Kretschmer, Klimis, and Wallis (2001)
|Kretschmer, Klimis, and Wallis (2001)|
|Title:||Music in Electronic Markets An Empirical Study|
|Author(s):||Kretschmer, M, Klimis, G. M., Wallis, R.|
|Citation:||Kretschmer, M., Klimis, G. M., & Wallis, R. (2001). Music in Electronic Markets An Empirical Study. New Media & Society, 3(4), 417-441.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||The dataset is based on more than 100 interviews conducted between 1996 and 2000 with multinational and independent music companies in 10 markets, strategies of the major players, current business models, future scenarios and regulatory responses to the on-line distribution of music files are identified and evaluated.|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||Yes|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
Music plays an important, and sometimes overlooked part in the transformation of communication and distribution channels. With a global market volume exceeding $40 billion, music is not only one of the primary entertainment goods in its own right. Since music is easily personalised and transmitted, it also permeates many other services across cultural borders, anticipating social and economic trends. This article presents one of the first detailed empirical studies on the impact of Internet technologies on a specific industry. Drawing on more than 100 interviews conducted between 1996 and 2000 with multinational and independent music companies in 10 markets, strategies of the major players, current business models, future scenarios and regulatory responses to the on-line distribution of music files are identified and evaluated. The data suggest that changes in the music industry will indeed be far-reaching, but disintermediation is not the likely outcome.
Main Results of the Study
- Multinational companies may be distinguished as the main provider of risk finance in winner-take-all markets and by their control of a capital intensive global marketing and distribution operation.
- How will digital communication and distribution technologies affect the structure of the music industry? Given the current oligopolistic order, it is unsurprising that our 15 interviews revealed a concerted effort by multinational companies to delay and control the impact of the Internet. Rather than engaging with the development of new business models for e-commerce, the multinationals showed a defensive orientation.
- Interviews at all multinationals indicated that they would ‘follow demand, not be proactive’ (CFO, multinational). Priority was given to protecting existing margins and relationships with retailers. Multinationals generally refuse to licence their catalogue to third parties, offering on-line distribution.
- Despite a defensive orientation, the established music industry is unlikely to succeed in stemming the digital tide. Scenario techniques open a way to conceptualise a multichannel future beyond on-line distribution. Over two axis’, supply and demand constraints for a future music industry were constructed. On the demand side, the consumers will either opt for high interactivity and a large range of choice, or less interactivity and more trusted suppliers of packages. On the supply side, the options are either a centralisation of content in the form of intellectual property rights (IPRs) controlled by few players, or decentralisation with IPR creators retaining ownership.
- The music industry is entering a period of instability, which is not primarily characterised by disintermediation but changing patterns of intermeditiation. The main strategic challenge to the established players appears to be that, as yet, no credible business model has emerged in the on line environment that would secure revenue streams from value-adding intermediation and, eventually, channel investments back into content production. It is conceivable that consumers are not prepared to pay for content on the Internet as they were in retail stores.
Policy Implications as Stated By Author
- As the global markets become more integrated and transparent, and better copyright monitoring technologies become available, the current ways of administering copyright are under threat. Venture capitalists are entering the market (e.g. with the No. 3 US-society SESAC) ‘guided by a general feeling that rights are becoming more important, and that the established players will find it hard to adapt to the changing market and technologies’ (President, Collecting Society). In many lucrative areas (mechanical reproduction; broadcasting), multinational right holders are now in a technological position to monitor music usage and collect royalties themselves, rather than assigning rights to a collecting society. We recommend to clarify the role of collecting intermediaries (copyright societies) by European regulation.
- For a creative and innovative society, access to ideas is as important as protection. Grass-root performance activities (clubs, pubs)and informal distribution networks (cassettes, fancines, internet communities, MP3 sites, local radio) appear to be an effective basis for a national music industry. Basic
intellectual property skills (including knowledge of creator’s rights, and legal options such as self-publishing) should become an educational priority.
Coverage of Study
|Level of aggregation:||Multinational music firms|
|Period of material under study:||1996-2000|
|Level of aggregation:||Focus of the study is the domestic market for recorded music in the USA.|
|Period of material under study:||1996-2000|