Pirate Bay.
[Online] Available at: http://blog.wired.com/music/2008/03/record-labels-c.html
[Accessed: 18 April 2008]
Buxmann, P., Pohl, G., Johnscher, P., Strube, J., Groffmann, H. n.d. Strategies for Digital
Music Markets: Pricing and the Effectiveness of Measures against Pirate Copies –
Results of an Empirical Study. [Online] Available at: http://www.is.tu-
darmstadt.de/download/2005_ecis_strategies-for-digital-music-markets.pdf [Accessed:
15 April 2008].
Chaffin, J. and Duyn, A. V. 2007. Amazon to Start Selling Digital Music. FT.com.
[Online] Available at: http://www.ft.com/cms/s/2/bbe3caec-03bd-11dc-a931-
000b5df10621.html [Accessed:: 15 April 2008].
Checkland, P.B. 1981 Systems Thinking, Systems Practice. John Wiley, Chichester, UK,
Cheng, J. 2007. The Art of Technology. iTunes Store rings up 3 billionth song. [Online]
Available at: http://arstechnica.com/news.ars/post/20070731-itunes-store-rings-up-3-
billionth-song.html [Accessed: 20 July 2007]
CIM. 2007. Strategic Marketing in Practice Case Study. The Chartered Institute of
Marketing, Moor Hall.
87
Cosper, A. 2007. Playlist Research. The Big Four Major Record Labels. [Online]
Available at: http://www.playlistresearch.com/recordlabels.htm [Accessed:: 15 April
2008].
Croxson, K. 2007. Promotional Piracy. Oxonomics. 2. pp. 13-15. [Online] Available at:
http://www.users.ox.ac.uk/~ball1647/Piracy.pdf [Accessed: 15 April 2008].
Currah, A. 2006. Hollywood versus the Internet: The Media and Entertainment Industries
in a Digital and Networked Economy. Journal of Economic Geography. 6 (4) pp. 439-
468. [Online] Available at:
http://www.ingentaconnect.com/content/oup/jnlecg/2006/00000006/00000004/art00439[
Accessed: 15 April 2008].
Digital Music. BurnLounge Sells Digital Music Snakeoil. 2006. [Online] Available at:
http://digitalmusic.weblogsinc.com/2006/06/16/burnlounge-sell-digital-music-snakeoil/
[Accessed: 21 June 2007]
Drew. 2007. Toothpaste for Dinner. [Online] Available at:

http://www.toothpastefordinner.com/072907/face-it-most-people-just-steal-music.gif
[Accessed: 05 August 2007]
Eisenmann, T. R. 2002. Internet Business Models, Text and Cases. McGraw-Hill. New
York
Fischbeck, B. 2000. Digital Music Business Models. e-Business II Final Paper. [Online]
Available at: http://faculty.darden.virginia.edu/GBUS885-
00/Papers/PDFs/Fischbeck%20-%20Digital%20Music%20Business%20Models.pdf
Flood, R. L. 2000. Brief Review of Peter B. Checkland’s Contribution to Systemic

Thinking. Systemic Practice and Action Research. 13(6) pp. 723-731. [Online] Available
at: http://www.springerlink.com/content/u7vv6r6806t27351/ [Accessed: 12 April 2008].
Fellowship of FSFE. 2006. Copyright perspectives: obligation to publish and DRM?

[Online] Available at:
http://www.fsfe.org/en/fellows/greve/freedom_bits/copyright_perspectives_obligation_to
_publish_and_drm [Accessed: 05 April 2008].
Future of Music Book. 2007. New Artist Model. [Online] Available at:
http://www.futureofmusicbook.com/2007/10/ [Accessed: 20 April 2008]
Gartner G2 The Berkman Center. 2003. Copyright and Digital Media in a Post-Napster
World [Online] Available at: http://cyber.law.harvard.edu/home/uploads/254/2003-05.pdf
88
Ghauri, P. and Gronhaug, K. 2002. Research Methods on Business Studies: A practical
Guide, Prentice Hall: Europe.
Graham, G., Burnes, B. and Lewis, G.J., Langer, J. 2004. The Transformation of the
Music Industry Supply Chain A Major Label Perspective. International Journal of
Operations and Production Management. 24 (11), pp. 1087-1103. [Online] Available at:
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/Emera
ldFullTextArticle/Articles/0240241101.html [Accessed: 10 July 2007]
HMV Group PLC. HMV Launches HMV Digital. [Online] Available at:
http://www.hmvgroup.com/media/view.jsp?id=1017 [Accessed: 02 August 2007]
IFPI Digital Music Report. 2008. [Online] Available at:

http://www.ifpi.org/content/library/DMR2008.pdf [Accessed:: 15 April 2008].
Ingram, H. .2000. Using Soft Systems Methodology to Manage Hotels: A Case Study.
Managing Service Quality.10(1) pp. 6-10. [Online] Available at:
http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&hdAc
tion=lnkhtml&contentId=842672 [Accessed: 14 April 2008].
IT Facts. $2 bln worth of digital tracks sold in 2006. [Online] Available at:
http://www.itfacts.biz/index.php?id=P7967 [Accessed: 20 July 2007]
Janson, E. and Mansell, R. 1998. A Case of Electronic Commerce: The Online Music
Industry - Content, Regulation and Barriers to Development. Electronic Working Papers
Series Paper No. 25 [Online] Available at:
http://www.sussex.ac.uk/Units/spru/publications/imprint/sewps/sewp25/sewp25.pdf
Jobs, S. 2007. Thoughts on Music. [Online] Available at:

http://www.apple.com/hotnews/thoughtsonmusic/ [Accessed: 31 July 2007]
Krishnan, R., Smith, M.D., Tang, Z. and Telang, R. 2007. Digital Business Models for
Peer-to-Peer Networks: Analysis and Economic Issues. Review of Network Economics. 6
(2). [Online] Available at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=917899#PaperDownload [Accessed:
15 April 2008].
Kretschmer, M. 2005. Artists’ earnings and copyright: A review of British and German
music industry data in the context of digital technologies. First Monday. 10(1). [Online]
Available at: http://firstmonday.org/issues/issue10_1/kretschmer/index.html [Accessed:
10 April 2008].
Kruger, D. J. 2003. Integrating quantitative and qualitative methods in community

research. The Community Psychologist, 36, pp.18-19.
89
Kunze, O. and Mai, L. 2007. Consumers Adoptions of Online Music Services: The
Influence of Perceived Risks and Risk-Relief Strategies. International Journal of Retail
and Distribution Management. 35 (11) pp. 862-877. [Online] Available at:
http://www.emeraldinsight.com/0959-0552.htm [Accessed: 15 April 2008].
Lane, D.C. and Oliva, R. 1998. The greater whole: towards a synthesis of system
dynamics and Soft Systems Methodology. Eur J Opl Res, 107, pp. 214−235.
Last.fm. The Social Music Revolution. 2007. http://www.last.fm [Accessed: 07 July

