Lecture given on the International Business School in Hungary, Budapest in 2011. Changes of the Music Industry - New Ways of Music Consumption Edited by Andras Bodrogi - New Media Manager and Consultant

1. Music in The Digital Era
Changesof theMusic Industry
New Waysof Music Consumption
Edited by AndrasBodrogi
New MediaManager and Consultant
Médiapark - WMMusicDistribution

2. Summary
• Music Industry vs. Internet Technology
• Changes in Music Consumption
• Digital Music – Trends and Business Models
• Global Market Overview
• Market Overview in CEERegion
• Market Overview in Hungary
• Social Media vs. Music
• Social Media Marketing and PR

3. Music Industry vs. Internet Technology
Internet vs Industry
• Piracy - Illegal FileSharing Networks(P2P)
• „Devaluation” of Music
• Disrespect of Intellectual Property Rights
• Digital Music Distribution

4. Music Industry vs. Internet Technology
Internet vs Artists in Music
• Online Communication Tools for Artists
• DIY Social Media PR, Marketing and
Distribution
• Fanbase Relation Management

5. Music Industry vs. Internet Technology
Music Industry in Mutation
According to the European Music Office (EMO)
„Music industry is today an industry
‘in mutation’, with
new consumption methods to be anticipated,
new economic models to discover,
new activities and new professions to define.”

6. Music Industry vs. Internet Technology
Music Industry must do’s
• Optimalization, rationalization in business, in digital music strategy
• Look for alternative channels such as mobile, invest in new
business models, and come up with attractive services
• Without elaborated legal market the illegal will grow
• Follow the changes by the development of technology
• New laws for the creative industries
„ Protecting intellectual property rights is key to growing the digital
business.” - International Federation of Phonographic Industries (IFPI) 2010.

7. Music Industry vs. Internet Technology
Global Music Industry Turnover (1973-2009)

8. Changes in Music Consumption
• Format change
.mp3 - .vaw - .wma
• Portable Devices
music capable mobile phones, MP3 players, tablets
• Mobile Internet - Music is mobile
increasing mobile broadband speed
• Music is everywhere
access to a music catalog, to your own music library

9. Changes in Music Consumption
OWN AND/ OR ACCESS
Pay per Track and/or Subscription
iTunes, Amazon Spotify, MOG, eMusic
Dalok.hu Vodafone Korlátlanzene
DOWNLOAD and/or STREAMING
Actual trend: Cloud Music Service
Web storage place - Upload and Store your music
Lets You Play and Edit and Sync Your Music From Anywhere and on
Any Devices (Web and Mobile) i.e. Amazon, Google, Apple

10. Changes in Music Consumption
According to eMusic independent research (2011):
• 91% prefer to own music because it allows them to listen as many times as they
want
• 89% prefer to own the music they like, rather than stream it
• 86% feel that ownership gives them security that their files will not disappear
• 76% use streaming to discover music that is new to them, before they decide
whether or not to buy
• 74% will stream music for free, but wouldn't pay to stream
• 13% pay to stream music online; 84% of consumers who pay to stream also
purchase digital music files
• 79% do not think they will ever give up owning music and just stream it online
• 39% will store digital music files they own in a cloud-digital locker, so that they
can listen to them anywhere
• Only 14% will increase their use of paid streaming services
Source: http://www.billboard.biz/bbbiz/industry/digital-and-mobile/new-emusic-study-touts-ownership-over-streaming-1005354752.story

11. Changes in Music Consumption
TheNielsen Company research on Global music consumption habits
Source: http://www.nielsen.com/us/en/insights/reports-downloads/2011/hyper-fragmented-world-of-music.

12. Changes in Music Consumption
TheNielsen Company research on Global music consumption habits
Source: http://www.nielsen.com/us/en/insights/reports-downloads/2011/hyper-fragmented-world-of-music.

