Monetizing intellectual property in the changing music industry

Term Paper (Advanced seminar), 2010

22 Pages, Grade: 2,0


Table of Contents

List of Illustrations

List of Abbreviations

1. Introduction

2. The Industry – today’s facts, figures & key players

3. The Industry – past and present
3.1 Piracy and decreasing prices
3.2 New Business Models

4. The Empowered Artist
4.1 Crediting Intellectual Property
4.2 Mechanical and Performance Royalties

5. Where the Industry is headed

6. Literature/Sources

List of Illustrations

Illustration 1 : Revenue from music

Illustration 2 : Revenue from music sales in the U.S

Illustration 3 : Bittorrent search query

Illustration 4 : Album credits

Illustration 5 : Collection Societies

List of Abbreviations

illustration not visible in this excerpt

1. Introduction

Imagine a world without music and you will realize it’s a fundamental part of our lives. It’s something we encounter daily; both in our working lives and leisure time, and is as essential a part of our culture as the written word. As something that is both inherently desirable and necessary for a full life, it’s a valuable commodity, and traded as such all over the world.

The development of the music as an industry was itself a fundamental process in the way consumers accessed music, brought about by the desire of composers and performers in the 18th century to free themselves of the restrictions on their work that were imposed by the princes and bishops who sponsored them. In realizing that people were willing to pay for the privilege of hearing or playing their music, they sold their works in print and charged for their performances, and thus bought their artistic freedom.

At present the industry is going through a period of great change. The introduction of the digital download market has meant re-thinking of business models and finding new sources of revenue, as well as new ways in which to protect interests. It’s tempting to see such periods of change as deeply negative but the industry has gone through many such periods, and has continued to flourish and adjust itself over the decades.

In this term paper I will discuss the recent changes within the music industry and how this is effecting the monetization of intellectual property.

I will focus on the two main groups, labels and artists, while pointing out the effects and opportunities of these changes for each of them. While doing so I´ll try to highlight the relevance of credits in music along with how recent developments in terms of digital download have affected them.

2. The Industry – today’s facts, figures & key players

Illustration 1 : Revenue from music

illustration not visible in this excerpt

(Source: IFPI – Recording Industry in Numbers, January 2010)

According to the IFPI more than 95% of the total revenue from music in 2009 was derived from the 30 major countries in the proportions shown above, organized roughly by geographic location. I will be focusing on the U.S. as being the largest market along with the UK as Europe’s largest music market, and the world’s third largest.

IFPI also states that four companies (majors) account for 71.7% of global retail music sales while the remaining 28.3% are made up by countless independent labels. These big four are:

- Universal Music Group—25.5%
- Sony Music Entertainment—21.5%
- EMI Group—13.4%
- Warner Music Group—11.3%

Together they contribute to the estimated $30 billion worldwide music industry of 2009.

Total revenue from U.S. music sales and licensing plunged to $6.3 billion last year. Only ten years ago that revenue figure topped $14.6 billion.

The UK made up for 10.4% of world record sales in 2009 totaling £928.8 million pounds. Last year’s modest result follows a five-year drop in annual income, and total UK music industry income has not exceeded £1billion since 2006.

The Recording Industry Association of America has reported declining revenue in nine of the past 10 years, with album sales falling an average of 8% each year. Last decade was the first ever in which sales were lower going out than coming in.

Album sales are currently in free fall all over the world. The 10% drop in the UK over the past year is dwarfed by a 15% slide in the US, 25% in France and a whopping 35% in Canada(IFPI, Recording Industry in Numbers, 2010).

3. The Industry – past and present

Illustration 2 : Revenue from music sales in the U.S.

illustration not visible in this excerpt

(Source: IFPI – Recording Industry in Numbers, January 2010)

Considering the U.S. figures presented earlier, one can easily see a drastic decrease in sales and revenue. To understand why this happened, let me sketch out the development of the music market in the U.S. over the last 10 years.

According to RIAA vice president of research Joshua Friedlander "There have been a lot of changes over the past 10 years, in which the industry is adapting to consumer's demands of how they listen to music, when and where, and we've had some growing pains in terms of monetizing those changes."(IFPI, Digital Download Report, 2010)

The two recessions during the decade certainly didn't help music sales. It's also a bit unfair to compare the 2000s with the 1990s, since the '90s enjoyed an unnatural sales boost when consumers replaced their cassette tapes and vinyl records en masse with CDs.

But industry insiders and experts argue that the main reason for the industry's massive decline was the growing popularity of digital music and with it the piracy and file-sharing issue.

To many heads of industry, the digital music business has been a war of attrition that nobody seems to be winning. The sales of CDs are constantly declining, and nothing is replacing it in entirety as a revenue generator.

The battle for paying digital customers may have been lost before it had truly begun. In 1999, Napster, a free online file-sharing service, made its debut. Not only did Napster help change the way most people got music, it also lowered the price point from $14 for a CD to free. (CNN Money)

Of course, when millions across the globe download songs and albums for free, record companies without a doubt will feel the impact.

0:00 /1:32Napster's impact a decade later

Apple's iTunes store is credited with finally getting people to pay for digital music, but it wasn't unveiled until 2003.

In the time between Napster's shuttering and iTunes' debut, many of Napster's 60 million users found other online file sharing techniques to get music for free. Even after iTunes got people buying music tracks for just 99 cents, it wasn't as attractive as free, since the purchased product did not differ from the free one.

Many argue that it was in this four-year lag, between1999 to 2003, where the music industry lost the battle. They lost an opportunity to take consumers' new behavior and really monetize it in a way that nipped the free music expectation in the bud.


Excerpt out of 22 pages


Monetizing intellectual property in the changing music industry
Cologne University of Applied Sciences  (Fakultät für Wirtschaftswissenschaften)
Export Management and International Marketing
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
1168 KB
music, music industry, intellectual property, monetize, copyright, filesharing, piracy, free music, credits
Quote paper
Jan-Patrick Stolpmann (Author), 2010, Monetizing intellectual property in the changing music industry, Munich, GRIN Verlag,


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