این فصل را با ذکر تمام تیترهایش (تاکید میکنم تمام تیترهایش) به انگلیسی ساده و روان خلاصه کن   Business Models and Value Creation in the Music Market


Music is an important and diverse cultural heritage with a long history. Important milestones in the development of music industry were the invention of the gramo- phone in 1887, the beginning of sound media reproduction a few years later, and the development of radio at the end of the nineteenth century.
These inventions contributed decisively to the mass consumption of music and abolished the nobility’s and clergy’s privilege of music consumption in the context of exclusive court music concerts. Since these times, the music industry has devel-
oped with different participants and interest groups that have gone through various phases of economic booms and recessions in the past (Vogel 2007).
The revenue in the music industry has been in decline since 1998, following a period in the 1980s and 1990s that has been characterized by successes and steady increases in sales. As a whole, the music sector is in a state ofux that is reected not only in the drop in sales but also in the entry of new market participants, the increase in music piracy, and changing business and revenue models. Especially the Internet has a decisive inuence on these developments. Music management has to face these changes. Against this background, market structures, range of services, strategies, and management approaches in the music sector are major interests for media management.1


10.1	Range of Services

Record producers and music publishing houses are central players in the music market. Hence they have major economic signicance in the music industry. Their range of services is an important part of the entire range of services of the music industry. In the following this will be analyzed in detail. The offer of music products
can be classied according to various styles. An overview of these various genres is provided in Table 10.1.



	Record Producers

The range of services provided by record producers focuses essentially on music recordings. First, music recordings can be differentiated according to the type of storage media or distribution channel. The product range includes CDs, DVDs, audio/SACDs, MCs, and vinyl records, as well as streaming and download offers. A further distinction can be drawn according to the scales of the music recording, namely, between long-playing (LP) and single.
These terms originated in the age of the vinyl records but are still in use. An LP is a production with several (at leastve) titles. A single or maxi-single CD usually
 

contains one song, often in various versions, or a small number of different songs (one to four titles).
A further criterion for differentiation of the range of services of record producers is the type of production. Here a distinction is drawn between national and interna- tional productions, soundtracks and compilations. Finally, a further distinguishing criterion is the differing repertoire segments. Music videos complement the primary
service of records as a small—in terms of sold items—but growing product segment of the record producers.
Merchandising items (textiles, posters, etc.) and concerts are also included in the range of services provided by the record producers.


	Music Publishing House

In the past, music publishing houses have increasingly integrated new functions into their value creation to expand their range of services. The original service offer of music publishing houses consisted of the sale of music-related print media, espe- cially the sale of sheet music publications. In the context of the wide prevalence of mechanical sound storage media reproduction since the beginning of the twentieth
century, which today is clearly more signicant for the prevalence of music than the public performance, the focus of the service of music publishing houses has shifted
to the administration and licensing of rights (Anderton et al. 2012).
Aside from the sale of sheet music publications and the utilization of rights, the range of services of music publishing houses also covers the area of other music services. This area includes, for example, music magazines, analysis of works, biographies, scores and libretti, or music encyclopedias.

	Interactions of Market Participants

The music market is characterized by a multitude of players that have been involved in the value creation process of music. In the foreground are the music publishing houses and record producers, which identify successful artists through their A&R management and keep them loyal to the enterprise for as long as possible. Artist and repertoire managers monitor social media appearances and video platforms, evaluate demo tapes, detect music trends and their potential for commercialization, and are responsible for supervising the artists.
In addition, the record companies provide know-how and infrastructure for marketing music. The production of therst copy in particular requires technical equipment and professional producers.
The products are marketed in the form of physical records or sheet music publications via wholesale or retail trade. In this respect, music stores, as a sales platform, have lost market shares over the past few years. Conversely, online music services, such as last.fm, iTunes, or Amazon, have experienced signicant growth in music distribution, so that in these sectors, separate and distinct contracts are
 
