KGRI Working Papers
No. 1
Mutual Liberation of Consumers and Technology in the Recorded Music Industry-A Historical Analysis of the Evolution of Experience Economy-

Version1.0
October 2020

Minkyoung CHO and Jiro KOKURYO
Keio University, Cyber Civilization Research Center (CCRC)
Keio University Global Research Institute© Copyright 2020 Minkyoung Cho and Jiro KOKURYO

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Mutual Liberation of Consumers and Technology in the Recorded Music Industry-A Historical Analysis of the Evolution of Experience EconomyMinkyoung CHO and Jiro KOKURYO
Keio University, Cyber Civilization Research Center
Abstract:
This paper describes how business models in the music recording industry have evolved in accordance withtechnological developments and a changing societal environment. The research initially started with ahistorical analysis on how new technologies have been reshaping business models to provide a better, or‘liberating,’ experience for consumers while unbundling and rebundling various components of the delivery
system to secure revenue from the intangible “experience” good. At the theoretical level, this paper aims toestablish a generic model for how technology affects business models in the “experience economy.”
Development of such a framework is important as the business models suited to physical goods are not usefulfor the rapidly developing experience goods that are delivered digitally. The first phase of the research strongly
suggested that not only technologies but also major societal events, most notably those that triggered economic
recessions, may have played a role in the development of new forms of business models in the industry thatsometimes use technologies that were developed decades before. A second phase of research was conducted toverify how social events played a role in the evolution of business models and technology adoptions that camewith it. We found instances of both technology-led evolution AND socially-led innovations. Ultimately, we
found that the meaning of ‘liberation’ in consumer experience has changed throughout history, which acted as
the driving force in the development of business models for experience goods like music.
Keywords: Business Model, Experience Economy, Music Business, Constraint, Technology, Economic Recession

1. Introduction

Changes in technology are converting the business model of many industries from oneof selling physical objects to one of selling access rights to experiences. The music industry isa prime example of a business that migrated from the physical goods economy to the“experience economy” (Pine & Gilmore, 1998). This paper looks at how successive forms oftechnology have been creating business models around the new user experience.
In analyzing this evolutionary process, the authors adopted three perspectives derived
from certain theories. One perspective examines how technologies removed constraints on thedelivery mechanisms of music (Goldratt, 1984; Zott & Amit, 2007). The authors knew, prior
to their research, that changes in technology had already been liberating consumers fromlocational, temporal and economic constraints in listening to music. Thus, we thought it would
be helpful to portray the evolution of business models in the context of how these changes intechnology have been liberating consumers from existing constraints.
Another perspective pays attention to the use of “bundling” in the music industry(Schmalensee, 1984). As music in itself is intangible, business models focusing on theprovision of an experience are usually established by bundling music with salable goods orservices. Bundling of music with LP records is a classic example of how the music experience
was monetized by selling the medium. The appearance of new forms of user experience hasoften meant the destruction of conventional forms of bundling and associated business models.
This causes a decline in revenue for the industry until other types of bundling appear whichallow the industry to create successful business models matched to fresh experiences.

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The third perspective is the experience economy. In fact, while we chose the musicindustry as our field of study, our original aspiration was to study the future of the experience
economy in the context of technological development. The notion of experience economy was
first coined by Pine and Gilmore in 1998, stating that we are proceeding to an ‘experiencefocused’ economy supported by the progression of economic value alongside consumer
demands which have been changing throughout history (Pine & Gilmore, 1998). The
experience economy focuses on the memorable and individualized creation of certain contents.
As more consumers today are demanding experience and putting more value on goods that can
only be appreciated over a limited period of time, more companies are promoting and sellingsuch quality time for individuals.
We believe that research in the experience economy is important as we observe an
increasing number of businesses being converted from those of delivering physical goods tothose of delivering experience as a result of advances in network technology. The musicindustry seems to be a prime example of such trends with past symphonic or operatic
productions being accessible in our homes unconstrained by time, location or economic factors.
Business models, having to capture the very elements of this experience, were required to adjust
to evolving technological frameworks in order to deliver an optimum experience.
In summary, we began our research by observing how changes in technology might
have been removing constraints from delivery mechanisms in the music industry. We asked
how these changes affected the manner in which delivery media and contents are bundled tosecure revenue models (a component of business models) and define the industry’s successive
business models. We hoped to arrive at a generalizable model for the analysis of the experience
economy.
A structured analysis of the industry revealed that relationships in which technology
removes constraints from business models to realize consumer benefits have not been linear
but rather interactive. Changing consumer demands brought technologies, some decades old,back to the front scene. We have also observed that such changes in consumer needs are often
triggered by economic recessions. In that sense the year 2020 has a special meaning as Covid19 has pushed society as a whole toward the use of various information technologies. Thus, we
conducted a brief additional literature review into how recessions may affect consumer
behavior and lead to technological changes.

2. Research Methodology

In seeking to understand how technology affects business models in the experience
economy, this paper employs a qualitative approach. Historical analysis will show us how
business models evolved with technological advancements. Our literature review on the
keyword ‘music business’ identified 31 closely related papers among the 50 extracted from
Scopus. Search results were limited to the top 50 journals used by the Financial Times incompiling the FT research rank. A certain gap in coverage was identified. Literature on
consumption behavior, value, pricing, sales of music and copyrights was abundant. However,works on business in relation to technology were relatively lacking. Considering that gap, ourpaper employs an integrative literature review aimed at exploring the way in which

3technology impacted the business models of the recording era, when music was recorded inparticular physical formats.
We conducted an extensive and historically integrated, archival literature review(Torraco, 2005) of the period 1948 - 2020. Our focus was the music recording era in aninterpretivist worldview (Creswell, 2018), limited to music business within the American
market. We see primary sources such as newspapers and magazines most instantly reflecting
the market with their depictions of concurrent issues. Among primary sources, we focused onnews media including the New York Times and LIFE and especially the entertainment media
magazine, Billboard, which concentrates on music. We distinguished articles in terms of (1)the introduction of technology to the market (1948, 1964, 1982, 1999, 2008), (2) peak sales(1973, 1984, 1991, 2012, 2016), and (3) a transition in sales dominance corresponding with
one in technology (1957, 1984, 1991, 2012, 2016). General databases in secondary sourceswere used to support the findings from primary sources including Google Scholar, Scopus,
EBSCO, IEEE Xplore, ProQuest, JSTOR, Academic Search Premier, Elsevier, and Project
MUSE. Additional data sources were utilized in order to compare and analyze the impact on
business models for music. These sources include the International Federation of the
Phonograph Industry (IFPI) and the Recording Industry Association of America (RIAA),
both of which support US music sales databases.
The findings outline the historical stages of business models in the recording musicindustry. Historical analysis helps us discern a pattern in, and draw a generic model on howtechnology changes affect business models in the form of bundling, unbundling, andrebundling. The outcome suggests a more complex relationship between models in whichsocial/economic crises may determine the selection of the technology that ultimately gains
dominance in sales. Also, while shifting from old to new technology, the removal of
constraints on the old business model will lead to new ones. In researching this we will
discuss changes in consumer behavior towards experience goods in the entertainment
industry, and the relationship between corresponding business models of the experience
economy. We will identify the time gap between the initial introduction of technology and its
adoption by business.

3. Literature Review

This section examines issues surrounding music business models in terms of the value
accrued to consumers in the experience economy and the impact of technology on generating
this value. First, we will take a look at current trends in the experience economy and how
their accelerating pace connects with the digital economy. Then we will discuss how businessmodels have evolved in relation to changing technology and how we can categorize bundling,
unbundling and rebundling in this industry. This will be followed by a review of earlier
analyses bearing on this research. Lastly, we will present and articulate this paper’s
theoretical framework, the theory of constraints.
3.1 Experience Economy
First coined by Joseph Pine and James H. Gilmore, experience economy, as shown in
Figure 1 below, refers to one stage in the progression of economic value over time. At each4

stage we find a pattern of economy reflecting a lifestyle that ties consumer demand to theexisting market (Pine & Gilmore, 1998). Pricing increases to premium, along with rising
relevance to customer needs and a more differentiated competitive position. This process
turns commodities into goods, and goods into customized services which ultimately become
experiences with an output of life-changing transformations. This is an exemplary snapshotof the current trend towards the experience economy with a form of goods that is digitally
executed and shared. Progress towards the experience economy had already been anticipatedand cited by the 1970 futurist Alvin Toffler. Additionally, Goffman (1959), Holbrook and
Hirschman (1982), Ogilvy (1985), Schulze (1992), and Jensen (1999) have joined Toffler in
speculating about The Experience Industry (Ogilvy, 1985), mentioning ‘experience’ as thedriving force in marginal growth in the US economy.

Figure 1: Progression of Economic Value

Source: Pine and Gilmore, 2013

Transition to the digital economy has offered consumers an open platform fordifferent kinds of market transactions and a plethora of diverse experiences. High penetrationof smartphones and Social Network Services (SNS) have stimulated humans to seek
belonging, recognition and meaning through increased opportunities to connect, share, andcommunicate with others. The experiential representation of one’s self and consequentaffirmation of social media platforms is today’s consumer trend, one which exceeds a mere
service. The key to experience marketing is to create an experience that initially catches theattention of the consumer and then raises their interest in taking the time to try it out and thengo on to pay for continued consumption of the offerings (Pine & Gilmore, 2013). The adventof the internet triggered marketing experience to become the core of any business. We cansay that while experience itself lacks in tangibility, the happiness consumers feel whenbuying experience exceeds that of purchasing material goods (Carter & Gilovich, 2010; Van
Boven & Gilovich, 2003). This is an upward trend associated with improved living standards,
ever more advanced technology and the impact of SNS that encourages people to document
and communicate experiences, interact with other users, and create new experiences.

3.2 Business Models
The design of businesses, i.e., the way firms ‘do business,’ have been researchedthroughout history. There are two kinds of discussions centered on business design, thosedealing with business models and those concerned with business architecture. While businessarchitecture in academic research (especially within software architecture) tends to be5

conducted on design themes such as content, structure, governance and value creation
outcomes (Zott & Amit, 2007), business models that gained great attention from the 1990s lean
towards more focus on the practical perspective of profitability. The difference between the
two approaches is continuously being discussed, noting also the many convergences between
them. Our research takes both into account, i.e., profitability in the music business andarchitecture in terms of the design framework with respect to each music format. We also showthat different, successive formats require the consideration of ‘constraints’ that ultimately push
one business model towards the next. We will use ‘business model’ in this sense throughout
this paper.
3.2.1 Technology and Business Models
Technology development puts new demands on businesses to adapt to the inherent
nature of the goods to be sold. The development of steam power facilitating the demand formass production business models is one critical phenomenon that shows the strong relationshipbetween technology and business model construct. Digital transformation brought innovationin business models especially with regard to the changed delivery methods of the goods
themselves. With the internet, the turn from physical goods to digital goods marked a milestone
in every industry. Many scholars have conducted research on the digital transformation
phenomenon in terms of implications affecting industrial business models and on
methodologies to transform them. Technological innovation affects performance (Bierly &Chakrabarti, 1996; Christensen & Bower, 1995; Zaheer & Bell, 2005) as well as the dynamic
capabilities of organizations (Teece, 2010).
Disruption is another way of comprehending the flow of technological growth andbusiness evolution. The technology S-curve model illustrates the maturing progress oftechnology (Rogers, 1962). Rogers regards technology as “a design for instrumental action that
reduces the uncertainty in the cause-effect relationships involved in achieving a desired
outcome,” (Rogers, 2003, p.13) with diffusion as “the process in which an innovation iscommunicated through certain channels over time among the members of a social system”(Rogers, 2003, p.5). Here, the S-curve is used to show how a given technology matures acrosstime, indicating the time and effort expended for the technology before it becomes fully
acknowledged and adopted. The transition from an old to a new technology starts slowly, thensteepens with accelerating improvement which involves a paradigm shift in underlying
assumptions, and finally stabilizes as the new technology reaches full adoption. Christensen(1997) mentions the S-curve by introducing the need for a new value network to measure theperformance of the technology that disrupts the preceding one, oftentimes rapidly. We could
say technology is more of a process with business evolving alongside it, meeting the newly
created values by designing new methodologies in the delivery of the good. Customers engage
in the new technology and are willing to pay for these values, converting payments to profit(Teece, 2010).
3.2.2 Technological Innovation and Business Model Innovation
Within the business model construct, technology development and business models
interact with each other dynamically and each is discussed extensively. We can, however, makethe following distinction between business model innovation and technology innovation at this6