2007]
Ledington, P.W.J., Ledington, J. 2000. The problem of comparison in soft systems

methodology. Systems Research and Behavioral Science. 16(4), pp 329–339. [Online]
Available at: http://www3.interscience.wiley.com/journal/71007378/abstract [Accessed:
12 April 2008].
Lets Sing It. 2006. Josh Kelley Biography. [Online] Available at:
http://artists.letssingit.com/josh-kelley-42nf1/biography [Accessed: 15 April 2008].
Liebowitz, S. J. and Watt, R. 2006. How to Best Ensure Remuneration for Creators in the
Market for Music? Copyright and Its Alternatives. Journal of Economic Surveys. 20 (4)
pp. 513-545. [Online] Available at:
http://www.ingentaconnect.com/content/bpl/joes/2006/00000020/00000004/art00003
Lin, A. 2005. Understating the Market for Digital Music. SURJ. Economics. pp. 50-56.
[Online] Available at: http://surj.stanford.edu/2005/pdfs/Albert.pdf [Accessed: 15 April
2008].
Madden, M. 2008. The longest points on the tail of music sales. [Online] Available at:
http://www.pewinternet.org/PPF/p/1236/pipcomments.asp [Accessed: 15 April 2008].
Mahadevan, B. 2000. Business models for Internet-Based E-Commerce: An Anatomy,

California Management Review. 42 (4), pp.55-69.
Molineux, J. Haslett, T. 2007. The Use of Soft Systems Methodology to Enhance Group
Creativity. Systemic Practice and Action Research. 20(6). pp. 477-496. [Online]
Available at: http://www.springerlink.com/content/y5487w35404mj5m1/ [Accessed: 12
April 2008].
New Music Strategies. 2007. This Year’s Model. [Online] Available at:
http://newmusicmanagement.com/2007/11/20/this-years-model/ [Accessed: 26 April
2008].
Pala1, Ö., Vennix, J.A.M. and Mullekom, T. Van. 2003. Validity in SSM: Neglected Areas.
Journal of the Operational Research Society. 54(7), pp. 706-712. [Online] Available at:
90
http://www.ingentaconnect.com/content/pal/01605682/2003/00000054/00000007/art00003
Peitz, M. and Waelbroeck, P. 2005. An Economist’s Guide to Digital Music. CESifo

Economic Studies. 51 (2-3) pp. 359-428. [Online] Available at:
http://www.sfbtr15.de/dipa/32.pdf [Accessed: 15 April 2008].
Pandora. Radio from the Music Genome Project. 2007. [Online] Available at:
http://www.pandora.com/ [Accessed: 22 July 2007]
Presley, A., Sarkis, J., Liles, D. H. 2000. A Soft-systems Methodology Approach for
Product and Process Innovation. Engineering Management. 47(3), pp. 379–392. [Online]
Available at:
http://ieeexplore.ieee.org/Xplore/login.jsp?url=/iel5/17/18747/00865906.pdf?arnumber=8
65906. [Accessed: 15 May 2008].
Reuters/Billboard. 2007. Microsoft Starts Ignition for Music Promotion. [Online]

Available at: http://uk.news.launch.yahoo.com/dyna/article.html?a=/02062007/80-
91/microsoft-starts-ignition-music-promotion.html&e=l_news_dm [Accessed: 15 July
2007]
Roughly Drafted. 2007. Is Piracy Really Killing the Music Industry? [Online] Available
at: http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/708F20CD-E67D-45C7-AF95-
3E1A6AC07C37.html [Accessed: 07 July 2007]
Rudestam, K.E. and Newton, R.R. 2001. Surviving Your Dissertation: A Comprehensive
Guide to Content and Process. 2nd edition. Sage, London.
Sastry, N. 2005. Stealing (From) the Music Industry. [Online] Available at:
http://www2.sims.berkeley.edu/academics/courses/is296a-2/s05/papers/nsastry_is296A-
2_spring2005.pdf [Accessed: 15 July 2007]
Sandulli, F.D. 2007. CD Music Purchase Behaviour of P2P Users. Technovation. 27. pp.
325-334. [Online] Available at: http://www.sciencedirect.com [Accessed: 15 April 2008].
Sicker, D., Ohm, P., Gunaji, S. 2007. The Analog Hole and the Price of Music: An
Empirical Study. Journal on Telecommunications and High Technology Law. 5. [Online]
Available at: http://ssrn.com/abstract=969998 [Accessed: 15 April 2008].
Smith, A. 2008. The Music Industry: Lost in the Shuffle. TIME Magazine. [Online]
Available at: http://www.time.com/time/magazine/article/0,9171,1723689,00.html
Swatman, P.M.C. and Krueger, C. 2006. The Changing Digital Content Landscape: An
Evaluation of e-business Model Development in European Online News and Music.
School of Computing and Information Science, University of South Australia. [Online]
91
Available at:
http://www.emeraldinsight.com/Insight/viewPDF.jsp?Filename=html/Output/Published/E
meraldFullTextArticle/Pdf/1720160104.pdf [Accessed: 25 July 2007]
Tawileh, A. 2007. A Study of the Music Industry in the Arab World. [Online] Available
at: http://www.icommons.org/articles/a-study-of-the-music-industry-in-the-arab-world
Velez, G. 2007. Marketing IT. Here, there and everywhere. [Online] Available at:
http://www.manilatimes.net/national/2007/june/04/yehey/techtimes/20070604tech1.htm
Walsh, G., Mitchell, V. W., Frenzel, T., Wiedmann, K. P. 2003. Internet-induced

Changes in Consumer Music Procurement Behaviour: A German Perspective. Marketing
Intelligence and Planning. 21(5) pp. 305-317. [Online] Available at:
http://www.emeraldinsight.com/Insight/viewPDF.jsp?Filename=html/Output/Published/E
meraldFullTextArticle/Pdf/0200210505.pdf [Accessed: 25 April 2008].
Wikipedia(a). 2007. Napster. [Online] Available at: http://en.wikipedia.org/wiki/Napster

Wikipedia (b). 2007. Netlabel. [Online] Available at:

http://en.wikipedia.org/wiki/Netlabel [Accessed: 15 July 2007]
Wikipedia(c). 2007. Qualitative Research. [Online] Available at:

http://en.wikipedia.org/wiki/Qualitative_method [Accessed: 10 July 2007]
Wilson, B. 2001. Soft System Methodology: Conceptual Model Building and its Contribution.
John Wiley & Sons Inc., UK.
Work, B. 2004) Electronic Commerce: A Study Guide, Cardiff University.
92
Websites Mentioned
Social Networking Sites
YouTube http://www.youtube.com
MySpace http://www.myspace.com
Facebook http://www.facebook.com
Bebo http://www.bebo.com
Music Review Sites
All Music Guide http://www.allmusic.com

Pitchforkmedia http://www.pitchforkmedia.com
Rate Your Music http://www.rateyourmusic.com
93
APPENDICES
APPENDIX A
Source: Entertainment Media Research. July 2007. The 2007 Digital Music Survey in
association with OLSWANG. [Online]
http://www.entertainmentmediaresearch.com/reports/EMR_Digital_Music_Survey2007.p
df [Accessed 08 July 2007]
2007 MUSIC SURVEY
The Main Headlines
• The 2007 Digital Music Survey reveals how social networks are changing the way
music is discovered, purchased and consumed
• Legal downloading is increasing but at a slower rate than hitherto
• Unauthorised downloading is now at its highest level after last year’s signs of decline
• consumers are less concerned about prosecution
• Mobile music downloading creeps forward. Predictions are for further modest growth
unless providers change current market conditions – ease, fair pricing & clarity
• Significant increase in listening to radio on mobile phones – good news for
broadcasters and possibly an exciting revenue stream if / when DAB is rolled out
• UK live music scene is buzzing & demonstrably effective in boosting album sales
• Strong indications that live music webcasts are an attractive new revenue stream
• USB format is highly regarded and further trialling is recommended
• Continuing growth in personal digital player penetration with digital players on
mobiles this year’s highest gainers
The Impact of Social Networks on Music Discovery & Purchase
• Social networks are impacting the way consumers discover, share and purchase
music
27% regularly discover music on the social network they love (33% MySpace
users,
94
30% Bebo, 26% YouTube)
• Discovery is translating into purchase. 17% of social networkers state using such
sites has had a “massive” or “big” impact on the way they purchase music 10%
have regularly purchased music discovered on these sites
13% regularly for MySpace
15% regularly for Bebo
7% regularly for YouTube
• Users of Bebo claim that site has more of an impact on music purchasing than
users of MySpace – 27% & 19% massive/big impact respectively (MySpace has
the greatest overall impact due to its size)
• Whilst such networks clearly influence purchase behaviour, more needs to be
done to make purchasing discovered music easier – 46% agreed with the
statement “I wish it was easier to purchase music that I find on these sites”
PC Downloading Trends – Legal
• The survey identifies a slowdown in the increase in the population of legal

