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Dance-onomics:
How Deejays from
The Netherlands have influenced
the Global EDM Industry
A study on the process of commodification of electronic music artists from The Netherlands. This research is focused on the underlying causations of the increasing success levels of
Dutch deejays in the global electronic music scene.
A thesis in the Field of Advanced Economic Geography for the Degree of Master of Science in Human Geography
By: Lizzy Nanninga (10541020)
University of Amsterdam
Supervised by Prof. Dr. R.C. Kloosterman
November 2018 Word count: 18.791
1 © 2018 Lizzy Nanninga ALL RIGHTS RESERVED
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ABSTRACT
Reflecting on the debates in economic geography on the national competitiveness of performers in the electronic music industry, this paper is evaluating how artists commodify their talent into (inter)national success. More specifically, this study tries to demonstrate where the Electronic Dance Music Industry (EDMI) derived from and tempts to explore how deejays from the Netherlands have managed to become prominently dominant in the global EDM scene. The growing role of geography proximity is playing a central part in this research, as the focus is pointed on the contribution of spatial clustering, tacit knowledge, inter(national) organizational connections and institutionalization, which are functioning as main pillars of national competitiveness.
Due an in-depth analysis of the empirical data, gathered through twelve semi-structured interviews with internationally known deejays, gatekeepers, radio representatives, nightclub-, festival-, music magazine-, and record label owners, it can be concluded that the implementation of online platforms as social media and digital music services have become increasingly effective marketing- and distribution tools, and therefore function as most significant contributors to provide international successes in deejays’ careers. Rising streaming numbers have transformed music from a physical product into a digital service. Other key factors that strengthen deejays’ position in the global EDM Industry, are the presence of local performing platforms as nightclubs and electronic music festivals in cities’ highly developed technology clusters. These platforms offer opportunities to rise fame and generate income streams which sometimes cannot be gathered through online content. Furthermore, performing platforms enhance social- and organizational relationship networking which are often accessed through local buzz or global pipelines and create economic spill-overs by promoting further entry for artists within EDM scenes. Local geographical scenes remain important aspects in the music Industry as highly specialized production processes and musical tacit-knowledge seem to exchange within and between cities through the mobility of skilled creatives, entrepreneurs and new technologies. Moreover, Dutch institutions constitute a large number of educational programs for deejays and producers. Finally, the Netherlands seemingly owe their well-established EDM sector to cultural historical heritages as early developed technological sound firms like Philips and early staged pioneer EDM event organizations as ID&T.
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ACKNOWLEDGEMENTS
I wish to thank, first and foremost, my supervisor Professor Doctor Robert Kloosterman for the scientific guidance concerning this thesis and all the support throughout the last four years. Without his persistent help and involvement, this thesis would not have been possible to accomplish.
In addition, I share the credit of my work to DDMCA, DJ MAG, E&A Events, BCM Mallorca, The Stage Mallorca, the former ID&T and Q-Dance directors, IAMM, Warrior Grooves Records and the electronic music artists that have provided insights and expertise that greatly assisted the research. I want to sincerely thank all the individuals for their honest and cooperative responses, which contributed to the realization of this thesis.
Finally, I would like to show my deepest appreciation to my friends and family, who have helped me in the completion of this paper and encouraged me throughout the years of my study. This accomplishment would not have been possible without them. Thank you.
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LIST OF ABBREVATIONS
The following list describes the definition of the various alphabetical abbreviations and acronyms used throughout the thesis. The middle column depicts the meaning of the abbreviations and the right column shows he first page where the abbreviations are given.
Abbreviation (A-Z) Meaning Page
A&R ADE EDM EDMC EDMF
Artists and Repertoire Amsterdam Dance Event Electronic Dance Music
Electronic Dance Music Culture Electronic Dance Music Festivals
22 16 12 16 12 EDMI CBS CD CDJ DJ DJ MAG DMS IFPI IMS IPR LSD MDMA MIDIA RLC SMP Electronic Dance Music Industry Central Bureau of Statistics Compact Disc Compact Disc Jockey Deejay, Disc Jockey DJ Magazine Digital Music Services International Federation of the Phonographic Industry International Music Summit Intellectual Property Rights A party drug, chemically known as lysergic acid diethylamid A party drug, chemically known as methylenedioxy- methamphetamine, also called ‘ecstasy’ Media Insights & Decisions in Action Record Label Companies Social Media Platform 12 15 19 23 3 3 19 21 18 27 17 17 63 16 42
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LIST OF TABLES
Table Descriptions Page
Table 1 Overview of the currently largest audio- and video streaming services on global level, measured in 2018.
(Richardson, 2014; Forbes, 2018; IMS, 2018)
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Table 2 Overview of the basic roles of important actors surrounding the deejay’s career.
(Hull, 2004; Author, 2018)
25
Table 3 The chosen success indicators for the EDM artists.