point. Teece (1986) defines technological innovation as the point where specific technicalknowledge points to new ways in doing business. Thus, technology is the dominating catalyst
in business development. On the other hand, business model innovation primarily seeks newrevenue streams and defines value propositions for multi-stakeholders (Teece, 2010). In otherwords, technology development may generate new business models while other businessmodels may be facilitated without technology development (Baden-Fuller & Haefliger, 2013).
It has been observed that business models are ultimately “the logical research thatlinks technical potential to economic value” (Chesbrough, 2010, p.532). This view emphasizes
that the model is the structure which introduces new technology to the market. While true,
however, market response to business may vary vastly, especially when considering the current
atmosphere in business globalization, technology development, and internet penetration. In thispaper, we regard both technology and business models as critical factors in market entry andrevenue gains, but ultimately one may identify more strongly than the other. This will be
discussed further in the second phase of our findings.
3.2.3 Significance of Bundling in Building Business Models in the Experience Economy
Bundling is the act of ‘grouped sales’ or ‘tying,’ i.e., marketing more than one productor service in a single package, usually providing the combination for a cheaper price than theparts, consumed separately (Chiambaretto, Dumez, 2012). Studies on bundling first appearedin the seminal paper of Adams and Yellen (1976), defining bundling as “selling goods inpackages.” This was further articulated with a focus on price in bundling (Guiltinan, 1987;
Yadav & Monroe, 1993). Bundling marketing has been predominantly used in economics andquantitative marketing, differentiated by product or service. Schmalensee (1984) distinguishes
bundling as follows:- Pure bundling: The firm sells its products solely as a bundle, never separately.
- Unbundling: The firm sells/prices its products solely on an individual basis.
- Mixed Bundling: The firm sells/prices its products both as a bundle and separately.
According to Schmalensee (1984, p.228), [pure] bundling “operates by reducing theeffective dispersion in buyer tastes, [which will] enhance profits by permitting more efficient
capture of consumer surplus.” Pure bundling benefits by reducing ‘effective consumer
heterogeneity.’ In this sense, then, unbundling would free up the restraints placed by pure
packaging on the business itself. Mixed bundling benefits from both advantages of purebundling and unbundling while reducing effective heterogeneity. Bundling is most successful
with economies of scale in production, economies of scope in distribution and where there are
low marginal costs. Entering the digital economy, bundling marketing has captured additional
opportunities in the transition from physical goods to information goods with an exponentially
increasing number of digital goods (Bakos & Brynjolfsson, 1999).
In this paper, the concept of bundling refers to an offering of various elements of music
within the limitations of available technology at the time. There are also times when bundlingis carried out to artificially create ‘scarcity,’ which allows revenue (business) models to be set
up around it. Copy protection mechanisms that bundle music to a physical medium is an
example of such scarcity creating technology. Unbundling, on the other hand, is the7unpackaging of the various elements of music delivery as occurred with the advent of the digital
economy. As for music delivery, we should be aware that there are two types of bundlingvariations, one involving technology, the other consumer experience. Technical bundling
imposes technical constraints so that music deteriorates when it is moved off a given mediumof delivery. Bundled consumer experience is defined as music which is “cross-sold” toconsumers with/for free goods or services.
3.3 Music Business
Our literature review of business modeling in the music industry was conducted by
selecting 31 papers closely related to the keyword ‘music business’ from those extracted from
Scopus. In terms of music in the business context, earlier studies are most numerous in the
2000s, which points to the significance of digitization in music. Major past research topics were
found to be:- copyright (Zhang, 2018; Guo & Meng, 2015; Vernik et al., 2011; Jain, 2008; Wilson& Kambil, 2008; Tang, 2005),- value of music (Datta et al., 2018; Zhang, 2018; Guo & Meng, 2015; Cattani et al.,2013),- impact on music sales (Zhang, 2018; Chen et al., 2015; Danaher et al., 2014;
Liebowitz, 2008; Bhattacharjee et al., 2007; Lee et al., 2003; Moe & Fader, 2002),- pricing (Danaher, 2014; Parker et al., 2005; Hann & Terwiesch, 2003; Klaes, 1997),- business design/product design (Geng et al., 2005; Asvanund et al., 2004;
Brynjolfsson et al., 2003; M. Klaes, 1997),- competition in music industry (Huygens et al., 2001; Anand & Peterson, 2000),- long tail (Zhang, 2018; Dewan & Ramaprasad, 2012; Elberse, 2008),- shift in music consumption from physical to digital formats (Datta et al., 2018;
Dewan et al., 2017; Guo & Meng, 2015; Dewan & Ramaprasad, 2012; Xia et al.,2012; Johar et al., 2011; Chung, 2009; Liebowitz, 2008; Bhattacharjee et al., 2007;
Hann & Terwiesch, 2003; Brynjolfsson et al., 2003), and- consumer experience in digital format (Datta et al., 2018; Zhang, 2018; Payne et al.,2017; Dewan et al., 2017; Teixeira et al., 2014; Dewan & Ramprasad, 2012; Xia etal., 2012; Johar et al., 2011; Chung et al., 2009). (See Appendix A for reference.)
Music in the business context started to be researched actively in academia from the
1990s as it turned to the digital medium. As shown above, most studies have been conductedin areas of consumption pattern change, copyright, sales and pricing. In the past decade,transition from compact discs to downloads and copyrights, and change in consumption
patterns in the digital economy have been substantial. Dellyana and Simatupang (2013)
conducted a systematic literature review on notable earlier studies of business model
innovation in the music industry within a framework proposed by Giesen et al. (2007). The
authors categorized business models into three types: industry, revenue and enterprise models.
The study was carried out across 104 empirical research papers in the area of music businessmodel innovation. The papers were extracted from ProQuest and EBSCO databases for theyears 2000-2013. While Dellyana and Simatupang provide findings in the areas of value chain
analysis, cost and distribution of new products, consumption pattern acknowledgement andvalue capturing, they lack (1) detailed analysis of patterns in the business model innovation
process, and (2) analysis of critical factors in innovation success and failure in the music8

industry. Despite an increasing attention to digital formats, their paper is deficient in its
fundamental understanding of the evolution of business models in music
Our paper aims to close these gaps in identifying patterns in business model evolution
by using historical archival methodology. We believe the study is unique in its reconfigurationof past studies in a systematic integrative methodology. It chronicles successive, dominating
forms of technology within the entire recording era from 1948 right up to now, analyzing how
business models have changed with each new technology while removing constraints from theuser experience.
3.4 Theory of Constraints
A key notion employed in a chronological review of technology and business model
evolution is the theory of constraints. It shows how technology has been removing constraints
in the delivery of musical experience. This theory was developed by E. M. Goldratt in 1980,
recognizing the significance of constraints in business management. It states that whileconstraints are the driving force in improving the performance of business systems by
maximizing resources to overcome them, they are also their weakest link until removed(Goldratt, 1984). This theory expects the independent variable, technology, to influence, or
explain, the dependent variable, i.e., the business model, due to the driving force of constraints.
The theory of constraints has been discussed and applied extensively in business
management with much research covering the subject. In any business, there are constraints
that hinder it from achieving its aim in increasing profits, while simultaneously encouraging
further development to remove them. The theory has evolved over the years such as with Amit
and Zott (2015). The authors discuss antecedents to business model design with ‘constraints’
being part of them. Boland and Collopy (2004) also indicate that while constraints are
undesirable in terms of design attitude, identifying constraints is defining a problem and thus astimulus to creative improvement. Our paper also adopts the perspective of both technologicalconstraints and consumer experience encouraging progress in building business models.
Constraints defined in this paper will refer to the categories of time, location, maintenance,storage, selection and sequence. In addition, we will show how previously existing constraints
such as accessibility, probability, reproducibility, selectivity, and personalization were
removed or relieved as a result of user experience liberation.

4. Interim Research Findings

Considering our extensive literature review, we assume that technology ultimately
removes ‘constraints’ in both technical and experiential terms. In this way it liberates
individual consumer experience by applying diverse business models to secure revenue. As
for music, a commercialized experience good, we can observe a range of bundling,
unbundling and rebundling of elements throughout its recorded evolution. Figure 2 shows our
proposed model.

9BreakhroughTechnology
Removing
Constraints

Business
Model AroundtheManagement ofConstraints

New
Constraints
EmergeFigure 2. Technology-Business Model Interaction Model

4.1 Overview of Critical Music Format Transitions
The first step our researchers took was the identification of major transitions in thedominant technological/business formats in the music industry. When the target transitions
were identified, we could analyze the interaction between technology and business models at
each transition and see whether and how effectively our model could explain underlying
realities. Technological disruptions will carry forward new types of technology that eliminate
the constraints of the existing technology with appropriate bundling and unbundling of
constituent elements. This will be discussed further on.
Figure 3 illustrates dominant music formats and transitions over time. As shown in thesource of revenue statistics of the Recording Industry Association of America (RIAA), thegraph provides us with 5 major phases for analysis, namely, LPs, cassette (compact) tapes,
CDs, Digital Downloads, and streaming.

10Figure 3: U.S. Recorded Music Revenues by Format
Note: Revenue has been adjusted for inflation in order to compare across board.

Source: RIAA, 2020

Each format made a significant contribution in technological innovation and produceda change in sales revenue. The formats standing out for greatest sales revenue are: (1) longplay (LP) and extended play (EP) records, (2) compact tapes, (3) CDs, (4) downloads, and (5)paid subscription. On this basis, we identified transitions between these five formats as ouranalytical targets.
Three peaks can be identified in the graph: 1978, 1999, and following rapid increase,2019. The recorded music industry has clearly gone through a number of disruptions fromphysical to digital goods which accounts for its successes and failures across the decades. At
the same time the method of transmission came to more closely approximate the model of amore liberated medium.
The gradients between peaks are also significant. Decreasing revenue and relatively
curtailed increases indicate disruption in the prevailing technology. With reference to the Scurve, it takes longer for a new emerging technology to disrupt the existing technology andadjust to society demands than for a successful implementation leading to new highs inrevenue. This phenomenon can also be supported by bundling theory: decline in revenue canbe attributed to technologies unbundling content from salable media that were used togenerate revenue for that content. We see a succession of established business models being
destroyed by such unbundling before new forms of bundling emerge to recover the revenue.
Such new forms of bundling are realized either by technological solutions or by legal
arrangements such as copyright enforcement.
We then observe what value was created for consumers, as well as how technology
urged the industry to create new forms of bundling in an unconventional salable medium torecover the lost revenue. Table 1 summarizes our analysis.
Liberated User
Experience Constraints

Business Model(Bundling/Unbundling/Rebundling)

Accessibility

Bundling
Media/Contents bundled by license on
physical format

Compact Tape
(1964)

Portability, Recordability

Bundling
Media/Contents bundled by license on
physical format

Compact Disc (CD)(1982)

Digitization, Reproducibility

Bundling, Unbundling
License challenged by DAT (Digital
Audio Tape) in Home Recording Act
of 1992 followed by DRM (Digital
Rights Management)Internet - Selectivity

Unbundling, RebundlingP2P unlicensed digital download
platforms. Eventually evolved tolicensed download platforms (i.e.
iTunes).

LP(1948)

File Download(1999)

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Streaming(2008)

Rebundling
Streaming service platforms oflicensed digital music locking in
consumers by subscription with wider
array of artists, albums, genres (Koh,Hann & Raghunathan, 2019)

Personalization

Table 1: Bundling of Music Business Models by User Experience Constraint

The formats of LPs, compact tapes and compact discs, unlike the recent formats ofmusic file download and streaming, identify with music bundled in physical formats subject
to greater licensed copyright protection. These formats also contrast in terms of digitizationand dispersion on the internet, which shows how a physical good changes into an information
good. Compact Discs (CDs) revolutionized the music industry by digitizing data, enablingmuch more playing time for music on one disc. With the dispersion of the internet andpersonal computers, online download platforms enabled sharing of files by download. Thisultimately freed consumers from the constraint of internet selectivity.
4.2 Rise of Critical Music Formats
4.2.1 LPs
In 1948 Columbia Records set the ground for a steady commercial format with its longplay LP, the 12 inch, 33⅓ rpm format that ran 45 minutes in total. At the time, Columbia
Records and RCA Victor were competing in a climate of market failure including the lack ofaffordable record players and a low level of consumerism during the Great Depression.
Nevertheless, Columbia Records debuted in 1948 and the LP became the standard format for
the following decades. (See Appendix B). Periodically this was marked by a boom in
consumerism such as from the time baby boomers entered their teenage years in the 1960s and70s. FM radios particularly suited for music started to spread from the 40s with commercial
radio starting in the 20s and dominating up to the 50s. Television became popular from the 50s
with growing contents like music programs that eased access to music, ultimately liberating
consumers from music entertainment tied to a particular location and naturally increasing
demand for records (Welch & Lamphier, 2019).
Although the Berliner Gramophone label had revolutionized records with its flat discs
having two sides and enabling the production of copies unlike the recording containers of
Edison’s cylinder phonographs, their main limitations were poor sound quality, short playing
time, and the need for frequent replacement. LPs, on the other hand, allowed a ‘standardized’
live performance to be recorded to a disc with long storage characteristics. Such a ‘long play’record had the potential for mass-distribution, enabling repetitive playbacks of both sides. Thiswas recognized as an effective long-term investment for consumers that ultimately opened up
increased ‘accessibility.’ The aim with vinyls was mostly the expansion of broadcasting
possibilities with a focus on advertising, given the growing influence of radios and televisions(Osborne, 2012). Advertising was the main purpose with regard to phonographs andgramophones as manufacturers offered ‘collectable items’ of record lists, posters, talking
machine brochures, greeting cards, etc. (See Appendices C, D).