downloaders. 40% growth rate in users in 2006 reduced to some 15% in 2007 2005 =
35% had at least once purchased a legal download
2006 = 50% had at least once purchased a legal download (41% active, 9% stopped)
2007 = 58% had at least once purchased a legal download (47% active, 11% stopped)
• While the main purchase driver continues to be to get hold of music immediately, the
survey reveals a marked decline in the perceived price advantage of legal downloads
over CDs following the widespread decline in the high street price of new releases
In 2006, 45% of legal downloaders cited price advantage of downloads as a reason for
purchase but by 2007 this had fallen to 31%, providing evidence that pricing for the
record industry is currently in a state of considerable flux
• One measure to combat this issue might be for digital retailers to consider introducing
variable pricing models
84% of consumers agreed that older digital downloads should be cheaper while
48% claimed they would be prepared to pay more for newly released tracks.
95
PC Downloading Trends – Unauthorised
• Further explanation for the trend in legal downloading is a noticeable increase in

piracy. After a decline in 2006, unauthorised downloading increased in 2007 to its
highest level to date
2005 = 40% incidence
• Survey reveals that piracy likely to increase further still
2005 = 6% of unauthorised downloaders state they will download more often
2006 = 8%
2007 = 18%
• Teenagers most likely to download more often in the future but 18-34 yr olds
show the greatest increase in propensity to download more in the future
18-24s increased from 7% in 2006 to 19% in 2007
25-34s increased from 5% in 2006 to 16% in 2007
• The explanation - consumers are now much less concerned about being
prosecuted (42% gave this as a reason for downloading less in 2006 Vs only 33%
in 2007)
96
97
98
Sources of New Music
99
100
Appeal of Different Methods of Downloading Purchased Music
Tracking Download Behaviour
101
102
103
104
APPENDIX B
The following Appendices are based on
Bockstedt, J.C., Kauffman, R.J., and Riggins, F.J. September 2004. The Move to Artist-
led Online Music Distribution: Explaining Structural Changes in the Digital Music
Market. [Online] http://misrc.umn.edu/workingpapers/fullpapers/2004/0422_091204.pdf
[Accessed 10 July 2007]
Appendix B-1
The following mini-cases illustrate these propositions:

Example “Beastie Boys Link to iTunes from Web Site.” Prior to their full-length
album release in June 2004, the Beastie Boys made use of their Web site to promote the
music it contained. The group’s site linked to Apple iTunes, where it was possible for a
consumer to immediately purchase their music in digital format. The Beastie Boys
continue to leverage their Web site to sell digital copies of their music, cutting out the
distribution and manufacturing middlemen.
Example 2: “Freezepop—A Do-It-Yourself Approach.” Freezepop, a Boston group,

recorded an album using a $300 sequencer, made two animated videos using inexpensive
Shockwave Flash, and developed a fan base by posting news, photos, and tour dates and
offering merchandise on their Web site. The group brokered download-only distribution
deals with online music stores, such as iTunes and Napster, avoiding the production
costs. This extreme example demonstrates the opportunities artists have in the music
industry through digital technologies.
Since digital music is virtually costless to reproduce and transfer, as manufacturing and
distribution costs are removed, artists will require less upfront investment to produce their
music and record labels will lose power over the value chain. The labels, thus, have an
incentive to claim a new stake, as we point out
105
Appendix B-2
Mini-Case 2a (Record Labels/Production Companies): “Bertlesmann Forms

Alliance with Napster.”
Bertlesmann, owner of BMG Entertainment (a major record labels), formed an alliance
with the P2P fileshare service. Napster 2.0 is a (now) legal pay per download and
subscription service. BMG’s alliance signaled the power of the digital music format in
the eyes of the record labels.
Mini-Case 2b (Record Labels/Production Companies): “Sony Launches Download

Service.” Sony launched its online music service, Connect, on May 4, 2004 to compete
with leader, Apple iTunes. Sony produces music through its record label, Sony Music,
and manufactures electronic devices that play digital music formats. Connect will provide
digital music downloads that are only compatible with Sony devices using flash media
technology.
Appendix B-3
Mini-Case 5a (Digital Music Retailers): “Apple iTunes Custom Playlists for

Download.” Apple iTunes offers playlists designed by celebrities and staff for download.
Playlists have individual tracks from various artists based on a theme. For example, a
consumer can download a Barry Manilow Playlist. Or, a consumer can download the
Totally 80s Playlist, which includes 1980s pop songs. The separability of digital music
into individual songs gives retailers the opportunity to create unique product bundles.
Source: Apple iTunes, Online.apple.com/itunes.
Mini-Case 5b (Digital Music Retailers): “Apple iTunes Tries New Pricing

Strategies.” Apple iTunes has priced single songs at 99¢ and albums at $9.99. Newer
albums have been priced higher. For example, Aerosmith’s newest album was priced at
$11.99, while Joe Satriani’s newest release was $14.99. Some record executives are
saying they are eager to test tiered-price models in the digital music market.
106
Appendix B-4
Mini-Case 6a (Consumers): “The 40G iPod.” Apple sells the most popular digital
music player on the market, the iPod. It comes in capacities from 4 to 40 GB. A 40GB
iPod can hold 10,000 songs, equivalent to 670 music albums. iPod owners can carry a
library of music in their pocket. The portability of the digital music format makes this
possible. But at current prices—99¢ per song—it would cost about $10,000 to legally fill
her iPod.
Source: Apple Computer, Online.apple.com/ipod.
Mini-Case 6b (Consumers): “iTunes Popularity Grows Exponentially.” Apple iTunes

increased its downloader base from 861,000 in July 2003 to 4.9 million in March 2004.
Because of this success, Sony, Microsoft, Virgin, Yahoo—and even AOL—are all
making plans to enter the market.
107
APPENDIX C
IFPI Digital Music Report 2007 - Key Facts
Source: http://www.ifpi.org/content/section_resources/digital-music-reportb.html
• Record companies' digital music sales are estimated to have nearly doubled in
value in 2006, reaching a trade value of approximately US$2 billion (up from $1.1
billion). The split between online and mobile remains fairly equal, but varies
substantially across markets. Digital sales are estimated to have grown from 5.5 % in
2005 to around 10 % of industry sales for the full year 2006.
• Single track downloads are estimated to total 795 million in 2006, up 89 % on