13. Digital Music – Trends and Business Models
Business Models

14. Digital Music – Trends and Business Models
Pay pertrack (one-off payment) model
Advantage : Simplest model to sell thetrack for oneset price- i.e. iTunes.
CRM (Consumer relation management) issuesareminimized
Low level of complexity appealsto customers.
Disadvantage: doesnothing to createaservicethat usersfeel compelled to revisit
Brand building morecostly
Servesto drivepricesand associated marginsdown
Ways to differentiate such service:
Thepriceof thetrack
Usability and Accessibility. (what really makesor breaksaservice)
Thenumber of clicksit takesto purchaseatrack
Favorites, recommendations, push updates, exclusivesand pre-releasecontent, dual download
(to PC and mobile)

15. Digital Music – Trends and Business Models
Subscription model
Offersadefined level of usagefor aset priceper month
CRM costsarehigher
High amount of revenuecoming from long term subscribers= higher returnsand profit
Only timewill tell exactly how successful thismodel will beand if they can challengethe
dominanceof iTunes
To makeusersloyal:
Allow usersto keep downloaded tracks
Allow usersto savetheir favoritetracksafter their contract expires
The one and only subscription based music service with a full catalog is the
Vodafone Unlimited Music Store in Hungary (Oct.2011)

16. Digital Music – Trends and Business Models
Bundled model
Offering mobilemusic servicesto their subscribersbundled aspart of their monthly
voiceand messaging subscription
Attract prepaid subscribersto monthly contracts
Bundled model for mobilemusic servicescould beserviceswhereaccessto music is
bundled with thepurchaseof selected mobiledevices

17. Digital Music – Trends and Business Models
Advertising-funded model
SDC (SecureDigital Container) isproviding an ad-funded mobilemusic servicethat displaysads
on thehandset screen whileusersarelistening to tracks
Monthly subscription at adiscounted priceif usersopt to haveadvertising playing on their mobile
screen whilethey listen to tracks
It enableslabelsto let userslisten to promotional tracksfreefor alimited period of time
Therevenuefrom advertising isshared with thelabel
If mobilemusic revenuescomewholly or partly from advertising, it becomesmorecomplicated to
determinewho should bepaid how much in royalties

18. Digital Music Trends
According to research group Ovum, thedigital music industry will achieve$20 billion in global
revenueby 2015 (4.6 billion dollar in 2010).
It will besubscription-based music servicesthat will help driveup revenueby 60% in four years.
Digital music industry to hit revenuesof $20bn by 2015
http://about.datamonitor.com/media/archives/5479
• Mobilemusic revenuesaregrowing fast
• Over 50% of sold mobilephonesaremusic capable
• New BusinessModels: subscription services(accessto music)
• Operatorsarefinding it difficult to competepurely with pay-per-track services
• Theemergenceof selling DRM-freetracks, such asiTunesand Amazon haveforced operators
to also introduceDRM-freeservicesin variousguises.
• Despitemaking substantial investmentsin promoting their music stores, many operatorshave
felt that their brandsarenot strong enough to persuadesubscribersto buy music
Source: InformaTelecoms& MediaMidem 2010
www.informatm.com

19. Digital Music Trends
„Telcos and Operators have a huge opportunity to curate
and lubricate digital content, and to host /curate the social
conversation around it.”
Contextualizing
Connecting
Curation
Culling
Collating
Source: Music 2.0: TheFutureof music - Gerd Leonhard 2011.

20. Digital Music Trends
Mobile Music Trends
The numberof
mobile music
streaming
subscribers
are increasing

21. Digital Music Trends
Mobile Music Trends
Mobile Music
Revenues
$18.4
billion
in 2013

22. Digital Music Trends
Future Mobile Music Trends
• A good number of mobilemusic businesslaunchescan beexpected in 2011
• Operatorswill turn to subscription modelsfor mobilemusic in 2011
• MoreD2C (direct to consumer) modelsfor mobilemusic will emergeand thisin
particular will bedriven by theapp storephenomenon.
• Moreconvergencebusinessmodelswill emergei.e. music servicesthat can be
accessed on mobile, online, in thecar, and on thehomestereo system.
Source: InformaTelecoms& Media Further details can be fo und at www.info rmatm.co m