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LP(1948)

Liberated User
Experience Constraints

Constraints left/created- Affordability- Quantity (easy storage)- Sound quality- Maintenance (easy;
shellac to plastic)- Commercial location- Temporal- Capacity-Liberated from prestigious
hierarchy access platforms

Left:- Weak maintenance- High cost (production, distribution)- Home location- Distribution: limited goods in stock
Created:- Physical (big, cumbersome)- Sequence (fixed)- Powerful record companies

Business Model
Bundling
Copyright Act of 1911:
media bundled with licenseon physical LPs that became
standard of music records.
With enhanced capacity up
to 45 minutes a side;
multiple songs were bundled
to form a ‘concept album.’Table 2: LP Constraint Analysis

One of the major constraints that LP vinyls removed together with the earlier
recording devices was very limited content capacity and the relative inaccessibility of music
when it had not been an everyday enjoyment. Liberation of constraints came hand in handwith ‘bundling’ music to suit and attract long-term consumer investment in LP albums. Sales
revenue is reflected in the gradual increase in consumers adjusting to the newly established‘album’ concept. In the past, consumers could only relish very limited accessibility torecorded music either on cylinders or discs, so LPs ultimately provided more business
opportunities given their sturdy quality, cheaper production cost, higher maintenancepotential, and unlimited quantity. Bundling singles into an ‘album’ raised both profit margins
in terms of investment and value from the perspective of consumers, hence the ‘the rise of thealbum’ (Rojek, 2011) which became the dominant vinyl commodity. Driven by technology
improvements in mass production and dominating in sales, this bundled LP format set thedominating business model for capitalization in the music industry. Production anddistribution of albums was often tested by premiering with a single before actually going LP.
Given an entirely different context we still find this idea of testing the market to apply today.
4.2.2 Compact (Cassette) Tapes
Tape traces back to magnetic recordings from 1928 which revolutionized recordingwith audio and video, relieving the constraint of constant live broadcasting in radios.
Producers were liberated from the burden of live transmission of data and instead had theoption to record and playback repeatedly any time. Commercialization and distribution
became a definite reality when Philips introduced the Compact Cassette tape for audio
storage in 1963 (Chandler, 1967). Philips did not attach proprietary rights to this technology
and was open to cooperate with other companies, licensing its use and encouraging them tofollow their standards. Allied with Japanese companies including Sony, the compact tapeformat set the world standard for music tapes.
Compact tapes gradually gained popularity with more than 2.4 million cassette
players sold worldwide by 1968. Before the end of the 60s the cassette business approached avalue of $150 million (St. James Encyclopedia of Popular Culture, 2000). At that time, LPs

13still dominated along with the relatively new 8-track 1 format, with both occupying
approximately a third of total music revenue. Sales of 8-track loop cartridges mainly intended
for car tape players were made available in cars manufactured by Ford from 1966. This was
the first instance of liberating consumers from partial location constraints. Music was now
experienced together with mobility. However, 8-track had its limitations including inferiority
compared with cassettes in terms of being too bulky, non-rewindable and with a playing time
not exceeding that of LPs, while also expensive and worn out quickly. Compact tapes had
longer playing times than the 8-track and were compact but had limited fidelity compared to
8-track or LPs.
Nevertheless, compact tapes quickly gained popularity, freeing consumers from thebulky equipment needed to listen to LPs at home and enriching consumers with portability(Byun, 2016). Music becoming recordable on ever smaller cassette tape units freed up
another consumer constraint. With further technological improvements in magnetic tapes,
batteries and shrinking transistorized circuits, cassettes opened up a new era for musicexperience in various indoor and outdoor environments. Cassette players were incorporated
into “radios, alarm clocks, automobile stereos, and even shower units” (St. James
Encyclopedia of Popular Culture, 2000, p.451). The location constraint was finally lifted, afact which popularized Sony’s Walkman in 1979. The walkman established magnetic audio
tape as mainstream in the consumption of music. Pluggable headphones allowed consumers
to immerse themselves completely in music that provided true ‘personal stereo’ with‘individualized music experiences.’
Recordability came with the unbundling of the previous ‘album’ business model andfreed consumers from the sequential constraint. The bundled format of LP albums was thedominating format accounting to over 60% of revenue of the entire music industry at its peakin 1977 which had naturally established the custom of listening to an entire album regardlessof preferences. The limited functionality of playbacks was part of the medium. In the past, theidea of having any access to music at all had been much stronger than any ‘consumer
preference.’ Now, consumers could record themselves using blank tapes and adjust playback
to their own taste, or mix tapes. While personalizing their own experience seemed to haveliberated consumers from every kind of constraint, tapes were still left with the constraint oflimited fidelity and the burden of rewinding as well as those loose tape situations.
Liberated User
Experience Constraints

Consumer Experience
Constraints left/created1

Business Model

8-Track appeared in 1963, originating from reel-to-reel magnetic tape technology from the 1940s. 8-track
cartridges had 4 programs that held no more than the equivalent of an LP, with severe playback constraints.

14

Tape
(1964)- Affordability (distribution,
production)- Recordability- Portability- Customizability- Quantity- mix/coordinate various
singles into one(customization)- Temporal (radio)

Left:- Excessive size of edited files- Quality Maintenance- Physical Stock Constraint
Created:- Copyright issue in recordability: 1989 DAT(Digital Audio Tape) bill restricts amount of tapes
consumers can buy & prevents making copies ofcopies (SCMS)- Sequence: Difficulty in skipping songs- Limited selectivity (physical/structural - Payola)

Bundling
Music became themainstream entertainment
and the bundled model ofmedia tied to physical(portable) format
prevailed.

Table 3: Compact Tape Constraint Analysis

From the 1980s revenue from compact tape started to peak, recording a total of$450.1 million in 1988. This amounts to approximately 60% of total music sales volume at
the time. Towards the late 1980s and through the 1990s, compact tape singles, like LP
singles, were introduced as a form of change to see how individual hit songs or entry songs
from new artists could sell on their own. There was also an evident need for such a form ofliberation from albums especially among teen and preteen consumers with a slight pricing
benefit as tape singles had only a 1~2 song size with a maximum 10 minutes play per side.
While sales did hit a peak in 1990, recording 10.1% of total sales volume, they soon died out.
Recordability and reproducibility on the side of consumers opened up opportunities
for creativity in DIY mix audio tapes and videos. Manipulating sound and making new
creations endowed the public with more power in terms of making their own music. Withcheaper access compared to other entertainment sources, possibilities in music rapidly
developed during this time. MTV (Music Television) was launched in 1981 with an initiativein DIY video approaches, offering rather affordable video recordings that were later
supported with substantial production budgets and becoming the biggest market in the musicindustry. The previous media marketing tactic via radio platforms soon migrated to
television. TV encouraged the market for videos and rather ‘killed the radio star.’ This
coincided with TV ownership by 90% of households in the US. No wonder that music videos
finally went mainstream by the 1980s.
4.2.3 Compact Discs (CDs)
Compact Discs were introduced in 1982. They originated from Laserdisc
technology, a video recording technology. Contrary to previous analogue recordings, binary
numbers were input into the storage form of the disc data format. The CD player laser lightwould read such data and convert it into electric signals, amplifying the sound for the user.
Sound quality did not degrade over time as a laser beam did not distort sound throughrepeated use, unlike the stylus of a record player. Also, CDs produced no surface noise, hadgreater storage potential and the advantage of customization of track sequence. The recorded
tracks could be reordered, omitted, or skipped easily within the one CD. (See Appendix E).
Despite the initially high cost, CDs, thanks to their quality, quickly gained popularity
amongst audiophiles. Their popularity then gradually spread into the mainstream as costs ofCD players declined with prices going down to $199 in 1985. Market demand grew alongwith Sony’s portable CD-player Discman from 1984 (Rasen, 1985). While initially marketed
for fine audio purposes, applications became available to enable erasable CDs and video15

formats (Immink & Braat, 1984). Entering the digital world, industries benefited bydecreasing reproduction costs, which led to a profitable market in the music business,
especially pop. By the late 80s and early 90s, CDs dominated the at-home music market,
exceeding cassette sales in 1991 with a revenue of $4.3 billion (55.4% of entire music
revenue). For the first time, CD sales were also larger than the all-time sales of vinyl records.
CDs hit the highest in revenue in 2000 reaching $13.2 billion and accounting for
approximately 93% of total music industry revenue. 2000 became the year of peak musicindustry revenue with an overall total of $14.6 billion. Moreover, the CD format occupied up
to almost 96% out of the entire music industry formats in the early 2000s. In the culturalcontext, people including older audiences were changing every music format of past years to
CDs. This can be understood as rekindled demand for recordings of past artists, thereby
raising the market opportunity of the medium.

CD (1982)

Liberated User
Experience Constraints

Consumer Experience
Constraints left/created

Business Model- Quality- Storage- Maintenance- Customizability- Reproducibility- Uninterrupted album

Left:- Maintenance of Physicalgoods (scratch/dust)- Weak in heat (better thantape)
- Distribution: goods thatare in stock- Carry around albums

Bundling, Unbundling
Unbundling with rise insingles and consumers
reproducing their own mix
CDs.
Bundling with themed CDalbums with different artists& billboard top 100*High Demand in CDs(ownership & collectables).

Created:- Tough barrier entering top
record companies
Table 4: Compact Disc Constraint Analysis

The liberated constraint that draws particular attention is reproducibility. An
affordable, wide variety of music with decent sound quality became available in a format
flexible enough for adaptation in the hands of consumers. While compact tapes also had thisfeature, the quality of reproduction on CDs was impeccable (Demetris, 1990).
4.2.4 Digital Downloads
Digital downloads ultimately freed consumers from a rather narrow, constrained listof selections to enjoy a vast variety of choices. While formats from LPs up to CDs used‘controlled delivery,’ digital music on the net grew massively in magnitude precisely because“freedom of choice was the engine powering internet music revolution” (Coleman, 2009,
Introduction). With LPs, cassette tapes, and CDs, consumers were confined to the given
physical format the music was delivered in, including also live-transmitting devices such asradio and television. Despite record shops, routes to discover new music were limited,
especially in view of high competition in billboard top lists that would be dominated by the
big record labels. Digital music freed up these controlled boundaries of music. With the
spread of the internet, increasing numbers of people gained access to an immense variety of
information, including music, which also allowed for ‘peer-to-peer (P2P) file sharing.’

16

Napster is notable in gaining popularity by establishing the business model of P2Ptechnology based on many other pirating platforms. Established in 1999, it grew to 80 million
users. This platform was an instant music discovery that was needless of the power of the‘record industry’ inserting itself between consumers and artists and commercializing any kindof business. Piracy was already being tackled with the previous CD-Rs, but the digital
revolution pushed for more liberation of constraints in favor of consumers. Additionally,
digital transactions were pushing for more transparency, which, in the music industry, had
always been a murky area in terms of profit sharing or transaction numbers. The musicindustry typically comes across as a monopolizing structure of record labels, and digital
downloading finally opened alternative options for artists, with contracts and law being
reviewed alongside internet development.
Consumer Experience
Constraints Resolved
Digital(1992)
Napster(1999)- Discovery channel platform- Broad selection of music- Longevity (longer battery andlarger digital files)- Easy access in few clicks(search-purchase-play)- Demise of physical bundling:
Digital Revolution- Distribution: goods can be
unlimited available online

Consumer Experience
Constraints left/createdLeft:- Easy blindsighted illegal
download
Created:- Consumers’ unwillingness to pay
for music- Loss in quality of music file- Copyright regulations reinforced
Less freedom to reproduce- Burden for storage restraints bydownloads

Business Model

Unbundling, Rebundling
Unbundling by P2P unlicensed
digital file sharing platforms. As
contents contained within physicalformats were unbundled, conceptsof albums deteriorated along withrise in MP3s that detached songs
from the physical format.
Rebundling with rise in licensed
downloading platforms ( iTunes).
Instead of physical devices, music
bundled with a ‘service’ platform.