2005. Single track downloads and mastertones remain the main digital music formats,
but other formats, such as mobile downloads, digital albums, music videos and
ringback tones all saw healthy growth
• The number of tracks available online doubled to reach over four million in the
last year. This compares to around 150,000 CD albums available in the biggest 'bricks
and mortar' music stores
• There are nearly 500 online music services available in over 40 countries
worldwide, offering consumers a wide variety of choice and great value
• Portable music players help drive digital music consumption. Portable player
sales totalled around 120 million in 2006, an increase of 43 % on the previous year
(Understanding and Solutions). Portable player owners are more likely to buy music
legally than general internet users; but the amount of purchased music stored on
devices is still low
• New revenue streams and business models emerge. Social networking sites
exploded in popularity while advertising-supported models such as video licensing on
Yahoo! Music and MSN emerged as a potentially exciting revenue stream for record
companies. Music video has become a revenue stream in its own right
108
• Advertising-funded models have become a new revenue stream for record
companies. Advertisers diverted budgets from conventional broadcast and print to the
Internet in 2006. Internet advertising is forecast to overtake traditional radio
advertising in 2009 (Zenith OptiMedia)
• Digital is boosting classical music. Classical music was the fastest-growing music
genre in the US, growing by 23 % in the US. There have been exceptional digital
sales on particular classical titles
• Lawsuits are having an impact. Legal action was taken against more than 10,000
uploaders in 18 countries in 2006 including Brazil, Mexico, Poland and Portugal for
the first time. The average legal settlement is now €2,420. Recent research from
Jupiter shows that illegal file-sharing in Europe has been contained in the last year, in
the context of a 30 % increase in broadband household penetration
109
APPENDIX D
Source: New Music Strategies
Let’s take it back to first principles: the internet is not a promotional tool for music.
Nor is it a retail platform. It’s not even a method of distribution. It’s electricity.
Instead of thinking of the internet as a brochure display case, as many do — or as a retail

outlet without walls — think instead of the internet as a common power source into
which a range of different appliances can be plugged.
As an analogy, it solves most of the conceptual problems that most people bring to the
internet, when they try and figure out what it is they should be doing online. It also
provides a neat little springboard into creative solutions that might otherwise never take
place.
For a start, the web is not the Internet. While web pages dominate most people’s use of
the online environment, a web browser is far from the only appliance that can be plugged
in to the internet. Other appliances include email software, instant messengers, Voice
Over IP clients (VOIP - like Skype), media players, podcast clients, RSS readers, IRC
software… and so on.
As I see it, there are three phases of innovation in any new media environment:
1) When the environment first comes on the scene, there’s a blank canvas. So someone
invents a web browser. Someone does the file transfer protocol thing. Someone else
invents a chat programme. Another person invents RSS. Before long, we start to have all
of the most fundamental tools that the environment allows for.
2) Then there’s a second phase of innovation. It’s a kitset approach. Someone takes the
idea of file transfer, and puts it together with RSS to create the media enclosure — and
hey presto! Podcasting is born. It’s not a new idea, as such, it’s a combination of older
ideas put together in a new way to solve a problem or address an issue. That’s the second
phase — one of intellectual experimentation and assembly, rather than of pure invention.
110
3) Like the first one, the third phase of innovation is a bit tough. It’s when it looks like
everything that can be invented has already been invented. All of the combinations have
been tried, and in order to come up with something new, one has to genuinely look at the
world in a completely fresh way, and enter a crowded landscape with something truly
revolutionary in order to make any sort of a mark.
111
Appendix E
Source: http://arstechnica.com/news.ars/post/20080409-last-fm-free-music-streams-turn-
into-increased-music-sales.html
Last.fm: Free music streams turn into increased music sales
By Jacqui Cheng | Published: April 09, 2008 - 08:04PM CT
• Why Last.fm's free music won't replace your music collection
Last.fm's free, ad-supported music streams have resulted in a 119 percent increase in
music purchases through Amazon, the company said today. The service, which launched
just over two months ago, has also brought on a number of new users, although old users
are contributing to the trend as well. Last.fm believes that, while the service is still young,
the proof is in the pudding: allowing users to have full-track previews drives music sales,
both digital and physical.
When Last.fm launched its on-demand music streaming service in January, it made
millions of tracks from all four major music labels (plus a smattering of indies) available
for free. The labels get paid every time a track is played, although there's a limitation of
playing a single track only three times before being shown an ad and links to affiliate
partners where you can buy the music.
Those links are apparently paying off. Although Last.fm has affiliate partnerships with
iTunes and 7Digital as well, the company did not release sales data for anyone but
Amazon. And while music purchases through Amazon more than doubled after an influx
of new users joined the site, Last.fm says longtime members were buying more music
too—there was a 66 percent increase in album and track purchases among existing users.
112
"In just over two months it's become clear that people will buy CDs and downloads if
they get access to the kind of service we offer," said Last.fm co-founder Martin Stiksel in
a statement. Stiksel went on to tout Last.fm as the leader in offering free, streaming music
from major labels, although other players (like MySpace and imeem) are getting in on the
streaming music fun too. Surely the music labels are happy, too, that the increase is
affecting CD sales in addition to cherry-picked digital tracks, as CD sales have been a bit
anemic as of late.
If music sales as a result of streaming offerings show growth over a longer period of time
(say, a year), then other services may also begin to push for full-track previews in hopes
of increasing sales. Imagine if Amazon MP3 or iTunes allowed full previews on their
respective services before buying—digital music could take off even faster than it already
has. It shows how the very ideas that the music industry resisted for years have the
potential to pay off financially.
113
Appendix F
Source: An Economist’s Guide To Digital Music http://www.sfbtr15.de/dipa/32.pdf
Basic facts about copyright

The U.S. Copyright Law serves the purpose of protecting authors of “original works of
authorship,” including literary, dramatic, musical and artistic works. The protection is
available for published and unpublished work. In addition to protection, copyright gives
an exclusivity right on the revenues generated by the copyrighted work. Two U.S. Acts
are of particular importance for the music industry: the Audio Home Recording Act and
the Digital Millenium Copyright Act.
Audio Home Recording Act (AHRA)

US Congress enacted the AHRA in 1992 in response to the appearance of home digital
audio recording devices. The law imposes monetary duties on equipment and supplies,
but non commercial users are protected from copyright infringement. According to the
Alliance of Artists and Recording Companies (AARC), a nonprofit organization
representing featured performing artists and record companies, as a first approximation,
40 percent of the Sound recording fund (2/3 of total royalty payments the other 1/3 goes
to the Musical recording fund) is distributed to artists and 60 percent to copyright owners
(i.e. music distribution companies) in proportion of their sales. The royalty payment is
under section 1004 2 percent of the transfer price of the device and 3 percent for the
media. A digital audio recording device is, according to the law, “the digital recording
function of which is designed or marketed for the primary purpose of, and that is capable
of, making a digital audio copied recording for private use.” Congress also used the
AHRA to introduce a DRM known as the Serial Copy Management System (SCMS) that
authorizes unlimited first copies of copyrighted material but prevents additional copies of
the first copies. Devices that do not include such technological protection can not be sold
in the U.S. There is much debate on the definition of “digital audio recording device” and
the obsolescence of the AHRA itself in the fast evolving technological environment
around digital music.
114
Digital Millenium Copyright Act (DMCA)
Following the World Intellectual Property Organization (WIPO) convention in Geneva,
in 1998, Congress enacted the Digital Millenium Copyright Act (DMCA) that extends the
Copyright Act. The DMCA
- makes it a crime to circumvent anti-piracy measures built into most commercial
software (except for research purpose, non-profit libraries, etc.),
- limits liability of copyright infringement of Internet Service Providers (ISP) and

