the future of music industry

music revenues are declining

Global revenue (billion $US) 30
24 18 12 6 0 Over a decade of decline in revenues 15.7 15.0 17.1 16.6 Global revenue of music industry (billion $US) 18.3 19.8 21.2 23.5 22.7 24.3 24.2 26.2 27.4 28.5 28.6 28.1 27.7 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014

but we are not listening
less music

it is changed how we
listen music

napster 1999 With Napster Consumers
began experiencing digital music for free. Record labels were not able to provide an attractive legal alternative. By then, illegal file sharing begun and consumers became accustomed to accessing music for free. iPod in 2011 was the first widespread successful portable media player. It further encouraged appetite for digital music. iTunes 2003 iTunes provided a legal and convenient way to download music. It became the top music vendor in US in 2008 and the top music vendor in the world in 2010. The successful business model is built around a simple yet compelling value proposition: a comprehensive digital world’s music catalogue available in an convenient and simple way. ! YouTube YouTube is quickly becoming the most popular music streaming service. It is a free and easy way to share and access the largest collection of videos. The “free” quality of the video streaming platform has led it to gain an impressive volume of consumers, thus making it an extremely attractive platform for advertisers. ! 2005 Spotify 2008 Spotify is quickly becoming the most popular on-demand and download music streaming service. The key driver of its business model is similar to both the iTunes Store and Youtube: it offers a breadth of music at the touch of the fingertips, either for free supported by advertising or with added benefits available through subscription plans. How we listen music is changed A roadmap of Innovative Music Services

Digital Music continue to rise
Global digital revenues of music industry to $5.9 billion Globale revenue (billion $US) 6 4.8 3.6 2.4 1.2 0 5.6 5.9 5.1 4.4 4.6 4.0 2.9 2.2 1.2 0.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014

Revenues from Digital Music account
for 39% of industry 25% 75% Physical Digital 5% 95% 39% 61% 2005 2009 2013 Source: IFPI Digital Music Report 2014 Global revenue of music industry (billion $US)

streaming is the fastest growing
media

Streaming services drive the digital
growth Streaming revenues more than tripling to US$1.1 billion in the last 3 years Global revenue (billion $US) 6 4.8 3.6 2.4 1.2 0 0.7 1.1 0.5 Digital download Digital streaming 0.3 4.7 4.9 4.8 4.0 4.4 4.3 2.9 2.2 1.2 0.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014

and it is changed the
perceived value

revenues are challenged because of
dominant methods consumers use to access music, such as Streaming, Torrents / P2P file sharing and YouTube, are either natively free or have a free option.

“There’s a new generation of
people who’ve been conditioned to expect their music for free, either through piracy or YouTube. We’re connecting powerfully with that generation, giving them a far superior way to enjoy music while magnetizing them by the millions. We convert their investment of time into real revenues by magnetizing the free service with advertising. Crucially we’re also seeing them move to Spotify’s paid service in their millions by offering mobility and convenience.” Ken Parks, Chief Content Officer, Spotify

A different monetization model Download
Song ! End User Price $0.99 ! Artist Royalties est. $0.60 Stream a Song ! End Price FREE ! Artist Royalties est. $0.008 Buy CD / LP ! End User Price $15.99 ! Artist Royalties est. $1.90 Source: Almighty Institute of Music Retail market research. Spotify doesn’t pay on a “per song stream” model, exactly: the total royalty pie is split among all rights holders based on the percentage of total streams and the company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties.

each market is different

Different performance across the world
5,389 4,897 3,616 521 Revenue by Market (million $US) Overall music revenues declined by 3.9% in 2013, heavily influenced by - 16.7% in Japan, a market at the start of its digital transition, and almost flat revenues in most of the other countries. Source: IFPI Recording industry in numbers 2014

North America is the biggest
market Global share of Sales of Recorded Music (million $US) 2,825 239 424 431 956 1,304 TOT 15,029 1,365 4,474 3,012 United States Japan Germany UK France Australia Canada Italy Other

And digital music consumption changes
by country share of revenues 10% 60% 30% 18% 27% 55% 6% 21% 73% 11% 44% 44% 13% 34% 53% Physical Digital Other 11% 68% 21%

business model is key to
monetization

“There are two real revolutions
taking place in digital music: first, value today is in ubiquitous access rather than ownership. Second, the focus of development in the worldwide music industry is no longer as concentrated, as it used to be, on the US.” ! Axel Dauchez, CEO, Deezer

1Easy and Free for Customers
In a world where Consumers have access to free services at the touch of their fingertips and are overwhelmed by the abundance of choices Music services should be: ! Convenient and Easy to access ! Improved musical Experience ! Free (or “feels like free”) Source: based on customer surveys available online

2 Satisfy all the Industry
with a Sustainable model A complex challenge is for music market is to find business models that satisfy all the chain, from Artist to Publishers to Distributors: ! Monetize asymmetric revenue streams (such as Advertising or Mobile data fees) ! Distribute revenues fairly among the players ! Enable economies of scale, to increase competition on Services Source: based on customer surveys available online