Table 5: Digital Download Constraint Analysis

Digital file downloads revealed the unbundling of the business model both in termsof technical and consumer experience aspects. Technically, album concepts were completely
unbundled as songs were detached from any physical music format or predeterminedsequence. With the progression from digital file formats of CDs and the acceleration of theinternet, the dominant business model was that of P2P unlicensed digital download platforms
that freed consumers from any physical constraint or album concept, and solely encouraged
freedom in music selectivity. One was not tied to any physical device, nor to a set list ofsongs. Therefore, unbundling of songs and encouraging accessibility of diversity in music
was foremost in appealing to consumers who ultimately freed themselves from physical corecomponents in preference of consumer experience constraints that determined consumption.
Eventually this trend evolved into licensed download platforms tied to iTunes, Apple, thatonce again rebundled music into a set platform and a physical mp3 player, though the notionof sharing music files remained predominant.
In terms of piracy, most songs were not licensed for distribution on many P2P
platforms. However, contrary to some outlooks on the demise of the music industry by digitalformats and piracy, this free access to music and broader discovery had a positive impact inencouraging music industry revenue. People were buying more CD albums than ever,recording a peak in 1999 with a total music revenue of $14.6 billion and CD format sales
17

only increasing the following years. The major factor here is free access to music prior toconsumption, which then led to a strong desire for ownership of music. Also, alternative
revenue sources of music from concerts to small goods were boosted. Music will always be
an experience good that needs to be experienced prior to becoming a monetary transaction.
4.2.5 Streaming
The next revolution in the music industry was streaming. It ultimately provided
consumers with a legal bundle of personalizable features that can be applied to many pieces
of music in one platform and without concerns for storage. Previous tactics in digital
download formats were partially attached to physical devices of MP3s with marketing pointsof design, price and storage capacity. Streaming, however, unshackled the physical technicalconstraint, opening up on-demand services of streaming applications installed in any device.
With the raw file remaining on the server, streaming takes the compressed raw file andtransmits it over the internet to the user via an app or plugin.
While the liberated technical constraints of storage capacity and convenience arenotable, the biggest element that freed consumer experience is personalizability.
Improvement in applications brought consumers an individualized experience with diversity
in discovery as well as the ability to curate created playlists. Sharing and gaining morediscovery options with recommendations and personalizing and sharing that very channel ofmusic added a new element of experience for consumers. The biggest gain was the turn inconsumer behavior from usage of illegal free downloads to legally licensed services people
were willing to pay for. It is often highly challenging to recapture the value of consumer
acceptance in payments for goods that once were available for free. However, thanks to highnetwork connectivity, streaming platforms offer the luxury of convenience andpersonalizability on top of liberation from every element of past constraints in the recorded
era. This has led consumers to compromise for a fixed cost on change in ownership, thereby
enabling access to preferred consumer behavior.
Personalizability within the streaming format does not come from just a one-way
delivery of music like in the past, but rather from an interaction between the platform and theconsumer. It allows you to create your own digital DJ by analyzing your attitude in listening
to music, which accordingly gives you the freedom to curate your music playlist in highfidelity or with additional discovery features.
Consumer Experience
Constraints Resolved
Streaming(2008)- Storage (on-demand)- Smart discovery music- Unlimited access- Recommendation service- DIY studios- Direct, closer relationshipwith artists (SNS promotion)- Demand for ‘legal,’‘convenient’ access tomusicConsumer Experience
Constraints left/createdLeft:- Data corruption (serverissue)Created:- Demand for discovering
indie bands- Deteriorated quality- Fragmentation (not all
songs in one service)- Data usage

18

Business Model
Bundling
Streaming platforms oflicensed digital musiclocking in consumers by
subscription with a wider
array of artists, albums, andgenres. Variation in
platforms targeting different
audiences, often either highfidelity or different genres.
Thus, bundling to platforms
for music preference.

Table 6: Streaming Constraint Analysis

Streaming started to overtake download sales in 2016 with exponential increases inrevenue. According to RIAA, streaming music has already been fully established among
millennials who are twice as likely to be paid subscribers than members of earlier generations(RIAA, 2019, Music Consumer Profile). The market share for paid streaming subscribers is
also increasing rapidly. The year 2018 saw subscribers mark a 9.7 percent growth rate, thehighest since 1997. It was also the fourth consecutive year in global growth, with numbers
since then only increasing (IFPI, 2019; Purnell, 2020). Streaming significantly contributes tothis with 24.1% growth in paid streaming revenues in 2019 that account for 56.1% of total
global industry revenue (IFPI, 2019). This coincides with total digital revenue accounting for58.9% of the global market share of music in 2019 (Purnell, 2020). These figures are
expected to increase with consumer behavior transitioning from non-paid to paid subscribers
and an opening up of as yet untapped markets in developing countries with low internet
penetration.

5. Emergent New Perspective and Further ResearchThis chronological analysis confirms that, within the recorded music industry,technology keeps constantly evolving, sequentially liberating components of consumer
experience constraints and resulting in the reconfiguration of the hitherto existing format’sbusiness model. We have identified a certain pattern in the removal of the following
components of constraints: access to music with LP formats, portability from tapes,
reproducibility from CDs, selectivity from online downloads, and personalizability fromstreaming. Additionally, we could see a continuous bundling of experience goods withsalable goods or services apart from the unbundling and rebundling of other components inthe music business. Thus, we argue that our analytical framework is useful in portraying thetechnology-business model evolution.
Moreover, this analysis reveals that technology was not the only factor that impacted
the evolution of business models in this industry. We came to this realization when we
noticed the time lag between the development of technologies and their adoption into thedominant format. If the mechanism of technological development was a linear one, in which
technology liberates the consumers from constraints, then the adoption of any newtechnology should have been much faster.
Particularly significant in our eyes was the impact of social/economic events on
consumer behavior that affected the selection of the technologies (Table7) referred to above.
This suggests that while technology development has been a stimulus for change in businessmodels, social aspects also seem to be a significant indicator of change in business models,
capturing new constraints with changed consumer behavior at each point in time. Thus, thispaper suggests that social/economic downturns often affect the selection of the technologythat later gains dominance in sales with the removal of existing constraints leading to new
business models.
To be a little bolder in our assertion, this also seems to suggest that the meaning of‘liberation,’ or freedom, changes over time and affects the choice of that technology whichmeets the needs of the time. Thus, technology that is newly introduced to the music medium
19may take some time to enter mainstream, but when it does it receives a positive consumer
reaction which seems to coincide with renewed economic activity following a given crisis,thus ultimately impacting the business model.
Based on this perception, we conducted a brief literature review on economic
recessions and their impact on consumer behavior. We carried out additional data analyses tosee how the state of the economy after a downturn or a recession has affected the social
consequences of consumerism and thereby verifies our modified version of the previously
proposed model.
5.1 Implications: Recessions and Consumer Behavior
The concept of consumer behavior originated in the early mass production era of the1850s to late 1920s, and eventually assumed a strong presence in the history of marketing in
the 1940s and 50s (Sheth, 1985; Jain et al., 2019). The early 1930s to 1950s aimed at largescale manufacturing but a mismatch of demand and supply became apparent which raised theneed to consider the needs and preferences of customers in the market, which in turn led tothe study of consumer behavior (Jain et al., 2019). Technology has always responded toconsumer needs, pushing business ahead and allowing new market opportunities. In thisprocess it becomes critical to acknowledge consumer behavior and consumer constraints
affecting the purchasing experience. Reconfigured business models are the ultimate responseto changes in these areas.
The macroeconomic trends of the impact of recessions have been extensively
studied. Consumption is understood to rely very much on consumers having disposable
incomes and feeling confident about their economy. High consumer confidence facilitates the
adoption of a better life-style and provides people with the opportunity to fulfill their desires(Quelch & Jocz, 2008). As for consumer behavior patterns during economic recessions there
is still a lack of studies that deal with experience or entertainment goods. However, theliterature suggests that economic crises degrade consumer confidence due to the uncertaintyof the economy. People will have reduced disposable income and will look out for cheaper
goods rather than leisure or luxury items (Zurawicki & Braidot, 2005; McKenzie &Schargrodsky, 2005). Consumer behavior changes considerably at such times with a greater
tendency to compare pricing, emphasize functionality and durability, express a preference for
DIY, reduce consumption of expensive items such as cars and houses, and become lessimpulsive consumers with less wasteful behaviors (Shama, 1981; Shipchandler, 1982).
In times of such uncertainties, psychological and emotional factors become criticalin influencing consumer behavior (Duțu, 2014). Recessions that lead to worries concerning
employment, wages, prices and products aggravate mental health and produce a low level ofhappiness resulting in a feeling of powerlessness (Ruhm, 2016). Contrary to theseobservations in cases of decreased overall expenditure, other studies refer to consumption in
the culture economy 2 which seems to manifest a stable if not increasing trend in2

Culture Economy is “a conception and fabrication of outputs whose function is to entertain, instruct,embellish and reinforce identity” (Scott, 2007, p.1474), as found in experiences including music, film, andcuisine (Grodach & Seman, 2013). Experience economy being a relatively recently established concept, we
reviewed studies in ‘culture economy’ as they contained more relevant observations than could be found formusic as such.

20

consumption that can be seen at work in the ‘lipstick effect’ (Tajtakova et al., 2019; Hill etal., 2012). The lipstick effect occurred in observing an unexpected increase in sales of
lipsticks during the economic downturn following the 9/11 terrorist attack in 2001 and otherrecessions. It caused a willingness to enjoy a small indulgence, a tendency that was also
observed during the Great Depression in the 1930s (Nelson, 2001). The lipstick effect inconsumer psychology is another characteristic of consumer spending during recessions. It
joined two previously established features established by many economists: spending on
inferior goods induced by budgetary constraints and spending on ‘morale boosters,’ with thelatter referring to activities such as watching a Charlie Chaplin film in times such as the Great
Depression (Hill et al., 2012).
Perhaps it is natural for humans to yearn for cultural consumption in the form ofsocial hedonism and emotional comfort during economic crises. During uncertainties, people
also tend to seek less worrisome sources of experience like music (Zullow, 1991). Music has
always existed in the history of humanity. Music has been the source of all expressions ofemotions during highs and lows and especially during social and economic downfalls. Just as
jazz emancipated people from hard times and gave comfort during WW1 and WW2, music
has been a medium that shows greater significance during social/economic recessions. If so,
it is evident that the selection of the underlying technology (format) would be highly
influenced by contextual consumer behavior. The implications of this relationship betweensocial/economic events and music business models in relation to changed consumer behavior
quotations will be discussed, based on the revised model analysis seen in Table 7. There are anumber of views suggesting that the music industry is recession-proof since music is anaffordable, relatively ‘inexpensive good which is long on value’ (Tucker, 2008) and therefore
a cultural fixture people would not give up on. This may be partly true. However, revenue
fluctuations in the music industry evidently show that major social/economic events may
have an impact and, in this way, coincide with market dominance of new technology.
This paper recognizes social/economic events to have a critical influence in changing
the behavior of consumers. Such changes affect market demand. A certain technology may
have been developed before any particular event, yet may have been challenged in meeting
demand upon its introduction on the market. While compact tapes were introduced to themarket in 1962, it was only in 1984 that needs met with the market and compact tape sales
dominated LP sales. The 1970 oil shocks (1973, 1979) happened in advance of change in therecorded music market which implies a turn in consumer demand. Likewise, the graph in
Figure 5 implies that economic downturns often change the social/economic context andcreate demand for a new lifestyle and experience in consumer behavior.
Format (year of techdevelopment)

Revenue*(RIAA)

Post-Social/Economic
Event &
Consumerism Change

21

Business Model

Time Lag

LP(1948)

Dominant from1957 (Shelton, 1958)
Peak in 1973

Compact Tape(1962)

Dominant from 1984
Peak in 1984

CD
(1982)

Dominant from 1991
Peak in 2000

Digital Download(1999)
iPod (2003)

Dominant from 2012
Peak 2012

High Mass
Consumption Era
Economy started torecover from WW2 andthe following Korean
War with increased
employment and wages
in the 1950s with rise in
consumerism amongst
the working-class =>Easier access toentertainment businessfrom televisions toautomobiles.

Stability in income
and rise in middleincome households,
marketed accessibility
to music with at-homedevices: specificallymarket household
lifestyle especiallyhousewives.
- Integration of themusic industry andconsumer electronics.

At-home Private
RecordingSocial status upgraded,coinciding with Hippie
culture from 1967
induced by the Vietnam
War, promoting‘freedom.’ The 1979
Oil shock decreased
consumerism, declining
vinyl sales (lacking
material), yet
encouraged affordable
tapes that allowed
privaterecording/copying/editing at home.

Target market shift
from adults in past to
untapped teenagers (inlight of hippie culture
movement amongst
younger generation)with boomboxes(1966) and thewalkman (1979),
producing more blanktapes for copying.

Prosperous Music
Industry
Developed media anddigital recordings
provided Gen X DIY
media from music tovideos, encouraging
more sales of CDs for‘close-to-perfect’
reproduction.
Prosperous record
industry responding
quickly to highdemands in music
pushed for millions ofsales.

Target moreproduction of CDs,favoring higher
margin profit thantapes. Shift from
hardware companies
to labels actively
using marketing
media (ads, TVs) for
promoting songs as
goods.
- Dilemma withcassette players thatare used in 80% of
automobiles in 1997
(Stearns, 2006).

Penetrating
Technology Becomes
Norm
Period of adjusting totechnology with entry to
the digital era. Growing
penetration ofsmartphones, WIFI, andmobile data service
popularity. Highdemand in flexibility
and selectivity in musicwith development intechnology.

Focus from record
quality improvement
to maintenance ofdigital format. (P2P
model with piracy
issues// Subscriptionbased platforms //SNS platforms)* Significance in
consumer electronics
to generate profit(Legal music
software, iTunes, tiedto iPods contribute torise in legal download

22

9 years

22 years+ Market cassettes in
automobiles

9 years

13 yearsrevenues)

Streaming(2008)

Dominant from 2016

Experience Discovery
Consumers
Consumerism changed
to willingly paying forconvenience, thus
reducing burden to
download and store,especially forexperience inentertainment aspects
with high demand ininteraction with artists.

