Friday, June 7, 2013

Digital Distribution Models Reviewed: The Content Provider’s Perspective (book chapter)

Citation (APA): Peltz, P. (2013). Digital Distribution Models Reviewed: The Content Provider’s Perspective. In Music Business and the Experience Economy (pp. 99-117). Springer Berlin Heidelberg.


Digital distribution has surpassed physical distribution in key markets and will soon be the dominant music distribution model in Australia. Four different business models (free, ad-funded, pay-per-use and subscription-based) and two different music delivery methods (downloading and streaming) currently compete in the market place. The author analyses each distribution model available in Australia and evaluates advantages and disadvantages from the content provider’s perspective. The most striking development is the blurring line between promotion and distribution. Content providers can either lower the barriers to access music in order to facilitate rapid music circulation and create a strong promotional effect to support various revenue streams; or heighten the barriers to access music in order to install an artificial scarcity through excludability, which is essential to implement a business model based on selling musical recordings. In this regard, the variety of different digital distribution models provides a flexible toolbox for content providers to coordinate their overall marketing strategy.
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Sunday, December 23, 2012

From Payola to Blogola to Pandola?

Montgomery and Moe showed that it would be efficient for labels to pay for airplay (Montgomery & Moe, 2002). This is not surprising given the impact airplay can have on sales, at least in the old music industry (Dertouzos, 2008). However, direct undisclosed payments to influence radio programming (called Payola, a combination of pay and Victrola) are prohibited by law. Hence, labels developed strategies to circumvent the law by using independent promoters or naming payments “consultant fees”.

The bottom line is, there will always be efforts in whatever form to get exposure through a promotion channel if it could increase profits or benefit an artist's career. This principle prevails, as for instance in form of’s Powerplay or Jango’s Airplay program, where artists can simply pay for plays. Or Blogola, where influential bloggers receive anything from free products, to tickets and money in return for featuring a specific artist on their blog.

Today, DJs are replaced by recommendation systems. So the question is: who to pay? I doubt the recommendation algorithm is up for free tickets, money, coke and girls …

What I don’t doubt is that some kind of a recommendation engine optimization strategy will evolve advising music creators how to produce and structure a song in order to maximize plays for a specific audience. Let me name it “Pandola” (Pandora + Payola = Pandola).

Sure it is not for every artist. There have been always two types of artists: The ones serving the crowds, and, on the other hand, the ones serving their own artistic egos. Obviously, Pandola would only be considered by the fist kind.

Would it be a bad thing?

Intuitively yes as it supposedly promotes a musical monoculture, where every song sounds the same. However, clever recommendation systems learn from consumers’ listening behaviors and incorporate feedback. For example, if the system presents 3 songs that are rather similar, I vote “thumps down” on the third song. Hopefully the algorithm learns and recommends songs that are slightly different.

Assuming the algorithm accurately knows my listening preferences (maybe I can switch between different modes, like curiosity and non-curiosity mode), then Pandola could be a good thing. For years, the music industry has been accused for its top-down approach, imposing tastes on consumers. Pandola, on the contrary, depicts a bottom-up approach, where consumers shape the music. If recommendation algorithms learn from consumers’ listening behaviors and music producers learn from recommendation algorithms, we may end-up in music wonderland...

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Monday, December 3, 2012

Some thoughts about where we are regarding digital distribution in 2012 (excerpt of an upcoming book chapter)

Digital distribution has surpassed physical distribution in key markets like the USA or UK and, thus, established as the dominant distribution practice.

While the media often speaks of the next killer app that will revolutionize music consumption and dominate music distribution, the analysis of the current situation suggests that different forms of distribution will coexist. The reason is that consumers value music differently, prefer different formats and expect different experiences from consumption. The same applies to content providers. Each artist or record label is in a specific situation pursuing different goals. As a result, a variety of different distribution models have emerged, each with pros and cons for a certain situation. For content providers it is important to choose the appropriate distribution model that supports the overall strategy.