institutions of higher education,
- requires webcasters and commercial broadcaster to pay licensee fees: these fees are set
to 0.07 cents per performance with a minimum of USD 500 a year; fees are collected by
the Royalty Panel (CARP),
- does not affect conditions of copyrights infringements, including fair use.
DMCA lays the ground for the legal foundation of pay per use even for material that is no
longer protected by the copyright law. In the extreme case of first-degree or perfect price
discrimination, use is not reduced at all. However, price discrimination tends to reduce
the surplus to consumers and raises distributional concerns. DRM can also be used to
target different segments with different types of restrictions and pricing schemes. Since
DRM can transmit information on consumers’ behavior (see the discussion on privacy
above), firms can use DRM to version their products to consumers' needs.
Some authors have advocated the use of “Rights expression language” to enhance
creativity and deal with multiple rights owners (Bechtold 2003). Others are proponent of
a “Copyright Commons”, where DRM is used to control copyrighted works that are
registered in a metadata system (Lessig, 2001; DRM is used to enforce openness and
enrich the commons). Several artists have released content under Copyright Commons
licenses: Chuck D., Beastie Boys, David Byrne, Gilberto Gil and Cornelius (see BBC
News, “A Sharing Approach to Copyright”, Oct. 5, 2004).
115
Appendix G
Source: http://www.is.tu-darmstadt.de/download/2005_ecis_strategies-for-digital-music-
markets.pdf
As shown in figure 2, most of the survey’s participants would not pay more than 99 Cents
per music download. The only exceptions are rarities, for which 25.6% of respondents
claim that their willingness to pay exceeds 1€. Furthermore, 28.5% of the people
questioned are willing to pay a price for current hits between 50 and 99 Cents, while only
12.3% and 14.6% would pay the same price for older titles respectively newcomers.
Hence, price discrimination dependent on level of publicity and availability of recordings
can be regarded as an interesting pricing strategy for providers of online music.
The figures illustrate that a price cut would probably lead to increased revenues.
However, a low price strategy is currently not feasible for digital music retailers due to
the high variable costs since a large portion is appropriated by the respective label.
116
Appendix H
Source: http://www.readwriteweb.com/archives/music/
Interview with Neil Young on Music Piracy
Written by Marshall Kirkpatrick / May 6, 2008 12:33 PM / 8 Comments
Free Music
I elbowed in between elder bloggers Tim O'Reilly and Dan Farber in the interview to ask
what Young thought of Trent Reznor's giving away free music and RadioHead's saying
they aren't going to do so anymore. At first I thought he wasn't going to give me anything
good, saying: "The recording business is going somewhere but I don't care about that, I
try to remove myself from the business part. The artistic part of me tries to. The world
will work it out."
He went on though to point out that his project Living With War always was and still is
fully listenable for free on his website. It delivered a message he wanted to get out, he
said. His thoughts about the content included in his giant life collection? Blu-ray may be
riddled with DRM but Young doesn't think that will be an issue.
"Ten Blu-ray disks doesn't lend itself to P2P," he pointed out. "They [the fans] are going
to do that anyway - people are going to copy all this music. We don't have to deal with
that. All we're doing is supplying the mother-lode, trying to give them quality whether
they want it or not. You can degrade it as far as you want, we just don't want our name on
it."
More than just indifference, Young was downright enthusiastic. "It's up to the masses to
distribute it however they want," he said. "The laws don't matter at that point. People
sharing music in their bedrooms is the new radio." Go Neil!
117
Appendix I
The dissertation’s planning stage. SSM’s tools were used.
A Cardiff University owned system operated by myself to systemically analyse the digital
music industry for the identification of an effective e-business model by carrying out
research on the current digital music industry and the people involved and creating a
conceptual model to the satisfaction of the University within time constraints.
C – University
A - myself
T – systemically analyse the digital music industry for the identification of an effective
ebusiness model
W – carrying out research on the current digital music industry and the people involved
and creating a conceptual model
O – Cardiff University
E – time
Using the above Root Definition a Conceptual Model can be created with the activities
that should be performed for the system to achieve its purpose .i.e. for this dissertation to
achieve its purpose. This will ensure, if strictly adhered to, the completion of the
dissertation on time with major deliverables and objectives produced during the lifecycle
of the dissertation. Refer Figure 8 for the conceptual model.
118
Conceptual Model for Planning Stage
119
Appendix J
Source: Source: An Economist’s Guide To Digital Music

http://www.sfbtr15.de/dipa/32.pdf
There are several hidden costs of downloading:
• Time is wasted by searching and testing the files after it downloads since it is only
possible to assess the technical quality and the content after downloading
• Erroneous, incomplete, badly compressed files since albums are usually in the
form of compressed archives
• Worm viruses that proliferate on a P2P network, which can replicate in the
computer’s memory and slow down the computer
• Adware/spyware is rampant in P2P software causing consumers to install spyware
to thwart spying software that can violate their privacy
• Storage hungry since transporting files to portable media or burning DVDs is time
consuming
• Users usually have to upload files due to built-in priority rating that determines
how fast a user can download the requested file. Uploading files is uses computer
resources and involves a risk of being sued and also opens the computer to
intruders who can hack system files
120
Appendix K
Appendix K-1
Artist Vs. Consumer
Artist Consumer Comparison

Assemble information Assemble information The artist should know about the potential
on file-sharing on labels and self- channels to distribute their music on. i.e. any
applications distributing artists application or web entity that can be used as a
Assemble information Assemble information sub-channel. Appendix NMS.
on digital music on music licensing
retailers The music provider should know about self-
Assemble information distributing artists, licenses, file formats, risks,
Assemble information on file formats etc. to act as the link between the artist and the
on the latest potential
music distribution Assemble information consumer to target the consumer’s needs.
sub-channels on flexible usage on
music
Assemble information
on consumer digital Assemble information
music listening on secure payment
sources methods
Assemble information Assemble information

on virtual social on consumer
communities perceived risks
involved
on file-sharing Assemble information
applications on sound quality
on interacting with
record labels
Determine potential Determine the The artist should narrow down a list of
sub-channels copyright laws, potential sub-channels to distribute music,
suitable pricing and which can be complemented with preference
technological options as a requirement by the consumer if the
constraints music is to be paid for.
Provide preference
options
Share and distribute Access licensed music These are complementary activities benefiting
music on selected both the artist and consumer since the artist
Provide secure
121
sub-channels payment methods wants to share and distribute music whilst the
consumer wants to access it. However, there is
a slight conflict with the fact that consumer is
willing to pay for music but the artist is not
interested in payment at this stage.
Evaluate potential Determine appropriate The artist should evaluate and select the sub-
sub-channels in terms licensed music channels for sharing music in terms of cost and
of cost and popularity popularity and then select them. The consumer
Determine flexibility
of music usage would prefer flexible usage and the music
Select sub-channels being licensed.
for sharing music
Interacting with labels helps the artist to reach
Interact with record their audience quicker and easier.
labels
Take control action to Take control action to The artist wants the selected sub-channels to be
ensure that the ensure the music popular, low-cost and suitable whereas the
selected sub-channels provided is easily consumer is interested in being provided with
listenable, on-demand,
are popular, low-cost flexible and legal listenable, on-demand music, which is flexible
and suitable and legal.
Take control action to
Take control action to ensure that the music The artist wants the time and attention of a
ensure the sharing of is accessed without consumer and the consumer if captured is
risk
music captures the willing to pay if the music can be accessed
time and attention of without risk.
the consumer
Working with labels appropriate to the artist’s
Take control action to music will be help the
ensure the record
labels are appropriate
Appendix K-2
Artist Vs. DMR
DMR Artist Comparison