Discovery-focused,personalizable,
convenient accessbased streaming
platform insubscription model(Main revenue source:
Advertisement).

8 years*Note: Year of revenue peak and new technology takeover from the previous format are shown. Time lag refers to the period from newtechnology entry to market dominance. ‘Dominant’ refers to leading revenue among all formats of the music industry revenue.

Table 7: Post-Social/Economic Event and Music Business Model Analysis

5.1.1 LPs
The music industry instantly expanded in the post-war years between 1945 and 1946
with record sales doubling from $109 million to $218 million as shown in Figure 5 below(Schmuck, 2006). Stagnation followed in the late 1940s. Military expenditure for the Korean
war from 1950-1953 was largely financed by taxation, which naturally led to the excise tax
policies of the Revenue Act effective from 1951 until 1954 while also supporting antiinflationary policy. During that time, taxation, costs and debt ranked at an all-time high in US
history. Consumer spending stagnated. The period following the Korean War marks the startof a hike in consumption following eased regulations with tax cuts for both corporates andindividuals from 1954 during the Eisenhower era (Clark, 1953).
Until that time, affordable radios had been the norm with the broadcasting industry
enjoying dominance. From the 1950s, the phonographic record industry went on to boomwith a boost in luxury at-home appliances which later in that decade also included
electronics. The post-recession recovery was populated with prosperous middle-class
Americans supporting development in the record industry (production and distribution).
Records were a natural product aimed at affluence and consumerism in the western industrial
society during the later 1950s and 60s. Living standards increased enormously, pushingpeople to consume more goods, especially the younger generation then enjoying steady
employment and high wages. It was a time of accelerating consumption with 75% household
car ownership and 87% household television ownership by 1960. (Automotive Repair
Industry, 1969). An emphasis on consumption in household gadgets was highly encouraged
along with definite gender roles for women as housewives. This explains why many LPmarketing posters were targeted at women, especially housewives.

23

Figure 4: Mother’s Day LP Advertisement

Source: Philips, 1954

Following their introduction in 1948, the LP recording format dominated that of theolder 45s and 78s by 1957 and occupied 61% of the industry (Shelton, 1958). That was four
years after the Korean War had ended in 1953. Sales in LPs were gradually increasing at first
but rising exponentially by 1956. All in all, during the 1950s, America was the biggest
consumer society with mass production part of the culture. This naturally contributed to anincrease in music industry sales overall with more access to music amongst the majority,
compared to the earlier belief in music as a luxury for the few. Soon, the music industry was
integrated with consumer electronics for a more profitable market, noting core sales in thelive and recorded sectors. By the 60s, LPs covered almost 80 percent of total record
expenditure (Keightley, 2004).

Figure 5: US Record Sales (US$ million) 1945-1960

Source: P.Tschmuck, 2006

5.1.2 Compact Tapes
Initially invented for portable dictation marketed to journalists, tapes were afterwards
commercialized with portable music players. Additional recordable features appeared withtransistor radios in the 1970s (Shuker, 2017). Following the consumerism that defines the
1950s and 60s, the economic crises caused by the 1973 and 1979 oil shocks and the Vietnam
War (1955-1975) also impacted consumer behavior during that time. These events led to adesire for personal freedom, to which tapes responded by liberating consumers, especially theyoung generation, with recordability and portability. Tapes enabled consumer participation
and brought the first positive change in cost compared with records along with a flood ofcounterfeits (Traiman, 1979).
The Vietnam War helped to give rise to the hippies, a subset of the Baby Boomers,from the late 1960s. They opposed consumerism and, contrary to their parents’ generation,
24

were living for authenticity, stressing peace, love, and freedom. But they also enjoyed music
and travel, exempting these two categories from anti-consumerism. While generally goingagainst materialism, the hippies intensified a “commitment to style, music, [and] leisure”(Clarke et al. 1976, p.21). The hippies identified with the Beatles, one of the best
representative bands of that time in record history. Their songs mirrored social change whileboosting consumer demand for music and its enjoyment.
In response to the cultural movement of the time, the compact tape era was slowly
replacing that of the record era with consumer demand for more simplicity as well as“increased social contents in lyrics” (Tiegel, 1979). With the active pop hippie band
movement in San Francisco from 1967, many creative controls were shed, with much DIY
music production accessible as the new norm threatening record label corporations byforming indie bands and independent labels. In this way, a gradual transition occurred from a
simply pacifist stance to an activist one that yearned for consumer participation in‘democratic- participant media’ (Mcquail, 1987). Many hippies also enjoyed the nomadic life
with Volkswagen Beetles 3, a lifestyle which required the forward push of ‘portability’ ofmusic with cheaper recordable tapes. Prior to that time, the era of pronounced consumerism
had already primed young car owners to seek portability of music in mobility, a demand
many hippies then also identified with.
While hippie culture was dealing with the fallout from the Vietnam War, the 1973
and 1979 oil shocks caused economic recessions to negatively affect overall consumerism.
Recorded music sales between 1978-1979 declined by 10.8% (RIAA, 2019), but surprisingly,
compact tapes continued to increase sales throughout. Despite the recession, sales showed a
30% increase between 1978-1979 and further rises beyond. The immediate impact of the oilshocks of the 1970s was a shortage in materials including that of vinyl materials needed forthe production of LPs (Wasko et al., 2011). Tapes at the time were only used as a recording
medium for copying LPs and were never thought of as a major music format (Traiman,
1979). Some saw tapes to be recession-proof as sales continued to prosper. Perhaps, this canbe explained with high oil prices encouraging people to spend more time at home and explore
their music experience with the new technology. Copying blank tapes and using affordable,
high-quality Japanese tape players such as the Sony Walkman gained great popularity.
Despite the material shortage the price of tape was relatively stable due to governmental
regulations in freezing prices, which contributed to consumer appeal (Fujita, 1980). In fact,
the price of music in general only further decreased despite a substantial increase in quality
through a series of technological developments. In fact, household ownership of taperecorders came to 87.4% by 1979.

3

As part of the hippie subculture, its protagonists enjoyed road tripping that stressed the value of ‘experience’in contrast to material goods (Fennell, 2003). The oil/energy crisis gave rise to an awareness of conserving
energy and refraining from unnecessary travel. This also led to increased sales in compact vehicles with better
fuel economy.

25

Figure 6: 1980 Economic Recession and Tape Sales Advertisement
Source: Advertisement, Billboard, 1980 Sep.6

Compact tapes ultimately maintained their dominance over 50% of the total musicindustry from 1984 to 1988 while the 1979 oil crisis affected every industry withskyrocketing costs. After short-lived recovery the recession of 1980-82 was by far the biggest
since the Great Depression and the brief recession of 1958. The music industry was
struggling with sluggish results as a whole and with decreasing revenue from vinyls eversince the peak record of $4.1billion revenue in 1978 (RIAA, 2019). Recreational travelincluding live music events suffered as traveling became more expensive and ultimately
reduced outdoor activity. Contrary to past experiences with a boost in post-recession
consumerism, the economy was still suffering even after the oil shocks had passed. Record
companies had overestimated themselves looking back at their glorious sales in the past.
Compact tapes, however, were a peculiar opportunity given portability and decent quality inrecordability, especially for young people seeking an affordable source for leisure.
Businesses responded to this demand also with offering rentals by phone and mail delivery.
While general consumerism had declined, consumers were actively seeking an alternative
source of entertainment, and this may have pushed them in the direction of private at-homecopying, producing mix tapes, and even tapping into a market supplying them with cheap
counterfeit copies. At that point analysts predicted that the demise of the record era was likely(Gronow, 1983).
5.1.3 Compact Discs
The next music revolution came with CDs, a medium used for entertainment that
almost entirely replaced LPs and cassette tapes and dominated the industry by the end of the90s. After the short recession of the early 1980s and the 1987 stock market crash, theeconomy had again become strong and competitive with consumers enjoying the peak ofcassette tape sales, which in turn accelerated competition in the record industry and led tomany mergers and acquisitions like the acquisition of the CBS record label by Sony, in 1988.
Indie record labels that had especially formed during the tape era also merged, resulting in astronger, consolidated market. There was also much integration in music and consumer
electronics as well as mergers of cassette tape and CD companies (See Appendices F, G).
When industries are down, intensity increases between existing rivals (Porter, 1980). The
stronger presence of the newly amalgamated record companies made for an aggressive stancein the CD market which dramatically pushed up overall revenue. As a result, in 1999 themusic industry was able to reach its historic peak of $14.6 billion of total revenue with $12.8
26

billion of it accounting for CD revenue. Vast amounts of investment were made in marketing,particularly to cement close ties with broadcasting stations. Quick production speed andhigher profit margins compared well with past formats and contributed to a strong andprofitable market. In the 90s the structure of the three big labels, Sony, Universal and Warnerconverged to something approximating a monopoly.
Revenue sales of CDs overtook vinyls by 1988 and tapes by 1991. People werelooking for long-life and affordable recordings such as CD-recordables that improved on
cassettes by adopting the digital format. Thanks to efficiency in production speed and low
marginal production costs, CDs could be mass-produced. As can be gathered from Figure 7,
CDs met with explosive demand, boosting a very profitable market. The figure indicates thatregardless of the stock market crash in 1987, retail stores were actively promoting theirhardware sales by cross merchandising cassettes and CDs in mixed bundles. See Figure 8 forthe marked rise in CD album sales. Along with digital formats of CDs, the video medium wasalso making its way into at-home entertainment. It allowed further perfection of DIY media
home creations along with the help of CD players that, by 1991, could be found in 28% ofhouseholds (US Industrial Outlook, 1992). While there was a slight halt in pre-recorded
music sales in 1989, it was the only year that experienced a slight decline in CD sales, which
accounted for 64.5% of total recorded music sales. With the boom of consumerism from themid 1990s, CDs finally got off to an exponential expansion up to the 2000s.

Figure 7: Hardware Bundle Sales
Source: Mccormick, 1987; Mayfield, 1987

5.1.4 Digital Downloads
The dot-com bubble most likely built up with the rise of diverse startups such as inmusic download software and ultimately caused the collapse of by then overvalued ecommerce companies. The proliferation of the internet and its adoption by the mainstream
had led to an overinflated market. Along with rapid technological development, digital musicformats of MP3 files and Napster questioned the need for CDs in obtaining a great musicexperience. Falling prices of radio, CDs and satellite transmission all have had implications
for radical change in the business structure of music delivery itself. Following the 2001 stock
market crash, the entire record industry started to decline and prices of technology
plummeted. This led to an accelerating migration of consumers to the internet taking
advantage of continuous development in smartphones, WIFI, and mobile data services.
During this period of adjusting to technology with its growing penetration of internet use,
illegal downloads spiked with Napster, the P2P music file sharing software, pushing down27

overall album sales (see Figure 8). MP3s were on an upward swing with the Apple iPod
release in January 2001 and the opening of the iTunes music marketplace in 2003. Perhaps
technology-driven innovation was seen stronger here with a revolution taking place inaccessibility. The network effect in music sharing became obvious with a fast-growing
number of users joining connectivity.

Figure 8: Per Capita Sale of Full-Length Album Sales (1973-2005)(Including CDs and Digitally Distributed Albums in addition to LPs)
Source: Liebowitz (2006)

In the early 2000s, ‘ringtones’ was one tactic with which the music industry
diversified its business model. Customers were inspired by the feature of being able tocustomize their incoming ringtone 4 for music downloads with business thriving in theprocess. 20-30 second ‘snippets’ of the songs were usually more expensive than the wholesong with an average price tag of $2.50 compared to the average price of $.99 for a complete
mp3 file song (Halloran, 2017). This was one of the first entertainment and audio products
users had access to on their phones. File sharing software had already accelerated CD-R
piracy issues with the spread of “music for free” mentality ever since the internet bubble had
burst (Ferguson, 2002). This has been shaking the entire industry with an all-timeplummeting rate in music revenues from the mid-late 2000s, causing a shift to focusing onother industries like ringtones, MTV 5 music videos and music audition 6 TV shows. Online
distribution channels rapidly developed with information on new album releases or increasing
interaction with artists via platforms like YouTube.
One event to take note of is the 9/11 terrorist attack in 2001. While all media becamenews outlets, people soon turned to music for emotional comfort (Garofalo, 2007). Despite
instant cancellations of live concerts and tours, beneficiary concerts were planned in memoryof 9/11. In terms of consumer behavior, while overall outside activities decreased and timespent at home increased, the psychology of mortality salience and wanting comfort andsecurity induced increased consumption. Businesses were taking advantage of this climate
4

Ringtones was introduced in Japan in 2004 (Gopinath, 2013). It grew exponentially but then also lost profit
within less than a decade, mainly due to entry of mobile music with iPhones (Gopinath, 2013).
5
Officially launched in 1981 in America, MTV established a concrete base for previous concepts of music
videos from the 1960s. High dispersion of TVs from the 1960s centralized this broadcasting medium as themain marketing platform that from the late 80s onwards also broadcasted interviews with artists and offereddial-requested VJs. MTV’s popularity decreased sharply from the late 90s to the early 2000s due to rise in social
media/online video platforms.
6
For example, ‘Pop Idol’ was initiated in the UK in 2001, originally inspired by the international television
franchise, ‘Popstars,’ in New Zealand, in 1999. Pop Idol succeeded in America with greatest popularity in the
2000s, largely due to personal engagement with the audience/viewers and contestants that ultimately
democratized the hierarchical structure of the record industry.

