Tom Bradley

The Music Industry: Lessons to be learned by Impact of Digital

• In the physical world, record companies = book publishers (create, manufacture and distribute product). Only licensed secondary rights eg K.Tel

• In the physical world, retailers mainly specialists record and book shops (in the same business)

• Danger of increased reliance on supermarkets in the physical world eg Tesco in the UK

• Piracy absorbed into the business model eg home taping, counterfeiting

Lost control and influence over Distribution

• Digital distributors not in the music business (unlike vested interest of bookshops

• iTunes model not good for the industry

(Apple only interested in selling ipods etc)

(pricing per track, album sales undermined)

• Tesco now squeezing margins on physical product as record shops disappear (? Amazon?)

Easy access to repertoire

• Record companies slow to embrace digital (uncooperative, direct licensing, slow and difficult due to Fragmentation)

• Napster lost opportunity? (BMG sued by peers)

• Lower price for increased volumes online (fundamentally different model)

• Possibility of parallel markets for physical CD’s and online tracks (not same consumers)

• Failed to offer a real alternative to the general public (but inexperienced in B to C)

• Unsatisfied demand for the unavailable – deletions (P2P danger)

Enforcing Copyright

• Major problem (music in public domain) – “free” on radio

• Need to monitor the market in order to protect it

• No one company is big enough/trade association suing individuals led to negative publicity

• P2P file-sharing and illegal Torrent sites – industry in re-active mode therefore sheer scale of piracy overwhelming

• Cultural expectation that on-line products will be cheaper

– Control over distribution

– Easy access to repertoire

– Enforcing copyright

• Music industry failed to deal with these problems by not taking a collective/industry approach

• Other industries – airlines (booking systems)

- banks (hole in the wall)

• Google is not the ultimate threat (can talk and negotiate); P2P

Summary – 3 major concerns

• Need a collective solution:

– Industry database real/virtual– Industry portal to facilitate easy access and

transactional licensing– Tracking technology to monitor the

marketplace/identify infringements – licence– Work with ISP’s, not against them – look for

‘added value’

Similar scenarios for this industry

• To be effective, industry solution needs potential global reach

• Need to work together on a co-operative basis across borders

• Still possible to compete within a collective infrastructure

• Primary and secondary rights blurred in digital world

• Sheer volume of online activity makes it difficult to regulate secondary copying

• Direct licensing (non-collective) and collective licensing needs to work together (as it has over the past 25/30 years in the physical world)

• Digital world has more complicated structures and needs investment for sophisticated solutions

• Rightsowners need the same protection – but also a menu of other collective services (avoid disenfranchised)

“The answer to the machine is inside the machine”

Charles Clark