Determine the characteristics of a Determine potential sub- These activities are
smooth running software or website channels complementary where the
DMR wants to provide a
consumer focused method
to offer music and the
122
artist wants to decide on
potential sub-channel,
which could include
DMRs.
Provide a smooth running and easy- Select sub-channels for The DMR wants to
to-use piece of software or website sharing music provide a smooth running
and easy-to-use software
Share and distribute music for accessing music
on selected sub-channels whereas the artist wants
to share music on any
potential channel, which
could also include a
DMR.
Assemble information on current Assemble information on The DMR is concerned
digital music services file-sharing applications with finding out about
current services whereas
Assemble information on current Assemble information on the artist wants to
pricing schemes digital music retailers assemble information on
the latest distribution sub-
Assemble information on bundling Assemble information on channels where the DMR
and packaging music the latest potential music could be a potential sub-
distribution sub-channels channel.
Assemble information on artist-
related value-added material Assemble information on
currently offered consumer digital music
listening sources
Assemble information on licensed
music Assemble information on
virtual social communities
Assemble information on music
networking communities Assemble information on
file-sharing applications
interacting with record
labels
Distribute music with an interactive Evaluate potential sub- The DMR offers legal
consumer experience channels in terms of cost music with an interactive
and popularity consumer experience to
Determine music that can be legally entice consumers with a
distributed differentiated service
123
whereas the artist wants
Develop a service that is interactive to evaluate sub-channels
and different to the current offerings in terms of cost and
popularity, which could
lead to selecting a
differentiated DMR.
Take control action to ensure the Take control action to The DMR wants to ensure
software and/or website is easy-to- ensure that the selected a smooth running and
use and smooth running sub-channels are popular, easy-to-use website or
low-cost and suitable software and a licensed
Take control action to ensure the differentiated service
distribution is licensed and Take control action to whereas the artist wants
differentiated ensure the sharing of music to select low-cost and
captures the time and suitable sub-channels
attention of the consumer which will eventually
capture the time and
Take control action to attention of a consumer.
ensure the record labels are
appropriate
Appendix K-3
Artist Vs. Networking Record Label
Networking Record Artist Comparison

Label
Assemble information Assemble The activities are of similar interest to both the
on current information on file- entities. The only difference being that the
developments and sharing applications artist’s scope is technology and online related
whereas the label covers the media industry as
trends in technology well. This shows that the label can expand the
and media industries Assemble artist’s reach since the artist is limited to a
information on smaller sector.
Assemble information digital music
on collaborating with retailers
artists
Assemble
Assemble information information on the
on liaising with mobile latest potential music
phone manufacturers distribution sub-
channels
124
on collaborating with Assemble
digital music authorities information on
and social networks consumer digital
music listening
Assemble information sources
on liaising with audio
device manufacturers Assemble
information on
Assemble information virtual social
on collaborating with communities
digital music retailers
Assemble
Assemble information information on file-
on current sharing applications
developments and
trends in technology Assemble
and media industries information on
interacting with
Assemble information record labels
on connecting with IT
providers
Analyse businesses in Evaluate potential
terms of promotion and sub-channels in
distribution of digital terms of cost and
music capability popularity
Take control action to Take control action The label wants to become a highly influential
ensure the exploitation to ensure that the connected entity to be able to promote and
will result in the label selected sub- distribute digital music. The artist wants to
select appropriate sub-channels to capture the
becoming a highly channels are popular, time and attention of a consumer and also
influential connected low-cost and suitable interact with labels who can promote their
entity music. However, a highly influential label
Take control action might not be appropriate to the artist in terms
Take control action to to ensure the sharing of cost.
ensure the selected of music captures the
businesses can be used time and attention of
to promote and the consumer
distribute digital music
Take control action
to ensure the record
labels are
appropriate
Undertake exploitation Select sub-channels The label wants to select businesses to network
and form alliances with and exploit trends with
125
for sharing music the intention of promoting artists. The artist
Select businesses to wants to share their music on selected sub-
network and form Share and distribute channels, which could include labels.
alliances with music on selected
sub-channels
Appendix K-4
Artist Vs. Promotion Record Label
Promotion Record Label Artist Comparison

Assemble information on potential Assemble information on The activities are of
artist file-sharing applications similar interest to both the
entities. The label is
Assemble information on blogs Assemble information on concerned with finding out
digital music retailers about strategies to promote
Assemble intelligence on digital the artist and about the
music influencing sub-channels Assemble information on sub-channels that can be
the latest potential music used to promote the artist
Assemble information on forums and distribution sub-channels on whereas the artist is
review sites interested in finding out
Assemble information on about sub-channels
Assemble information on digital consumer digital music concerned with sharing
music retailers listening sources and distributing the artist’s
music on.
Assemble information on guerrilla Assemble information on
marketing strategies virtual social communities
Assemble information on viral Assemble information on

marketing file-sharing applications
interacting with record
labels
Evaluate strategies in terms of Evaluate potential sub- The label wants to
popularity and cost channels in terms of cost evaluate its promotion
and popularity strategies and the artist
Evaluate distribution sub-channel wants to evaluate the
potential sub-channels.
Both in terms of
popularity and cost.
Develop strategies Select sub-channels for The label wants to develop
126
Select strategies sharing music the promotion strategies
and the artist wants to
Select distribution sub-channel Share and distribute music select sub-channels for
on selected sub-channels music promotion.
Implement selected strategies on sub-
channel
Determine appropriateness of media Determine potential sub- The label wants to
to artist channels promote the artist on
media appropriate to the
artist. The artist wants to
decide on potential sub-
channels to share music
on.
Take control action to ensure Take control action to The label wants to ensure
strategies are innovative and ensure that the selected the strategies are
appropriate to the artist sub-channels are popular, innovative and appropriate
low-cost and suitable to the artist to speedily and
Take control action to ensure the artist economically proliferate
is speedily and economically Take control action to the artist whereas the artist
proliferated throughout the Internet ensure the sharing of wants to select sub-
due to the implemented strategies music captures the time channels that are popular,
and attention of the low-cost and suitable to
consumer share music and capture
the time and attention of
Take control action to the consumer.
ensure the record labels
are appropriate The artist can achieve this
by using the label as a sub-
channel who will in turn
promote the artist.
Appendix K-5
Consumer Vs. DMR
DMR Consumer Comparison