28

with patriotic advertising campaigns centered on music, considering the uniqueness of musicin human psychology (Choi, Kwon, & Lee, 2007). This also naturally gave rise to live
performances with 9/11 beneficiaries.
The effect of the increase in live performances was at once positive and negative:
increased internet broadband penetration and piracy issues in downloads. This resulted in awelcome but massive exposure of live performances and pirated music. Still, the upside isthat music is a good which consumers must experience before they will purchase it. Realizing
this, online video platforms like YouTube began to democratize the structure of the media.
Video recordings and phone technology made people themselves producers. The ability to
upload live concerts completely revolutionized the industry, removing the location constraintof live performances.
The 2008 financial crisis also provides a meaningful indicator of linking sales ofdigital downloads with MP3s. There is viable evidence of revenue growth in downloads on
iPods, which corresponds to changed consumer behavior amidst much lower consumer
confidence when compared to the dot-com bubble and 9/11. Consumption in both durables
and nondurables significantly decreased compared to past recessions that had only affected
the former (Gennaioli & Shleifer, 2018). The 2008 financial crisis also took longer to recoverfrom (Gennaioli & Shleifer, 2018). However, despite the economy struggling with
substantially decreased consumer confidence, the music medium of MP3 and iPods was
relatively stable with iPod sales as shown in Figure 9. Given the tendency to purchase only
basics, consumers of especially between the ages 18-34 were looking for a small indulgenceof comfort in the music and gaming industry. However, as for technology goods preferences,consumers opted for the more promising investment of ‘No.1 trusted brand names,’ which
resulted in a greater number of purchases of Nintendo Wiis and Apple Ipods (MintelInternational, 2008). There was an additional impact on younger consumers who preferred atrendy design in iPods together with iTunes software which gave them comparative flexibility
and selectivity. A fresh transformation of the self was taking place at a dark time with highunemployment and uncertainty. Consumers of iPods “simultaneously became users of new
software that organized, sorted, and presented their music collections” (Morris, 2015, p. 146).
This awareness naturally led to an increase in sales but also raised a barrier to piracy.

Figure 9: Apple’s iPod Sales in Units

Source: Statista, 2019

The data on iPod sales is highly correlated to digital downloads due to device integration with
iTunes. The combination offered a legitimate service for decently priced music available on a
one-piece basis. With the peak for iPods in 2008, and the ensuing domination of downloads
from 2012, the ongoing spread of smartphones contributed to providing cheaper access to29

music on these devices. The great time lag between the point when digital downloads wereintroduced and when sales started to dominate within the music industry may be explained by
the drastic cut in cost of information goods due to eased reproducibility and low transmission
costs. Developments in music distribution were converging in the direction of ‘public goods’
compared to physical goods such as LPs, tapes and CDs that resonate more with ‘private
goods.’ This has challenged businesses to refrain from solely cost-based pricing strategies
and move to more value-based strategies.
5.1.5 Streaming
Even with legal downloading platforms, piracy issues continued in the music industry.
Revenues were constantly plunging due to the devaluation of music. Perhaps the persistentexclusivity of Apple products, such as with iTunes, got in the way. Similar download
platforms were formed continuously and expanded their music library with extra features.
They included paid-for movies and TV shows as well as an increased use of video platforms
such as YouTube and internet radio also seeping into the market. Internet radio provided
more personalizable functions and gradually implemented smarter algorithms in streaming
recommendable music stations. The challenge in revamping the music industry to regain
profits seemed to be slowly changing.
The financial crisis in 2008 affected the world’s economy slightly differently frompast crises. As mentioned previously, shared effects were in terms of job stability, wage andproductivity, but consumer post-recession behavior was different from previous strong
consumerism rebound. According to Mansoor (2011), after the 2008 financial crisis,consumer behavior had changed to desire simplicity, smart consumption, temperance, andgreen, ethical consumerism. Particularly, consumers were now past the introductory stage ofinternet on PCs and had rather adjusted to the digital economy with high internet penetrationon hand-held devices and a preference for trusted service brand names that encouraged thesale of iPods. Additionally, consumer spending now revolved around social media with agreater flow of information and formations of more interactive platforms in communities ofsimilar interests (Kozinets, 2010; Perner, 2008). Introductory platforms like Myspace Musicor Pandora Radio and the ad-supported social media of Imeem or Last.fm eventually evolved
into today’s dominant music streaming business, Spotify.
In the midst of plummeting sales revenue (see Figure 10), the 2008 crisis not only
boosted the sales of trusted iPods but also opened a new opportunity for the younger
generation to overcome declining revenue in physical media. Streaming services defined theculture of peer-to-peer and captured the needs of consumers wanting to interact on social
media. Spotify was launched as a freemium model in European countries in 2008 and in the
US in 2011. Spotify soon implemented a premium option for ad-free transmission andadditional features for personalizability at a set monthly fee. Responding to an atmosphere ofhigh mobile data penetration and a change in consumer behavior toward acceptance of aquality experience in exchange for a fee, streaming resolved the piracy issue of the longrecession and gained dominance in total revenue over physically recorded music revenue in2017, incrementally increasing since (IFPI, 2019).

30

Figure 10: Global Recorded Music Industry Revenues 2001-2019

Source: IFPI, 2019

While Spotify was introduced during the 2008 recession, expansion of the businessseems to have only recently taken a big leap due to enhanced connectivity. Streaming
represented the greatest proportion of music sales for the first time in 2015 with control of
34.3% of the entire revenue (RIAA, 2019). Rather than being based on durable goods, therevenue count has changed to account for sales per stream of nondurable experience goods
online. This change has much impacted the meaning of ‘albums.’ Previously, albums bundledfrom singles of varying quality made a larger profit. A bundle of singles, even if including
fewer desirable tracks, could be promoted to consumers as a great investment, thoughrelatively costly. Streaming, however, with the structure of pay-per-stream, has changed theconsumer behavior immensely by way of selectivity, a feature that trickled down to major
shifts in business (revenue) models.
The current COVID-19 pandemic has completely changed the lifestyle of people
confined in lockdowns and practicing social distancing. Such an ‘untact’ economy has been
boosting business innovations especially in the music/entertainment industry as more time isbeing spent at home. So far, fewer streaming hours on music have been consumed due to lesscommuting hours, but the number of paid users wishing to unsubscribe has stayed low.
Rather, with Spotify expanding business from music into audio following its recent merger
with podcasts, people have been exploring the latest selectivity features in audio that appeal
to new potential consumers. Streaming in visuals has been soaring with more time spent athome and has led to more demand in streamed live concerts and interaction with artists in themusic industry. Ongoing observation is needed to see how business models, revenue and thestreaming industry, which shows great potential for other industries as well, will fare.
5.2 Findings: The Impact of Past Social Events on Human Behavior and Technology
What does historical evidence tell us about the interaction between technology andbusiness models in the music industry? In the first half of our exploration we arrived at anawareness of the critical role of social events affecting the choice of technologies whichbecame incorporated into the music business model. In the second half, while we foundevidence that supports this perception, we also noted that the process was not simply a caseof social needs leading to the development (or rediscovery) of technology.
Although social/economic events have not always had direct impact on format
transitions and associated business models, we can infer, in most cases, a close relationshipbetween the end of economic recessions and the time the new technology starts to dominate
31

the market. ‘Music’ is an experience and a cultural activity. Music has historically almost
always been embedded in our social interactions which intensify the feeling of a particularexperience. It refers to a core human experience that encourages human well-being by
establishing “human contact, meaning and imagination of possibilities, [while] tying to oursocial instincts” (Schulkin & Raglan, 2014, p.1). Music, while a source of entertainment, also
helps people endure pain, which explains why it leads to particular forms of consumerism ingiven social/economic contexts. We know that consumers tend to depend on music foremotional psychological support in hard times.
Despite the strong relationship shown between social/economic events and thetechnology that is being transitioned to in a number of cases, there is still room to argue thatentering the digital era of downloads and streaming seems to identify more strongly withtechnology-led innovation. The entry point to digital music research in the past focusedheavily on behavioral economic theory (from the value of illegal, free downloads to that ofpaid-for albums) and the consumer theory of compensation (pirating compensates for
decreased physical sales and income derived from tours, thus directly and negatively
impacting musicians). The impact of the internet on the music industry has often led toresearch which uses internet penetration data as a proxy for pirated data. The internet,
especially the very extent of penetration of mobile data, ultimately enabled users to accessand share information goods freely. The benefits of network usage are evident to consumers.
Leaving aside the internet, the introduction of iTunes and the increase in iPod sales during thefinancial crisis of 2008 were exceptional for resolving copyright issues. The added value ofinteroperability of music files among Apple devices drastically changed the experience ofmusic. Younger generations accept a high level of technology with the digital native’s natural
posture and are willing to pay for streaming services.
In the near future, especially with the current pandemic of COVID-19 affecting every
industry due to lockdowns, there seems to be more market opportunity attached to phones.
Acceleration of smartphones with 5G will lead to more demand in entertainment in the formof virtual performances or video ringtone. ‘Personalization’ and ‘recognition being the
keywords in consumer behavior today within an ‘untact’ culture that is slowly becoming thenorm, extra features related to music seem to be in demand on communication mediums.
This raises many questions on how business models are re-established, what
consumer constraints are removed, kept or added, what can be expected in terms of sales
revenue and how quickly, and whether the pace of progress is related to economic downturns.
Tapes had a relatively long, yet stable dominance in revenue. In fact, among the dominating
formats, tapes and digital download had the lowest increase in total recorded music revenue.
They are similar in that both had severe challenges with copyright, being the first mediums
with a ‘complete’ form of recordability and reproducibility. Tapes enabled consumers tophysically reproduce content on a physical medium. File downloads were reproducible andexchangeable with others completely virtually. CDs, on the other hand, were still limited by
the constraint of necessitating a physical format for reproduction and delivery of music while
digital files were exchanged completely online. It seems that the introduction of a format thatpromises complete liberation from existing constraints is likely to raise another type of
constraint in turn. Nevertheless, digital formats have provided consumers with more agency
32

and more flexibility in forming their own experience, all of which would identify music as a‘prosumer 7’ good.
This historical analysis has sought to identify constraints that are affecting streaming
during the ongoing pandemic, COVID-19. However, ever since the advent of the COVID-19
in February, 2020, with this research on streaming in the experience economy still ongoing,
there have been diverging opinions on its future prospects. While sales in technology devices
dropped in relation to manufacturing struggles, those of streaming services have been on therise, especially in video streaming. The media and the entertainment industry have always
been sensitive to technology development as IT disruptions are tied to declining revenue.
With social distancing, TV/film productions as well as physical entertainment venues wereforced to cancel their services, including tickets to concerts, theme parks, etc. At the sametime ‘at-home’ entertainment gained demand with downloads in streaming services shooting
up. Analysts are expecting more consumption of items and experiences that will bring friends
and families closer including devices used for video chatting, game consoles and streaming
subscription. While the peak of the pandemic seems to have passed, we are trying to settle
into the new normal while wondering how business models in the experience economy will
evolve from here on. We will need to add to our findings against a backdrop of changes intechnology, consumer behavior and social/economic phenomena, including COVID-19.
Briskly advancing experimentation and diversification in delivery methods needs to be reexamined.
Comparisons of both current and past recessions and crises as well as the relationshipbetween economic recessions and change in consumer behavior and spending on experience
goods will require more research in the future. Another study may need to examine theliberation of constraints on artists and producers, considering that the focus of this research
was on consumers. This paper also suggests other experience goods such as podcasts oronline reading to be studied along the lines used in this paper, highlighting the distinct
characteristics of experience goods in contrast to physical goods, especially in view oftoday’s growing experience economy.

6. Conclusion

We started off this research assuming that consumer preferences would move in the
direction of a complete liberation of constraints, i.e., toward a static model in whichcustomers can enjoy the ultimate state of freedom in their preferences. We anticipated thattechnological development in music delivery would gradually bring consumers closer tofreedom while correspondingly revised business models would ensure revenue in return. Our
hope was that such a model would be the model to explain the role of technology in enriching
the experience economy.
However, our research revealed that the process is a much more dynamic one, inwhich the meaning of freedom, at least as expressed in consumer behavior, changes overtime. In such a context, we observe phenomena in which technologies that were obscure for7

A prosumer is one who provides and consumes. Toffler (1980) argues while producers and consumers werecertainly distinct in the industrial age, the difference is becoming more obscure in the prosumer movement
induced by general higher education, preference for customization, self-actualization, and the development oftechnology (Toffler, 1980).