23. Global Market Overview
• In 2010 - 823 million paid usersof digital music - number isexpected to increaseto
1.55 billion in 2014
• Thenumber of music usersdownloading viamobilehandsetswill increasefrom
483.8 million in 2009 to over 1 billion in 2014
• Thegreatest growth in theglobal digital music industry will happen through
subscriptionsto both onlineand mobilemusic channels
• Record company revenuesfrom downloads(full tracks, albums, music video and streams
over thefixed and wirelessnetwork) will reach $21.1 billion in 2014, from the
estimated $4.8 billion in 2009
Source: Global Digital Music Forecast for online, mobile, and subscription channels, 2010 – 2014. IE Market Research 2010.

24. Market Overview in CEERegion
CENTRALANDEASTERN EUROPEAN MARKET
• In 2009, therewere37.5 million paid usersof digital music in Eastern
Europeand that number isexpected to grow to 69.3 million in 2014
• Onlinemusic download usersin Eastern Europewill increasefrom 11.9
million in 2009 to 30 million in 2014
• Digital music retail revenuesin Eastern Europewill increasefrom $100.6
million in 2009 to
$737.5 million in 2014 (59.5%).
Source: Digital Music Forecast of Eastern Europe
IE Market Research 2010.

25. Market Overview in Hungary
• Thedigital music locally started in 2005
T-OnlineMusic Store- closed in 2009 - pay per track
Songo - closed in March 2011 - pay per track
• Legal Digital Music Stores (Oct.2011)
iTunes Music Store Hungary
Vodafone Unlimited Music Store
Dalok.hu - only local content - pay pertrack
zenewebshop - selected local content - pay pertrack
• Mobile WAPPortals
T-Mobile - Vodafone Live! - Telenor/djuice

26. Market Overview in Hungary
• In 2005
253.794 unitsof downloadsonlineand mobile
$ 372 130
• In 2008
thenumber of total downloaded and streamed digital music content was
41.593.837 units
$ 922 917
• In 2010
$ 496 042
Source: MAHASZ

27. Social Media vs. Music
Source: Horn Group 2007

28. Social Media vs. Music
“Theterm Social Media isreally kind of an artifact, a
mereconstruct.”
Networked Media
Real-TimeMedia
User-driven Media
Engaged Media
Source: Gerd Leonhard 2010. MIDEM
http://www.mediafuturist.com/

29. Social Media vs. Music
Social networksarechanging the way how
music isdiscovered,
purchased
and consumed

30. Social Media vs. Music
A massive importance of music in social networks
Reflectspersonality and helpsto understand thepersonality
of peopleyou meet on such sites
Peopleexpressthemselvesviamusic and they often make
friendson thebasisof similar music tastes

31. Social Media vs. Music
Myspace Music http://www.myspace.com/music
• Still the only place online where you can find most of the
bands
• Opportunity to users to listen to unlimited audio and music
video streams (hundreds of thousands tracks)
• Users can create own playlists and postup to ten songs on
their profile pages for others to listen to
• Bands can create a personalized and branded profiles filled
with information, music, video, events, blogposts, weblinks…
• An important feature: a ‘buy button’ that directs users to
AmazonMP3 for DRM-free downloads and Jamster for
ringtones

32. Social Media vs. Music
Facebook (Fan Page) http://www.facebook.com/pages/
• Global Audience: 741,426,860
• Hungary - 3,582,320 (30.09.2011)
Hungary
• 52.2% female- 47.8% male
14-17 - 15.9 %
18-24 - 23.7 %
25-34 - 25.6 %
35-44 - 17.4 %
45-54 - 8.1 %
55-64 - 5.1 %
Source: http://www.checkfacebook.com/

33. Social Media vs. Music
Facebook (Fan Page) http://www.facebook.com/pages/
• The leading social network. Still not the most user-friendly for bands
• It brings you closer to millions of fans and helps you discover new
fans with unparalleled distribution
• Connection: create an authentic connection by sharing
information. Encourage for support by comments and content
shares with friends
• Content: share updates about latest tour or album, stream music,
post photos, videos, create event reminders…
• Distribution: access to a global audience and grow your fan base.
Keep current FB users engaged through News Feed updates