Assemble information on current Assemble information on The activities are quite
digital music services labels and self-distributing similar. The DMR can
artists complement its activities
Assemble information on current Assemble information on with the consumer’s since
pricing schemes music licensing it reflects what a music
provider should find out to
127
Assemble information on bundling digital music pricing satisfy the consumer.
and packaging music
file formats
Assemble information on artist-
related value-added material Assemble information on
currently offered flexible usage on music
Assemble information on licensed Assemble information on

secure payment methods
music
Assemble information on music consumer perceived risks
networking communities involved
sound quality
Provide a smooth running and easy- Provide preference options Both activities are
to-use piece of software or website consumer focused and can
Provide secure payment be complementary.
methods
Determine the characteristics of a Determine appropriate The DMR wants to
differentiated service licensed music determine the
characteristics of a
Determine flexibility of
Determine the characteristics of a music usage differentiated service and
smooth running software or website smooth running software
Determine consumer or website whereas the
Determine music that can be legally perceived risks in this consumer is concerned
distributed context with appropriate licensed
music and flexible usage.
Develop a service that is interactive Access licensed music The DMR wants to
and different to the current offerings develop a service that is
Assess consumer perceived different to the current
risks
Distribute music with an interactive offerings and the consumer
consumer experience wants to access licensed
music and assess their
perceived risks.
Take control action to ensure the Take control action to These are complementary
distribution is licensed and ensure that the music is activities where the DMR
differentiated accessed without risk wants to ensure the
Take control action to distribution is licensed and
Take control action to ensure the ensure the music provided differentiate by providing a
software and/or website is easy-to- is easily listenable, on- smooth running software
use and smooth running demand, flexible and legal and/or website and the
consumer wants to access
music without risk and
128
wants listenable, on-
demand, flexible and legal
music, which the DMR can
provide.
Appendix K-6
Consumer Vs. Networking Record Label
Networking Record Label Consumer Comparison

Assemble information on current Assemble information on The label is concerned with
developments and trends in labels and self-distributing activities on finding out
technology and media industries artists about trends and
Assemble information on developments in
Assemble information on music licensing technology and media
collaborating with artists industries and linking with
Assemble information on different businesses
Assemble information on liaising digital music pricing whereas the consumer is
with mobile phone manufacturers Assemble information on concerned with the music
file formats provided from labels and
Assemble information on artists and quality of
collaborating with digital music Assemble information on music, etc.
authorities and social networks flexible usage on music
Assemble information on liaising secure payment methods
with audio device manufacturers
Assemble information on consumer perceived risks
involved
collaborating with digital music
retailers Assemble information on
sound quality
Assemble information on current
developments and trends in
technology and media industries
Assemble information on connecting

with IT providers
Analyse businesses in terms of Provide preference options The label wants to analyse
promotion and distribution of digital businesses in terms of their
music capability Provide secure payment promotion and distribution
methods
capability whereas the
consumer wants preference
129
options and secure
payment methods when
accessing music.
Select businesses to network and Determine appropriate The label wants to exploit
form alliances with licensed music businesses to exploit and
the consumer wants to
Determine flexibility of
Undertake exploitation music usage access licensed music that
is flexible and without risk.
Determine consumer
perceived risks in this
context
Assess consumer perceived

risks
Access licensed music

Take control action to ensure the Take control action to The labels wants to ensure
exploitation will result in the label ensure the music provided that the exploitation will
becoming a highly influential is easily listenable, on- lead to it becoming a
demand, flexible and legal
connected entity highly influential
Take control action to connected entity by linking
Take control action to ensure the ensure that the music is with businesses that can be
selected businesses can be used to accessed without risk used to promote and
promote and distribute digital music distribute digital music and
the consumer wants to
ensure that the music
provided is easily
listenable, on-demand,
legal and that it can be
accessed without risk.
Appendix K-7
Consumer Vs. Promotion Record Label
Promotion Record Label Consumer Comparison

Assemble information on potential Assemble information on The labels activities are to
artist labels and self-distributing find out about digital
artists music influencing sub-
Assemble information on blogs Assemble information on channels and the consumer
music licensing is concerned with the
Assemble intelligence on digital music provided from
music influencing sub-channels Assemble information on labels and artists and
digital music pricing
130
quality of music, etc.
Assemble information on forums and Assemble information on
review sites file formats
Assemble information on digital flexible usage on music
music retailers
Assemble information on guerrilla secure payment methods
marketing strategies Assemble information on
consumer perceived risks
Assemble information on viral involved
marketing
sound quality
Develop strategies Provide preference options The labels wants to
develop strategies and
Select distribution sub-channel Provide secure payment select strategies based on a
methods
cost and popularity
Evaluate strategies in terms of Access licensed music evaluation to be
popularity and cost implemented on selected
sub-channels whereas the
Evaluate distribution sub-channel consumer is interested in
accessing licensed music
Select strategies with preference options
and secure payment
Implement selected strategies on sub- methods.
channel
Determine appropriateness of media Determine flexibility of The label wants to
to artist music usage determine whether the
media is appropriate to the
Determine appropriate
licensed music artist and the consumer is
concerned with deciding
Determine consumer on the flexibility of music
perceived risks in this and the appropriate
context licenses and risks.
Assess consumer
perceived risks
Take control action to ensure Take control action to The label wants to snsure
strategies are innovative and ensure that the music is that the selected strategies
appropriate to the artist accessed without risk are innovative and
Take control action to appropriate to the artist
Take control action to ensure the artist ensure the music provided and as a result the artist is
is speedily and economically is easily listenable, on- speedily and economically
131
proliferated throughout the Internet demand, flexible and legal proliferated through the
due to the implemented strategies internet whereas the
consumer is concerned
with accessing music
without risk and that the
music is easily listenable,
on-demand, flexible and
legal.
Appendix K-8
DMR Vs. Networking Record Label
Networking Record DMR Comparison

Label
Take control action to Take control action to The label’s view is focused on increasing
ensure the exploitation ensure the software its popularity where as the DMR is
will result in the label and/or website is easy- concerned with satisfying the consumer.
becoming a highly to-use and smooth There is a link between the DMR and label.
influential connected running The label will work with DMRs that are
entity capable of promoting and distributing
Take control action to digital music and the DMR will provide a
Take control action to ensure the distribution licensed and differentiated service, which
will entice labels and thus benefit both
ensure the selected is licensed and entities.
businesses can be used to differentiated
promote and distribute
digital music
Analyse businesses in Decide how to make The label wishes to select business
terms of promotion and the software or including DMRs to form alliances with and
distribution of digital website smooth exploit trends in the industry.
music capability running and easy-to- The DMR wishes to be more consumer
use focused by providing easy-to-use software
Select businesses to and an interactive experience. These
network and form Provide a smooth should be differentiated.
alliances with running and easy-to-
use piece of software
Undertake exploitation or website
Distribute music with

an interactive
consumer experience
132
Develop a service that
is interactive and
different to the current
offerings
Assemble information on Assemble information Similar views to find out about current
current developments and on current digital developments.
trends in technology and music services
The label is concerned with assembling
media industries information on forming alliances with
Assemble information different beneficial businesses. The DMR
Assemble information on on current pricing is concerned with finding out abut the
collaborating with artists schemes current prices, ways of music are bundled
and distributed to differentiate theirs
accordingly.
Assemble information on Assemble information
liaising with mobile on bundling and
phone manufacturers packaging music

collaborating with digital on artist-related value-
music authorities and added material
social networks currently offered

liaising with audio device on licensed music
manufacturers
Assemble information on on music networking
collaborating with digital communities
music retailers
current developments and
trends in technology and
media industries
connecting with IT
providers
Appendix K-9
DMR Vs. Promotion Record Label
133
DMR Promotion Record Label Comparison
Assemble information on current Assemble information on The DMR should find out
digital music services potential artist information on the current
offerings, distribution
Assemble information on current Assemble information on methods and licensed
pricing schemes blogs music.
Assemble information on bundling Assemble intelligence on The label should find out
and packaging music digital music influencing information on potential
sub-channels advertising channels
Assemble information on artist- including DMRs and
related value-added material Assemble information on strategies to promote
currently offered forums and review sites artists.
Assemble information on licensed Assemble information on