33

an extended period of time after their emergence suddenly find their way into the limelight.
Our findings show that each of the five technology formats discussed signified different
liberated constraints in terms of accessibility, portability, reproducibility, selectivity, andpersonalizability, implying an augmenting change in the meaning of freedom. Each stage oftechnology development liberated consumers from different kinds of constraints.
Simultaneously, in accordance with consumer behavior at each stage, bundled or unbundled
elements of technical or consumer experience would occasionally recreate certain constraints
that were previously relieved, only to successfully meet the ends of changed consumer
behavior. Considering our findings of divergent consumer liberation and a continuous trend
in the cycle of bundling and unbundling, an ultimate state of freedom is perhaps notachievable. However, the meaning of freedom continues to alternate with social impacts ofchanges in consumer behavior. Business models are therefore reconfigured as technology
adjusts to consumer needs.
Additionally, we realize that major social/economic upheaval influences gains inmarket dominance resulting from new technology, thus also affecting consumer behavior.
While technology itself may have been introduced to the market before any gains were noted,social/economic events ultimately helped reconfigure business models based on newtechnology by removing constraints which stood in the way of revenue domination. It seems
technology and society have shaped each other by impacting one another in diverse
spectrums that collectively push for business innovation. Music is an experience good that issignificantly dependent on adoption by consumers. ‘Culture’ is created where technologicalchange in delivery ultimately changes the consumer experience. Considering this, majorsocial events have oftentimes changed consumer desires leading to the liberation of current
constraints and thus to business model innovation. We have observed several different factors
working in this process and found that consumerism has always influenced business
innovation, so that for some it is the dominant factor. Technology penetration has also always
affected business innovation, not only often being dominant for the needs of consumers but
also frequently being a critical factor responding to the needs of the industry as well. We
found that efficiency gains in the industry during the CD era ultimately boosted the CD
market. We intend to further explore our current pool of evidence to verify our current
thinking.

34

MajorSocial/Economic
Events Changing
Consumer
Desires

BreakthroughTechnology
Removing
Constraints

Business
Model
Build
Around theNew
Constraints
EmergeFigure 11: Technology-Business Model Interaction Model Incorporating Social Impact

Clearly, social/economic events have implications for business innovation which are
crucial as they are often vital indicators of business model innovation. Therefore, we need tocarefully assess in any business whether we have technology-led or socially-led innovation.
Entering the digital era, digital downloads and streaming have been relatively more strongly
identified with technology-led innovations compared to the past physical formats of LPs andtapes or even CDs that have shown stronger traits of socially-led innovation. Differentiating
between the two will better prepare us for further improvement in business model innovation
as well as for unexpected risks.
Although the latter part of our qualitative archival research focused on the role oftechnology and economic crises in evolving business models, there is evidently room for
more discussion, especially when considering digital download and streaming formats. Our
research into the music industry contributes to literature what has been lacking so far: asystematic analysis of the evolution of both the experience economy and business models
emerging within it.
We should caution readers that this paper has limitations in being a historical archival
analysis and therefore, despite careful planning in methodology and checking for accuracy, it
still has the potential for deficiencies. While we tried to collect ample data for a systematicchronological compilation and strive for an objective analysis, the possibility of bias cannot
be ruled out. Also, we faced a time limitation in observing how a social/economic event,
COVID-19, impacts streaming. This will be explored further.
This paper focuses exclusively on the emergence of the experience economy in theworld of music and therefore does not easily allow generalizations on value derived fromalternative or complementary areas of experience consumption. Such areas would include
reading books, watching movies and documentaries, listening to podcasts, engaging indifferent processes of discovery and study, and exploring complementary ways in music
consumption like life concerts and performances (Mortimer et al. 2010). What value do users
35

attach to these individual activities? To find the answer we need to test them - the first step
toward consumption (Pine & Gilmore, 1998).

36

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8. Appendices

1

Title

Authors

Changing their tune: How
Consumers' Adoption of
Online Streaming Affects
Music Consumption andDiscovery

HannesDatta,
GeorgeKnox, Bart J.
Bronnenberg 20182Intellectual property strategy
and the long tail: Evidence
from the recorded music
Zhang, L.
industry3

Hearing music in service
interactions: A theoreticaland empirical analysis

4

5

6

7

8

9

10

Appendix A
Review of Literature in Music Business
Data extracted from Scopus (May 31, 2020)

Popularity or proximity:
Characterizing the nature ofsocial influence in an online
music community

IT-enabled broadcasting insocial media: An empirical
study of artists' activities
and music sales

Digital content provisionand optimal copyrightprotection

Payne, J.,
Korczynski,
M., Cluley,R.

Dewan S.,
Ho Y.-J.,
Ramaprasad
J.

Chen H., De
P., Hu Y.J.

Guo L.,
Meng X.

Why, When, And how muchto entertain consumers in
Teixeira T.,
advertisements? A webbased facial tracking field
Picard R., el
study
Kaliouby R.

An empirical analysis ofdigital music bundlingstrategies

Value creation andknowledge loss: The case of
cremonese stringed
instruments

Music blogging, online
sampling, and the long tailDanaher B.,
Huang Y.,
Smith M.D.,
Telang R.

Cattani G.,
Dunbar
R.L.M.,
Shapira Z.

Dewan S.,
Ramaprasad
J.

Year

Source

Theme

Data

Marketing
Science
How streaming changes consumers' consumption behavior.
37(1), pp. 5- Streaming increases total consumption, leads to more variety,21
and facilitates discovery of more highly valued music.

Comparison of Spotify and anotheranonymous music platform

2018

Removing DRM(Digital Rights Management) increases digitalmusic sales by 10%, but relaxing sharing restrictions does not
impact all albums equally. Increases low-selling albums (longManagement tail) significantly (40%) but does not benefit top-selling albums.
*Dropping DRM increases value of music as consumers can use
Science64(1), pp.
music to the fullest. *Discovery in less popular music especiallymore jazz and classic than hip hop and r&b
24-42

DRM removal/time correlation in Sony,
Universal, EMI, Warner sales

2017

Human
Relations70(12), pp.
1417-1441

Impact of music on interaction with customers and service
workers-> music is important in supporting positive interactions
with customers but is not in itself a sufficient condition.

60 retail and cafe workers in UK chains andindependents, and free text comments
collected through a survey of workers in alarge service retailer

Information
Systems
Research

Study on two types of social influence (popularity influence &proximity influence) in an online music community where a user
can like/follow songs or other users’ likes. In conclusion, bothhave strong impact, also substituting each other in influence, but
proximity dominates popularity.
Quasi Experimental Research Design on-> Implications for design and marketing strategies with
empirical method of highly granular data
online communities
from online music community

2015

Information
Systems
Research

Quantify effect of artists' broadcasting activities on a wellknown social media site for music, Myspace, on music sales.
Result: significant effect. Effect mainly comes from personalmessages rather than automated messages.. Timing and content
of personal message also have influence. => important to
conduct captivating conversations with customers in social
media marketing

Myspace (personal//automated msg)=>music sales, media channels, album prices,
new music releases, user-generated content,
and artist popularity

2015

Influence of copyright protection on firm profitability. 1. More
Copyright protection impacts Consumers’ willingness to search(price/quality etc.) negatively. 2. Optimum of incomplete andeven zero copyright protection policies in markets where
consumer prepurchase search is important (information goods,
Management digital products) 3. Firm may provide lower quality as copyright
Scienceenforcement increases.

Utilize parsimonious model to reexamine if
unauthorized copying hurts sales. Set
condition under which imperfect or zero
restriction on copyright protection is
optimal. (Extract different result fromprevious studies: negative impact on sales
by copyright protection)

2017

Large scale field study using 82 ads withvarious levels of entertainment shown to
178 consumers in their homes andIn terms of TV ads, entertainment (visual imagery, upbeat
workplaces. (Used novel web-based facemusic, humor) has an inverted U-shape relationship to purchase tracking system, measuring consumers'
intent. Entertainment coming after brand is positively associated smile responses, viewing interest andwith purchase intent while entertainment coming before brand is purchase intent with Bayesian hierarchicalnot.
model.)

2014Marketing
Science2014

Tiered pricing coupled with reduced album pricing increases
revenue to the labels by 18% relative to uniform pricing policies
traditionally preferred by digital marketplaces while also
increasing consumer surplus by 23%. => Even without tiered
Management pricing, unbundling of albums outperforms "album-only" pricing
Sciencepolicies that dominates the era of physical CD/cassette sales.

2013

Value attributed to Cremonese stringed
instruments. Value wasn't realized until
19th century when, in evaluating musicalperformance, performers, critics and publicaudiences took over from royal courts, andHow is the value of cultural products determined? How theselected Cremonese instruments as the best
Organization dynamics of value determination over time have implications for for performing the emerging Romantic
Scienceknowledge management processes.
music.

2012

Information
Systems
Research

Online social media like blogs are transforming how consumers
make consumption decisions. Intensity of music sampling is
positively associated with popularity of a blog among previous
consumers and that this association is stronger in the tail in the
body of music sales distribution. Music popularity on samplingis also stronger in tail.

45

Panel data on digital song and album sales
coupled with Quai-random experiment todetermine own- and cross-price elasticities
for songs and albums. Then Develop
structural model of consumer demand to see
welfare under various policy relevant
counterfactual scenarios.

How social media are reshaping music
sharing and consumption. (data from
Leading music blog aggregator ->relationship between music blogging andfull-track sampling, drawing on theories of
online social interaction)

11

12

13

To continue sharing or not
to continue sharing? An
empirical analysis of user
decision in peer-to-peer
sharing networks

Music downloads and theflip side of digital rights
management

16

17

18

19

Vernik D.A.,
Purohit D.,
Desai P.S.

2012

2011

Analyzing sharing in peerJohar M.,
to-peer networks under
Menon S.,various congestion measures Mookerjee V. 2011

The music industry's
14 unbundling blues

15

Xia M.,
Huang Y.,
Duan W.,
Whinston
A.B.

My mobile music: An
adaptive personalization
system for digital audio
players

Should you invest in theLong Tail?

Digital piracy: A
competitive analysis

Testing file sharing impact
on music album sales incitiesOpen source salvation or
suicide?

[No author
nameavailable]

Chung T.S.,
Rust R.T.,
Wedel M.

Elberse A.

Jain S.

Liebowitz
S.J.

Wilson S.,
Kambil A.

1. The more benefit users "get from" the network, in the form of
downloads, browser and search, the more likely they are tocontinue sharing. 2.the more value users "give to" the network,in the form of downloads by other users and recognition by the
network, the more likely they are to continue sharing. 3.
"Getting from" is a stronger force for the continued-sharing
decision than "giving-to."Large scale data set of individual activities
in a peer-to-peer music-sharing network,
understand users' continued-sharing
behavior as a private contribution to a
public good.

Marketing
Science

Download piracy might decrease when the firm allows legal
DRM-free downloads. 2. A decrease in piracy doesn't guarantee
an increase in firm profits and copyright owners do not always
benefit from making it harder to copy music illegally.

Model consumers' utilities and their
incentives to purchase legal products versus
pirate illegal ones. Analyze competition
among traditional retailers, digital retailers,and pirated sources of info goods, get better
understanding of competitive forces in themarket and insights of the role of digitalrights management.

Information
Systems
Research

When delivering general-purpose content, congestion and its
P2P community in delivering generalrelationship to sharing is a critical factor that influences end-user purpose content of the web, even in real
performance. => looks at P2P networks from this newtime instead of user-initiated exchanges
perspective by explicitly considering the effects of congestion on (mostly music). Analyze sharing in p2p
user incentives for sharing. Also propose a simple incentive
community with three different congestion
mechanism that induces socially optimal sharing.
measures: delay, jitter and packet loss.

Information
Systems
Research

HarvardBusiness2010 Review$0.99 music downloads are disrupting music industry. 1%
increase in music downloads are leading to 6$ decrease in album
sales.
Sales comparison between consumption ofbundled single songs instead of bundled(Bundled or mixed bundle strategy in Cable TV or Microsoft
Office sales increases adoption and revenue)
package of an album

Marketing
Science

Simulation study shows adaptive
personalization system to outperformbenchmark approaches. Implement adaptive
personalization system on palm PDAs andPropose an "Adaptive Personalization System" and illustrate its test its performance with digital audio users.
implementation for digital audio players, a product category with (Active users: adaptive personalization
rapidly expanding sales. This automatically downloads
system provides substantial improvements
over benchmark approaches both in terms of
personalized playlists of MP3 songs into a consumer's mobile
digital audio device and requires little proactive user effort. (e.g., number of songs listened to and listening
no explicit indication of preferences or ratings for songs).
duration)

HarvardBusiness
Review

Conclusion: Blockbusters are capturing even more of the market
than they used to and consumers in the tail don't really like niche
products much. Digitization is changing storage. "The Long
Tail: Why the future of business is selling less for more, Chris
Anderson, 2006)" sudden availability of niche offerings moreclosely tailored to their tastes will lure consumers away fromhomogenized hits. "Tail" of sales distribution curve will become
longer, fatter and more profitable. Elberse, HBS professor,
investigated if this long tail theory is actually playing out intoday's markets. (Elberse outlines the implications of her
research for producers and retailers and offers strategic advice toboth groups.)