	Value Creation Structures	163
concluded. Here a distinction is made between suppliers of downloads and streaming.
The use of music in other media, such as radio, movie, or television, and the use in the context of events are transacted with licensing agreements with the collecting societies BMI and ASCAP. The requisite rights for such uses are directly transferred from the music enterprises or the artists. Live concerts constitute a further form of music distribution.
They are usually carried out by specialized concert organizers, although a few record companies negotiate a percentage of the total revenue for live performances. Aside from the talent search, the long-term loyalty of the artists, and the identica- tion of trends in the branch, the ability of integrated communication measures to increase sales constitutes a core competence of the record companies.
In addition, strategic partnerships with enterprises from other media branches are being increasingly established, which facilitates a win-win situation in marketing. The most important actors and interactions in the music sector are portrayed in Fig. 10.1.


	Value Creation Structures

The value creation process in the music industry can be basically divided into the
ve steps of composition, trade of rights, recording, record production, and distribu- tion (see Fig. 10.2). In therst step of the value chain, a composition is written by a composer or song writer.
In several cases the interpreters are the authors of the composition. The transfor- mation of a composition into an audio track is undertaken by an individual or by several artists or by a band or orchestra. First a demo tape is produced. With this demo tape, the artists themselves usually apply to record labels and music publishing houses.
The second step of the value chain covers the production or recording of the individual composition. The production belongs to the scope of the music labels’ responsibilities, because they provide the interpreters with a producer and the requisite resources for production of the so-called master recording.
In the third step of the value chain, the rights of use transferred from the owners to the music publishing house are licensed for further use. In the fourth step of the value chain, the compositions which were produced arerst assembled as albums or compilations or allocated as singles.
Afterwards, the music records are physically manufactured. This process is not applicable if the music title is to be marketed exclusively online. Thefth and last step of the value creation chain covers the distribution of the records that were produced or the digital musicles from the location of their manufacture to the recipient.
	
	Core Assets and Core Competencies

Core assets and core competencies also constitute the basis for the lasting success of a business model in the music industry. They will be subsequently discussed with respect to record producers and music publishing houses. Core assets for record producers are primarily the employees, the artists under contract, and the brand name. In this context the employees of the artist and repertoire department are very important. Valuable A&R employees distinguish themselves with a good intuition for the market and trends. The employees are able to discover, promote, and use
successful artists better than the competition, as well as better able to win the artists’ loyalty to the record label.
The repertoire of the artists is the basis of the service creation, i.e., the production of music by the record producers. Successful musicians are characterized by loyal followers, who guarantee long-term sales of their music productions and who also are interested in fan articles and concerts. If the artists are contractually bound to the record producer, they cannot be easily acquired by another record label. Even the
imitation of successful interpreters turns out to be very difcult because music is a rened service which is characterized by its uniqueness.
The brand name of the record producer (e.g., Sony Music Entertainment) or the brand names of the manufacturer’s sub-labels (e.g., Sony Masterworks, Sony Music Nashville) imply an image of the services provided by this manufacturer or its
 

sub-labels. The signicance of such a brand lies less in the recipient market than in the market for artists and interpreters. A positive brand name of a record label facilitates the acquisition of new talent and is thus benecial in the development of a valuable pool of successful interpreters.
The central core asset of music publishing houses is the number and extent of exploitation rights which are available to the enterprise. These exploitation rights to lyrics, compositions, and/or recordings form the basis for the business activities of music publishing houses. Music publishing houses license to third parties (e.g., radio, TV, and movie) the rights transferred to them by the originator and demand royalties for them. Exploitation rights to successful music material are especially valuable; they guarantee the publishing houses lasting streams of revenue and can contribute to the long-term success of the enterprise.
For music publishing houses, the core competencies which are necessary for obtaining and using core assets consist of the acquisition of exploitation rights and their associated contractual arrangements. For record producers, the most important competence is the music and artist sourcing competence. The music and artist sourcing competence consists of two subcompetencies.
On the one hand, they cover the competency of a record producer to indepen- dently develop new music genres and artists. On the other hand, they include the competence to assess the existing supply of established and new artists with respect to their consumer attractiveness and market opportunities. Further important competencies include promotion competence, which primarily consists of the place- ment of the music to achieve mass appeal, cross-media exploitation competence, and contract drafting competence.