music digital music retailers
Assemble information on music guerrilla marketing
networking communities strategies
viral marketing
Decide how to make the software or Evaluate strategies in terms The DMR is concerned
website smooth running and easy-to- of popularity and cost with deciding how to
use provide a smooth running
Evaluate distribution sub- software and/or website
channel whereas the label wants to
evaluate its strategies and
distribution sub-channels.
The DMR is a potential
sub-channel.
Provide a smooth running and easy- Select distribution sub- The DMR wants to provide
to-use piece of software or website channel a smooth running and easy-
to-use piece of software
Select strategies and/or website whereas the
label wants to select a
distribution channel and
select strategies. The DMR
can be selected as a
distribution channel.
Determine the characteristics of a Determine appropriateness The DMR wants to decide
differentiated service of media to artist on the characteristics of a
134
differentiated service, legal
Determine music that can be legally music that can be
distributed distributed and
characteristics of a smooth
Determine the characteristics of a running software and/or
smooth running software or website website. The label wants to
determine the
appropriateness of the
media to the artist. This is
a conflicting activity since
the label is artist focused
and the DMR is consumer
focused.
Develop a service that is interactive Develop strategies The DMR wants an
and different to the current offerings interactive consumer
Implement selected experience to differentiate
Distribute music with an interactive strategies on sub-channel its service whereas the
consumer experience label wants to develop
strategies and implement
them on the selected sub-
channels. This could
include DMRs.
Take control action to ensure the Take control action to The DMR wants to ensure
software and/or website is easy-to- ensure the artist is speedily that the software and/or
use and smooth running and economically website is easy-to-use and
proliferated throughout the smooth running and
Take control action to ensure the Internet due to the licensed music is
distribution is licensed and implemented strategies distributed and that the
differentiated service is differentiated.
Take control action to The label wants to ensure
ensure strategies are that the artist is speedily
innovative and appropriate and economically
to the artist proliferated throughout the
Internet due to the
implemented strategies and
that the strategies are
innovative and appropriate
to the artist.
Appendix K-9
Networking Record Label Vs. Promotion Record Label
135
Networking Record Label Promotion Record Label Comparison

Assemble information on Assemble information on The activities between both
current developments and trends potential artist entities are contrasting but
in technology and media can be combined to offer a
industries Assemble information on better service.
blogs
collaborating with artists Assemble intelligence on
digital music influencing sub-
Assemble information on channels
liaising with mobile phone
manufacturers Assemble information on
forums and review sites
collaborating with digital music Assemble information on
authorities and social networks digital music retailers
Assemble information on Assemble information on

liaising with audio device guerrilla marketing strategies
manufacturers
Assemble information on viral marketing
collaborating with digital music
retailers
current developments and trends
in technology and media
industries
connecting with IT providers
Analyse businesses in terms of Develop strategies The networking label is
promotion and distribution of interested in analysis other
digital music capability Select distribution sub- businesses to liaise with them
channel to distribute digital music.
Select businesses to network and The promotion label wants to
form alliances with Evaluate strategies in terms formulate and implement
of popularity and cost strategies to promote artists.
Undertake exploitation These activities can be seen
Evaluate distribution sub- as complementary as the
136
channel strategies can be
implemented on the selected
Select strategies businesses.
Implement selected strategies

on sub-channel
Take control action to ensure the Take control action to ensure The networking label wants
exploitation will result in the strategies are innovative and to ensure that the selected
label becoming a highly appropriate to the artist businesses will help the label
influential connected entity to become influential and can
Take control action to ensure then leverage this to promote
Take control action to ensure the the artist is speedily and digital music. This is
selected businesses can be used economically proliferated complementary with the
to promote and distribute digital throughout the Internet due to promotion label as the
music the implemented strategies promotion of digital music
will help promote the artist
using the appropriate
strategies.
137

A Systemic Analysis of Music Distribution Over The Internet

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

A Systemic Analysis of Music Distribution Over The Internet

Uploaded by

Copyright:

Available Formats

Title: A Systemic Analysis of Digital Music Distribution on the Internet

Chapter 1: Introduction ................................................................................................... 1

Chapter 2: Literature Review .......................................................................................... 5

Chapter 3: Methodology ................................................................................................37

Chapter 4: Analysis, Evaluation and Learning................................................................49

Chapter 5: Conclusions ..................................................................................................83

Websites Mentioned ......................................................................................................93

Appendix H ................................................................................................................. 117

Attempting to solve these problems is impractical. Thinking about and attempting to

• Mikhaila Burgess, as my supervisor guided me through the project and helped

BPR – Business Process Reengineering

Figure 2-2: Digital Music Product Characteristics ..........................................................10

Figure 2-4: Initiators of Digital Music Websites.............................................................16

Figure 2-5: Web Comic .................................................................................................30

Figure 3-1: The Customised SSM Approach Illustrated .................................................47

Figure 4-1: The Consumer’s Conceptual Model .............................................................58

Figure 4-2: The Record Label’s Conceptual Model (Promotion Orientation)..................59

Figure 4-3: The Artist’s Conceptual Model ....................................................................60

Figure 4-4: The Digital Music Retailer’s Conceptual Model .........................................61

Figure 4-5: Record Label’s Conceptual Model (Networking Orientation) ......................62

Figure 4 6: An Autopoietic Methodology-Creating System ............................................73

This project’s motivation is obviously interesting enough to any individual with an

A tailored version of Wilson’s Soft Systems Methodology (SSM) is used as the

In Chapter 4, a detailed description of the activities undertaken based on the

Finally, Chapter 5 culminates with a summary of the essential elements of this

This dissertation’s aim is to holistically analyse the industry by conceptually organising

1.3 Target Group

Note: This chapter is Stage 1 of the customised SSM approach.

Chapter 2: Literature Review

2.1 The Music Industry: An Overview

2.2 How the Traditional Music Industry Works

2.3 What is an eBusiness Model?

A business model represents the proposed theory of a business. A business model

2.4 Changes in the Music Industry’s Value Chain

Figure 2-2: Digital Music Product Characteristics (Bockstedt et al., 2004)

2.5 Growth of Digital Music: A Background

2.6 The Industry’s Participants

2. Digitally-Intermediated Distribution - Due to new incentives more artists will contract

2.6.2 Record Labels

2.6.3 Digital Music Retailer

be able to differentiate themselves through specialised services, trust and by perhaps

1. Digital Music Retailer Differentiation - By offering new services, product versions

2.6.4 The Consumers

2.7 Challenges in the Digital Music Industry

2.7.1 Revenue Stream and Pricing

2.7.1.1 Artist Perspective

2.7.1.2 Digital Music Retailer Perspective

2.7.1.3 Record Label Perspective

Ad-supported services offer consumers free access to streamed or downloaded music

2.7.1.4 Consumer Perspective

2.7.2 Gaining Value from and Adding Value to the Industry

2.7.2.1 Consumer Perspective

According to Sicker et al. (2007) consumer’s consider important characteristics to switch

Whenever we release a premium download as well as a basic album bundle, it’s

Nine Inch Nails and Radiohead have proved this.

2.7.2.2 Digital Music Retailer Perspective

2.7.2.3 Record Label Perspective

2.7.2.4 Artist Perspective

2.7.3 Piracy Perspective

2.7.3.1 Artist Perspective

2.7.3.2 Record Label Perspective

2.7.3.3 Digital Music Retailer Perspective

2.7.3.4 Consumer Perspective