34. Social Media vs. Music
4 Most PopularFacebook Apps ForMusicians
• Facebook isfast becoming ahub for music discovery and marketing.
• BandPages By Root Music isthe#6 Facebook App with 32M+ MAU
(monthly averageusers).
• ReverbNation'sFacebook app isgaining impressivetraction reacing
#25 with 12.5M MAU
• Bandsintown'slivemusic app isat #117 with 3.4 million MAU
• SoundCloud chartsat #281 with 1.4 million MAU

35. BandPages
By Root Music
www.rootmusic.com

36. Reverbnation
www.reverbnation.com
Facebook applications

37. Bandsintown's live music app
www.bandsintown.com

38. SoundCloud
www.soundcloud.com

39. Social Media vs. Music
Micro blogging Communities
Twitter http://www.twitter.com
Nearly 200 million usersworldwide- 110 million tweetsper day
It enablesitsusersto send and read other users' messages
Text-based postsof up to 140 charactersdisplayed on theauthor'sprofilepage
Local: Turulcsirip http://www.turulcsirip.hu Yamm
http://yamm.hu/
(both usethedatabaseof theHungarian usersof Twitter)
Thesefollow around 30-40.000 Hungarian
Twitter users’ 40-60.000 daily tweets

40. Social Media vs. Music
Twitter http://www.twitter.com
• Thenumber of musiciansusing Twitter to connect with fansisgrowing
• Thewaveof servicesto sharemusic on Twitter keepsgrowing
Few TwitterApps formusic:
• TwitterSearch – you can seewhat fansaresaying at your showsand break down the
searchesinto location, emotion and other features.
http://search.twitter.com
• Hootsuite – analyzestatsof your Tweets, schedulemessagesin advanceand
managemultipleaccountsfrom oneplatform. http://www.hootsuite.com
• TweetDeck – Theultimateapplication to manageyour Twitter account, Twitter searches,
Facebook, LinkedIn and Myspace. http://www.tweetdeck.com

41. Twitter
TwitterApp - Facebook

42. Social Media vs. Music
Video Sharing Sites:
YouTube
http://www.youtube.com
Theworld’slargest video sharing community, aGoogleproperty
that streamsover abillion videosaday
Other: Vevo, Ustream, Vimeo, JustinTV
Local: Videa, IndaVideo, Webcsatorna

43. YouTube Channel YouTube
apps
Facebook
www.involver.com
„Everything you need to build and
scalecustomized social
marketing experienceswith
speed and pixel perfect quality.”

44. Social Media vs. Music
Photo Sharing Sites
Flickr http://www.flickr.com/
• Thepremierephoto sharing site
• Very well indexed in Google
• They also allow to useand let othersuseyour imageswith
creativecommonslicenses
• Also allowsfor video upload
Others: Picassa, Photobucket, WindowsLivePhoto
Local: Indafotó http://indafoto.hu/

45. Social Media vs. Music
Streaming sites and communities,
Last.FM http://www.last.fm/
A music servicethat learnswhat you liketo listen.
It can connect you to other peoplewho likewhat you like
It recommendssongsfrom their and from your music collections
Blip.FM http://blip.fm/
A placeto createyour own radio station and shareit over Facebook, Twitter,
Last.FM, FriendFeed and others.
Also discover music based on other DJ’sand tastemakers.
Soundcloud http://soundcloud.com/
UseSoundCloud to send your tracks
Very clean and user friendly servicewith optionsto sharetracks

46. Social Media vs. Music
Mobile Applications
Mofuse http://www.mofusepremium.com/
• Createmobilewebsites, track your statsand get iPhoneoptimized
• Worksbest with blogpostsand RSSfeedsrunning into it
• It can beput on custom domain for free
• It hostsAdSenseto makeafew centson advertising
Mobile Roadie https://mobileroadie.com/
• Bandscreatetheir own custom iPhoneapplication
• Includescontentslikephotos, music streams, YouTubevideos, events,
lyrics, news, Twitter and RSSfeeds
• Interactivefeatures: "wall” wherefanscan post commentsand photos
• Link to Ticketmaster and LiveNation ticket salesinformation
• Link to theband'salbum(s) on iTunes