	Business Models

Business models are highly relevant for the music industry as an integrated manage- ment concept. Therefore, the business models in the music industry are portrayed in
this section. The business and revenue models of the two important players—record producers and music publishing houses—differ sharply and must be analyzed differently.
Following a general presentation of the revenue and service creation models of music records, the details of the business and revenue models of music labels and publishing houses will be explained.
For the record producers, the recipients or audience markets are the central source of revenue acquisition. Revenues in these markets are mostly generated by transaction-related payments which accrue through the purchase of music recordings or the download of music titles. Against this background, music publishing houses generate the majority of their revenue in the markets for rights. In these markets, the exploitation rights to music pieces are licensed and assigned to third parties.
Revenue acquisition is always associated with a transaction that depends on the type and extent of the licensing rights. Music publishing houses also generate revenues in the print market. Therefore, music magazines pose a further revenue
source for the music publishing houses in the advertising markets. These revenues can be acquired through the placement or integration of advertising content in magazines.
In the record industry, music titles are produced for distribution. The service creation model of the record industry correspondingly reects important core pro- cesses that arise during the production and distribution of music. Of special impor- tance in this context is the cost structure of the service creation. It provides evidence of the central cost factors in service creation. Through a reduction of the service creation costs, competition-related efciency benets in the form of cost benets as opposed to the competition can be achieved. Figure 10.3 provides an overview of the cost and revenue structure of service creation in the record industry.
In order to familiarize the public with newcomers there are higher promotion costs. Marketing expenses and music production costs can correspondingly be identied as the central cost drivers. Similar to the copy costs, the prot margin (on average 6%) varies as well. The participation in sales by producers, artists, and
composers varies according to the contract and the amount of advancenancing by the record label.
The production costs of the physical duplication of the records and their accessories depend on the production volume. However, these production costs are comparatively low at an average share of 7%. The largest cost item is trade, at about 18%.
 

	Business Model of Record Producers

The main issues of the business model of record producers are the creation of a local music repertoire and the marketing of the international music repertoire. The central tasks of the service creation process are the acquisition of artists and their supervi- sion, product development, product management, marketing, and distribution. Here the physical manufacture of the recording media copies is usually not carried out by the record producers themselves.
It is outsourced to the more than 200 CD production plants worldwide. However, in many cases these belong to the major entertainment conglomerates. Almost every major company has an in-house manufacturer (e.g., Sony DADC as a CD manufac- turer and Sony subsidiary).
A typical additional business of sound record producers is the production and distribution of music videos and music DVDs. Finally, the business model of the record producers also covers the area of merchandising. This is understood as the utilization of ancillary rights for artists or music products.
An example is the manufacture and distribution of items such as posters and T-shirts with the name or image of the interpreter. Aside from traditional merchandising, revenue from the area of digital merchandising is increasingly important. The business model of a record producer is provided in Fig. 10.4.


	Business Model of Music Publishing Houses

The overwhelming majority of the activities of music publishing houses are concerned with the acquisition, administration, and licensing of rights. Music pub- lishing houses demand royalties for the utilization of music titles (e.g., in TV, radio, concerts, and discotheques). These fees are seldom levied by the publishing houses themselves but rather are processed via collecting societies (e.g., ASCAP).
Streams of revenue arise from payouts from collecting societies and from the direct exercise of rights of use and utilization of copyrights (licensing to third parties). A part of the income remains at the music publishing house, and the rest is transmitted to the author and/or interpreter. A clearly smaller part of the activities of music publishing houses involves the production and sale of sheet music and other
music services, or the so-called print business. Figure 10.5 contains an example of a simplied business model of a music publishing house.