Music and home-video industries, the twomarkets that Anderson and others frequently
hold up as examples of the long tail inaction- reviewing sales data from NielsenSoundScan, Nielsen VideoScan, online
music service Rhapsody, and the AustralianDVD--by-mail service Quickflix.

2008

Marketing
Science

Contrary to claims of manufacturers, there are conditions underwhich copying can increase firms' profits, lead to better quality
products, and increase social welfare. This is because weakercopyright protection enables firms to reduce price competition
by allowing price-sensitive consumers to copy. THUS, weakercopyright protection can serve as a coordination device toreduce price competition. Also, examining how equilibrium
copyright enforcement is affected by network externalities. In
contrast to previous research, showing strong network effects
can sometimes lead to a firm choosing higher levels of copyrightprotection. => In presence of strong network effects, stronger
copyright by one firm can serve as a coordinating device toreduce price competition.

Examine impact of illegal copying ofsoftware and other similar intellectual
properties on firms' prices, profits andquality choices even when there are no
network effects and the market is saturated.

2008

1. File sharing impact to US decline in sound-recording sales(1998-2003). 2. Impact of internet on entertainment activities tohelp cleanse internet penetration coefficient of that impact. =>file sharing appears to have caused entire decline in record sales
Management and appears to have vitiated what otherwise would have been
Sciencegrowth in the industry.

Data set including album sales, internet
penetration, and various demographic
measures for 99 American cities over periodof 1998-2003.

2009

2008

2008

HarvardBusiness
Review

Fictional case study joined by 4 experts.: 1.
Jonathon Schwartz, CEO of Sun
Microsystems: If KMS confident with whatcustomers will want next, and if it's content
with small corner of the market, stay
proprietary, but with reputational price. 2.
Eric Levin, executive vice president ofTechno Source: KMS should take middle
Context of KMS's brainchild, Arms up, popular electronic-music path: license its software to third party
game being ripped off the idea by start-ups by OPEN SOURCE. companies and add features to promote
community building. 3. Gary P.Pisano,
1. How can company make money without its IP? 2. And why
should it try?
HBS: Open-source strategy could increase46

Amp up's rate of improvement, enhanceusers' satisfaction with the game, reduce
KMS's development costs. Michael J.
Bevilacqua, law firm WilmerHale: Warns
that KMS risks greater liability for
intellectual-property infringement if it joins
the open-source community, where code
carries no guarantee that it doesn't infringe
on someone's IP rights and providers offer
no indemnification.

20

21

22

23

24

Bhattacharjee
S., Gopal
R.D.,
The effect of digital sharing LertwacharaK., Marsden
technologies on music
markets: A survival analysis J.R., Telangof albums on ranking charts R.
2007

Impact of recent developments related to music industry on thesurvival of music albums on the charts and evaluation of specificimpacts. Post P2P era: find significantly reduced chart survival
except for those albums that debut high on charts. Also see
narrowing of advantage held by major labels. Also, sharing does
not hurt survival of top-ranked albums but does negatively
Management impact low-ranked albums. => increased risk from rapid
Music albums on Billboard charts with file
Science
information sharing for all but the "cream of the crop."
sharing data from popular networks.

Two-sided network effects:
A theory of information
product design

2005

How can firms profitably give away free products? -> findings:
1. even in absence of competition, a firm can rationally invest in
a product it intends to give away in perpetuity. 2. identify
distinct markets for content providers and end consumers andshow that either can be a candidate for a free good. 3. productcoupling across markets can increase consumer welfare even as
it increases firm profits. => model also generates testable
hypotheses on the size and direction of network effects while
Management offering insights to regulators seeking to apply antitrust law to
Science
network markets.

Introduce a formal model of two-sided
network externalities based in textbook
economics- Mix of Katz and Shapiro
network effects, price discrimination, andproduct differentiation.

2005

Consumers' average value for information goods, websites,
weather forecasts, music, and news declines with the number
consumed. This paper provides simple guidelines to optimal
bundling marketing strategies in this case. If consumers' values
do not decrease too quickly, we show that bundling isapproximately optimal. If consumers' values to subsequentManagement goods decrease quickly, we show by example that one should
Science
expect bundling to be suboptimal.

Optimality of pure bundling2005

Research
PolicyIf and how the new digital copyright laws in the US and Europe
are affecting innovation on the internet. (argues these laws arehaving a positive effect on internet innovation, despite strident
argument that these laws will inhibit innovation (as in p2p filesharing tech and new business models for music retailing thatp2p has spawned). Conclusion: digital copyright laws could
create perverse incentives for innovation and wonders if
legislators may not require a better understanding of theinnovation process when crafting IP laws.

Information
Systems
Research

Early speculation focused on behavior of p2p networks' positive
network externalities play in improving performance as the
network grows. BUT, negative network externalities also arise in
P2P networks because of the consumption of scarce network
resources or an increased propensity of users to free ride inlarger networks and the impact of these negative network
externalities has received far less attention. -> Research
addresses this gap in understanding by measuring impact of both
positive and negative externalities on the optimal size of p2p
networks. Conclusion: 1. users contribute additional value to the
network at a decreasing rate and impose costs on the network at
an increasing rate, while network increases in size. => at one
Empirical study on optimal design of thesepoint, the costs that a marginal user imposes on the network will networks (p2p) under real-world conditions.
Uses unique dataset collected from the 6exceed the value they provide to the network. 2. these results
most popular OpenNap P2P networks
also highlight the importance of considering user incentives in
network design.
between Dec 19 2000 and April 22, 2001.

Parker G.G.,
Van Alstyne
M.W.

Geng X.,
Stinchcombe
M.B.,
Bundling information goods Whinston
of decreasing value
A.B.

Digital copyright and the"new" controversy: Is thelaw moulding technology
and innovation?

An empirical analysis of
network externalities inpeer-to-peer music-sharing
networks

Tang P.

Asvanund A.,
Clay K.,
Krishnan R.,
Smith M.D.
2004

47

Exploratory article examining US andEurope's digital copyright laws

25

26

27

28

29

A Bayesian model for prelaunch sales forecasting ofrecorded music

Lee J.,
BoatwrightP., Kamakura
W.A.
2003

Consumer surplus in thedigital economy: Estimating
Brynjolfsson
the value of increased
E., Hu Y.J.,
product variety at online
booksellers
Smith M.D.

Measuring the frictionalcosts of online transactions:
The case of a name-yourown-price channel

Using advance purchaseorders to forecast new
product sales

Co-evolution of firm
capabilities and industry
competition: Investigating
the music industry, 18771997

When Market Information
Constitutes Fields:
Sensemaking of Markets in
the Commercial Music
30 Industry

2003

Hann I.-H.,
Terwiesch C. 2003

Moe W.W.,
Fader P.S.

2002

Ex: number of book titles available atAmazon.com is more than 23 times larger
than Barnes and Nobles bookstore. 57 times
greater than the number of books stocked in a
Present a framework and empirical estimates that quantify thetypical large independent bookstore. Our
economic impact of increased product variety made available
analysis indicates that increased productthrough electronics markets. While efficiency gains fromvariety of online bookstores enhanced
increased competition significantly enhance consumer surplus, consumer welfare by $731 million to $1.03
for instance, by leading to lower average selling prices, ourbillion in the year 2000, which is between 7
present research shows that increased product variety madeand 10 times as large as the consumer
available through electronic markets can be a significantly larger welfare gain from increased competition andsource of consumer surplus gains. One reason for increased
lower prices in this market. (Also may be
product variety on the internet is the ability of online retailers to large welfare gains in other SKU-intensive
Management catalog, recommend, and provide a large number of products for consumer goods like music, movies,
Sciencesales.
consumer electronics, hardware, software)
Study offers submitted by consumers to a large Name-YourOwn-Price (NYOP) online retailer. In our setting of allowing
repeated offers, consumers trade off a direct financial value(lower price) for frictional costs. Based on a consumer choicemodel capturing this trade-off, we use the observed consumer
behavior to reconstruct the frictional cost parameters for the
consumers in our sample. We show that, perhaps contrary to
general wisdom, frictional costs in electronic markets aresubstantial, with median values ranging from EUR 3.54 for a
portable digital music player (MP3) to EUR 6.08 for a personal
digital assistant (PDA). We find that consumers who havegathered experience with the NYOP channel in previous
Management transactions exhibit lower frictional costs than consumers who
Scienceuse the channel for the first time.

Marketing
Science

NYOP (Name-Your-Own-Price) online
retailer that allows consumers to repeatedly
submit offers on one and the same product.
While consumers could identify thethreshold price (the minimum price forwhich the retailer is willing to sell) byincrementing their offer in small steps ineach consecutive round, such a strategy
would require them to go through many
additional online transactions. (Frictional
cost is defined as the disutility that theconsumer experiences when conducting an
online transaction, such as submitting anoffer)

Duration model that incorporates the basic
concepts of new product diffusion, using a
mixture of two distributions: one
representing the behavior of innovators andone representing the behavior of followers.
(This mixed Weibull model gives flexibility
that makes the model well-suited forMarketers have long struggled with developing forecasts for new experiential product category (e.g., movies,
products before their launch. This focus on one data sourcemusic, etc.) in which we frequently observeadvance purchase orders- that has been available to retailers for very different sales diffusion patterns,
many years but has rarely been tied together with post launch
ranging from a rapid exponential decline tosales data. Conclusion: mixed Weibull model fits well fora gradual buildup characteristic of "sleeper"
experiential product category given its flexibility. Hierarchicalproducts. Incorporates product-specific
Bayes methods fit a variety of sales patterns far better than do a covariates and uses hierarchical Bayes
pair of benchmark models. We demonstrate ability to forecast
methods to link the two customer segments
new album sales before the actual launch of the album, based
together while accommodating
only on the pattern of advance orders.
heterogeneity across products.

This paper proposes that rival firms not only search for new
capabilities within their organization, but also for those that restin their competitive environment. Longitudinal study of 120
years of music industry. 1. historical study (1877-1990) 2.
multiple-case study (1990-1997) Concluding that searchbehavior drives co-evolution through competitive dynamics
among new entrants and incumbent firms and manifests itself in
Organization the simultaneous emergence of new business models and new
Studiesorganizational forms.

Integrated analysis of new capability search
processes at both firm and industry levels
shows how their interaction makes
industries and firms co-evolve over time.
Focus on music industry

This paper outlines a key mechanism through whichorganizational fields are constituted. We suggest that incompetitive fields the market serves as a magnet around whichgroups of actors consolidate, and that cognition of markets
Organization occurs through the creation, distribution, and interpretation of a2000 Science
web of information about the "market."

Case study of Billboard music chart fromthe commercial music industry to show thatchanges in either scope, methodology, or
political tone with which market
information is presented can provide amajor jolt to the participants' understandingof their field.

Huygens M.,
Baden-Fuller
C., Van Den
Bosch F.A.J.,
Volberda
H.W.
2001

Anand N.,
Peterson R.A.

Use weekly sales data of albums thatappeared in Billboard's Top 200 albums
chart from Jan 1994-Dec. 1995. (Use salesof previous albums along with information
known prior to the launch of a new album,
the model constructs informed priors,yielding pre launch sales forecasts, which
are out-of-sample predictions. (metaPurpose of this study is to obtain sales forecasts for a new album analytic approach on dynamics of duration,
before it is introduced. It develops a hierarchical Bayesian model the effects of marketing variables, and thebased on a logistic diffusion process. It allows for the
unknown market potential). As new data
generalization of various adoption patterns out of discrete data
becomes available, weekly sales forecasts
Management and can be applied in a situation where the eventual number ofand market size (number of eventual
Scienceadopters is unknown.
adopters) are revised and updated.

48

Sociotechnicalconstituencies, game theory,and the diffusion of compact
discs. An inter-disciplinary
investigation into the market
31 for recorded music
Klaes M.

Research
1997 Policy

Comprehensive case study of technological innovation in themarket for recorded music in Britain. General thrust is to foster
the dialogue between sociological approaches to the study ofinnovation and microeconomic theory. Innovation of compact
discs enabled the major record companies to redefine the overall
price level to their advantage, after the industry had undergone a
period of profit-squeezing price-competition. This has theimportant policy implication that radical product innovation may
call for regulative changes in the techno-institutional structure of
the market.

The material is analyzed with the aid of the'sociotechnical constituencies' approach
recently proposed in this journal by Alfonso
Molina, followed by a game theoreticalanalysis of competitive alignment between
the dominant constituents. Using thisinterdisciplinary approach, the article argues
that technological innovation may induce
price rigidities by allowing theestablishment of focal points for tacit
collusion.

Note: A total of 50 journals were initially found on Scopus with the keyword ‘Music Business.’ 31 were extracted andanalyzed for this paper.

Appendix B
LIFE Magazine, Nov.15, 1948, p.2

Appendix C
Billboard, Jan.22, 1972, Poster Market Joining Record Business

Appendix D
Billboard, Nov.3, 1962, Disk Deals for Dealers49Appendix E1984 Commercial of Sony CD Player

50Appendix F
Billboard, Aug 11, 1990, p.41

Appendix G
New York Times, March 16, 195851

52