The most striking development in digital distribution is the blurring line between promotion and distribution. This refers to the fact that, on the one hand, lowering barriers to access music creates a strong promotional effect due to the facilitation of rapid music circulation. On the other hand, heightening the barriers to access music causes an artificial scarcity through excludability, which is essential to implement a business model based on selling musical recordings. The following graphic illustrates this trade-off and the position of each distribution model.

Trade-off between promotion effect and direct revenues
Figure 3: Trade-off between promotion effect and direct revenues

Different distribution models can also be combined parallel or subsequently. In this way, content providers can apply different strategies in different career stages or for specific consumer groups with particular listening preferences. However, if applied at the same time, cannibalization effects may eventually occur. For example, if an artist distributes her music via the free model and a pay-per-download model at the same time, the free model will likely cannibalize revenues of the pay-per-download channel.

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Thursday, November 29, 2012

The Scope of Artist-Entrepreneurship (conference proceeding)

Citation: Peltz, Philipp. "The scope of artist-entrepreneurship in the music industry."Instruments of Change: Proceedings of the International Association for the Study of Popular Music Australia-New Zealand 2010 Conference. International Association for the Study of Popular Music, 2011.


Ambitious musical activities outside of the established structures of the music industry are not new. The number of amateur and unsigned musicians has always outweighed that of professional and signed musicians. Today, the distinction on the basis of being signed by a record label or not is blurring. Decreasing entry barriers enable hobbyists and unsigned artists to enter established markets on a large scale.

The present research project utilised two datasets to estimate the total size of artist-entrepreneurship in the music industry. The findings reveal the sheer scope of this phenomenon. According to the figures, there are five times as many artist-entrepreneurs than artists signed by record labels struggling for consumer's attention. On average, every artist-entrepreneur produces and releases the same amount of music as the group of traditional artists through established structures. Thus, the total amount of new music seeking consumer attention increases by a factor of five. Artist-entrepreneurs generated sales of roughly $7 billion US in 2008. From the data one cannot discern if sales are cannibalized from the established industry or an increase of the total market size. Either way, established players have to rethink their business models and adapt to the new situation. How far this, in the words of Andrew Keen, "flood of amateurs” leads to a loss of culture or to a counter-movement to the mass media and the loss of individuality as criticised by Theodore W. Adorno can not be answered yet.

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Wednesday, November 21, 2012

From music as a recoding to music as an experience

Kevin Kelly writes: “The elusive, intangible connection that flows between appreciative fans and the artist is worth something”.

Or as Joel Zimmerman, better known under his artist name Deadmau5 puts it:

“You need to make a world: […] you have a rollercoaster in your backyard… which is rad. coz everyone loves roller coasters,[…] and all the people from around your block is gunna wanna come and at LEAST check that shit out, or ride it. And itll be the hot thing in the neighborhood for about a week. But once everyone’s had a go… they’ll lose interest, go home n play Sega instead. I see this happen to SO many people… its ridicules.

Well, what you need then, is a fuckin theme park… and you AND your music are the theme. You with me here?  Now, people come into your theme park, and holy fuck, check out all this shit… buncha rides, no 2 the same, some merch here and there, special events, dolphins through hoops and all that whack shit. You want people to come to your theme park and feel like they’re a part of this world of yours”.

Joel points out that an artist needs to offer an exciting and ever changing experience of which the fan can be a part of. He practices what he preaches and offers a wide range of experiences for fans. From using social media platforms like Twitter, Facebook, Instagram to communicate with fans, to selling merchandizing, organizing remix competitions or providing insights into his studio work via a live webcast.

The song “The Veldt”, for example, resulted from cooperation between the artist and a fan who spontaneously sent a vocal recording to Zimmerman via Twitter during a live broadcast of his studio work. Zimmerman contacted the fan live on air expressing his appreciation for the musical contribution and offered him cooperation. The resulting song became a big success and fans valued Zimmerman’s openness to work together with his followers.

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Monday, June 20, 2011

No Copyright - No music? (article excerpt)


To what extent does copyright law encourage the production of music? On the one hand, the Internet features a vast amount of new music, while on the other hand copyright law is practically weakened by piracy. This is a paradoxical situation. Following the rationale of copyrights, a mitigation of the law (due to problems of enforceability) should lead to a decrease in musical output due to lack of incentives and vice versa. This paper analyzes the motivational incentive of copyrights to artists and labels to produce and publish music.