47. Social Media vs. Music
OtherTools
ReverbNation http://www.reverbnation.com/
Onlinemarketing toolsfor musicians: gig finders, video widgets,
email services, digital distribution…etc
Others: Fanbridge- fanbase, email list management,
Bandmetrics
Ning http://www.ning.com/
Thefastest way to createyour own social network
They offer afreeand paid version of theservice
Collaboration Sites - Indaba, Splicemusic, Kompoz
Blogging Platforms - Blogger, Wordpress, LiveJournal

48. Social Media Marketing and PR
Ways and techniques to keep up online presence and
online band-fan base interactions
• To extend and keep up theonlinepresence: oneof thesignificant keysfor
futuretalentsin digital music
• Optimally retrievableby search enginesisan important aspect: SEO (search
engineoptimization) and SEM (search enginemarketing)
• A continuousand assiduouscontent creation and shareon variousplatformsat
thesametime, in diverseformatssuch astextual, visual and audiovisual
• Way of tagging, adding uniquekeywordsthat describeand relateto certain
content, that help usersand search enginesto retrieve

49. Social Media Marketing and PR
• Social MediaAdministrator / Manager
• Social MediaMarketer
• Street Teams(based on fans)

50. Social Media Marketing and PR
Broadcast media
isdeclining and expensive
Networked Media
isexploding

51. Social Media Marketing and PR
Trust - Attraction - Openness
“Trust isthemost important currency online, so to
build it weadhereto threeprinciplesof open
information: value, transparency, and control”
Source: GoogleSenior VP, Product Management
Jonathan Rosenberg'sessay, TheMeaning of Open,
published on theOffical GoogleBlog

52. Social Media Marketing and PR
Three challenges
• Opennessishard - and not our default setting
• Conversationstaketime- and can beareal work
• ‘Offering something for freeso that you can ask to get
paid later’ takesreal courage- and believe!
“Wehaveto striketheright balancebetween being in touch, and
being in control. Theirony is, themorein control weare, the
moreout of touch become.”
A.G Lafley CEO of Procter and Gamble
at theANA Annual Conference
in Orlando, October 2006

53. Social Media Marketing and PR
No!
• Push Marketing
• Top-down
• Domination Plays
• Uni-directional marketing
• Interrupting consumers
• Shout: buy buy buy
• 100% control everything

54. Social Media Marketing and PR
YES!
• Social-Mobile-Web-NativeMarketing:
• Pull ‘Followers, Friends, Fans, Users’
• Attract and addict
• Low-cost, very targeted
• Conversational
• Engagement isthegoal
• Message: Share. Follow. Talk.
• 100% Trust
Source: Gerd Leonhard Midem 2010

55. THANKYOU!

56. Sources
• Hypebot - www.hypebot.com
• Mashable - www.mashable.com
• Music Industry Report - http://musicindustryreport.org/
• Music Ally - http://musically.com/blog/
• Billboard Biz - www.billboard.biz
• Digital Music News - www.digitalmusicnews.com/
• Future of Music - www.futureofmusicbook.com
• Music Think Tank- www.musicthinktank.com
• TopSpin- www.topspinmedia.com/blog/
• Indie Music Technology - www.indiemusictech.com/
Experts, Marketers, Futurists:
• Derek Shiver- http://sivers.org/blog
• Bob Baker- www.bob-baker.com/musicpromotionblog
• Gerdh Leonard - www.mediafuturist.com
• Andrew Dubber- www.newmusicstrategies.com www.andrewdubber.com
• Bob Lefsetz - http://lefsetz.com/wordpress/

57. Contact
WMMusicDistribution Szolgáltató és
Kereskedelmi Kft.
Address: 1024. Kis Rókus utca 2-6
Contact Person:
András Bodrogi - New Media Manager
E-mail: bodrogi.andras@wmmd.hu