A sagging copyright (due to piracy) should lead to a decreasing number in music recordings. However, in light of the flourishing supply of new music on the Internet, something in this equation appears to be wrong.

Firstly, artists appear not to be influenced significantly by copyrights. The majority of artists would not adjust their musical productivity to copyright alterations. In addition, there is evidence of a cost-of-creation effect shown by a contrary reaction of some artists to copyright modifications—meaning, the weaker copyrights are, the more music some artists would produce.

Secondly, even though the overall number of record labels which would react in line with copyright modifications is relatively small, they seem to be more sensitive to copyright alterations than artists. While around 7% of the artists indicated to adapt their output in line with copyright modifications, around 17% of the labels would react in such way. In addition, similar to the case of artists, there is evidence of a cost-of-creation effect in the case of the labels as well.

Thirdly, these results experience support by the analysis of the artist’s and record label’s opinions toward copyright infringements. While around 80% of the artists do not support severe penalties for copyright infringements, only 50% of the record labels indicated such behavior.

These findings are consistent with previous research which found only little evidence for the incentive effects of copyrights to produce art. The overall results show that even without a copyright there will be plenty of artists and a hand full of record labels which produce and market music. However, this present study emphasizes that there is a significant gap between the artist’s and label’s opinion toward copyrights. It appears that a strong copyright fosters the industry side of the value-creation chain in the music industry more than the creation side represented by the artists. Following this logic, it seems understandable that parallel to the multiple extensions of international copyright laws a strong and professionalized-shaped music industry has evolved.

On the contrary, a weak copyright should lead to a trend to amateurism. Exactly this is what can be observed over the last approximately ten years. The mitigation of copyright law in the wake of piracy (in particular its enforcement) led to a, in the words of Schumpeter, “creative destruction.” According to the results of this study, artists continue to produce music even without significant copyright earnings. We see an increase of self-marketing artist-entrepreneurs and a decrease in revenues in the professional industry. Due to the fact that these days artists can enter the market and distribute their work over the Internet easily and single-handedly, a different business environment in market for music recordings arises. We see a shift from professionalism to amateurism, from maximizing profits to maximizing creative expression, from full-time label-signed artists to part-time self-marketing artists-entrepreneurs. Accordingly, the initially stated paradoxical situation about a weak copyright but a flourishing music supply is explainable.

Nevertheless this should not be understood as a recommendation to weaken or abolish copyrights in the music industry. This paper just shows that the regulating mechanism of copyrights has different effects on different market participants. In the controversial debate about the bargaining function of copyrights, this information is crucial to evaluate each side—access to culture versus incentives to produce creative goods. Furthermore an interesting issue arises in the question whether an environment of amateurs and semi-professionals will produce music of inferior quality than a professionalized industry. Future research will assist in completing this picture.

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Sunday, March 13, 2011

Remix Competitions - promising career springboards or just promotion tools? (work-in-progress)

We are working on a paper about remix competitions. If you have ever participated in a remix competition, it would be great if you could participate in our little survey. Thanks a lot!

Remix Competition Survey  (done, we are analysing the results)

Here a brief abstract what the paper is all about:

Remix competitions have become very popular among aspiring music producers. If established artists like Depeche Mode, 50 Cent or Fatboy Slim call for remixes, up to 1000 and more music producers take the chance to submit their own interpretations of the original tune. Despite their popularity, remix contests are subject of controversial debates among artists. Organisers promote remix competitions as promising career opportunities for unknown artists to get a foot in the door of the professional music business. Participants, on the other hand, often accuse the organisers to exploit the artist’s dream and use remix contests only as a promotional tool.
In this regard the present paper will analyse the following questions: (a) Do remix competitions have any impact on the participant’s career? (b) What are the motivational factors of participants to attend a remix competition? (c) Which features of remix competitions are important for artists in order to participate? The results can provide interesting insights into the driving forces of remix competitions for artists as well as for event organisers.
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