(Author, 2018)
44
Table 4 Identified variables, categories and key factors leading to innovative EDM artists.
(Porter, 1990; Author, 2018)
45
Table 5 Overview of the three global Top 100 deejay polls in the EDMI. The Dutch deejays are coloured orange.
Source (IMS, 2018; DJ MAG, 2018; Billboard, 2018)
51
Table 6 Overview of DJ MAG’s Top 10 best global deejays, measured from 1997 – 2018. The Dutch deejays are coloured orange.
(DJ MAG, 2018; Author, 2018)
52
Table 7 Number of followers of the Top Dutch EDM artists on the most important DMSs and SMPs, measured in millions.
(Spotify, 2018; SoundCloud, 2018; YouTube, 2018; Facebook, 2018; Instagram, 2018; Twitter 2018; Author, 2018)
57
Table 8 Overview of the Dutch EMDFs that the respondents declare to feel most familiar with.
(Author, 2018)
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LIST OF FIGURES
Figure Descriptions Page
Figure 1 Global recorded music industry revenues in US$ billions, divided by segments and measured in the period 1999 – 2017.
(IFPI, 2018)
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Figure 2 A deejay’s professional career defined in three different stages.
(Author, 2018)
24
Figure 3 Overview of the three main income streams of a deejay.
(Hull, 2004; Author, 2018)
27
Figure 4 A draft of the local buzz and global pipelines in the cultural sector of a city, in this case the EDMI.
(Kloosterman & Boschma, 2004)
31
Figure 5 Porter’s Diamond Model of national competitive advantage.
(Porter, 1990)
37
Figure 6 A conceptual framework of Porter’s Diamond Model, based on the deejays in the EDMI.
(Author, 2018) 41 Figure 7 Figure 8 Figure 9 Figure 10
Conceptual overview of the changing developments within the EDM ecosystem, framed on Porter’s Diamond Model.
(Author, 2018)
Personal characteristics of the twelve interview respondents.
(Author, 2018)
Overview of the increasing percentages of Dutch deejays in the DJ MAG Top 100 Poll, measured from 1997 ̶ 2018
(DJ MAG, 2018; Author, 2018)
Overview of the Top 5 best earning Dutch deejays, measured from 2012 – 2018. Please not that not all data is available.
(Forbes, 2018; Author, 2018) 42 47 55 58 Figure 11 Figure 12
Overview of the number of live music festivals organized in the Netherlands in 2015 and 2016, divided per province.
(Festival Monitor, 2018; Festival Atlas, 2018; Author, 2018)
Figure 12: Overview of the increasing digital distribution sales and decreasing psychical distribution sales in the global EDMI.
( Towns, 2014)
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Figure 13
Figure 14
The DMSs that the six responding deejays declare to use in order to promote and sell their content.
(Author, 2018)
The old (physical) EDM model versus the new (digital) EDM model. (Author, 2018) 65 66 Figure 15 Figure 16 Figure 17 Figure 18 Figure 19 Figure 20 Figure 21
How important do the respondents value having a strong social network with actors within the EDMI in order for a deejay to become successful?
(Author, 2018)
How important do the respondents value the partnerships with today’s record labels in order to become an internationally successful deejay?
(Author, 2018)
A conceptual scheme of the continuous process of the market pushing the EDM artists for innovations.
(Author, 2018)
How important do the respondents value the role of a local, strongly developed technology sector in order to become an in internationally successful deejay?
(Author, 2018)
How important do the respondents value the presence of institutions in order to become a successful deejay?
(Author, 2018)
An overview of the Dutch institutions that provide educations for deejays and productions. The institutions are divided per
municipality and measured in 2018.
(Author, 2018)
A summary of all the respondents’ answers on the standardizes interview questions which contain possible key factors for the successes of Dutch deejays in the EDMI.
(Author, 2018) 68 73 75 76 77 79 85
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TABLE OF CONTENTS
Page. ABSTRACT………..2 ACKNOWLEDGEMENTS………. 3 LIST OF ABBREVIATIONS……….. 4 LIST OF TABLES………... 5 LIST OF FIGURES……….. 6 TABLE OF CONTENTS………. 8 1. INTRODUCTION……… 12 2. RELEVANCE OF RESEARCH………... 14 2.1. Scientific relevance……….. 14 2.2. Societal relevance………. 15 3. THEORETIC FRAMEWORK………. 163.1. The emergence of the EDMC………... 16
3.2. New technologies: from phonographs to streaming………. 19
3.3. Changing business structures………... 22
3.4 Musical creativity in clusters……… 30
3.5 Porter’s Diamond Model versus Smith’s Wealth of Nations………... 35
4. OPERATIONALIZATION………... 40
5. RESEARCH METHODOLOGY……… ……… 43
5.1. Research design and method……… 43
5.1.1. Restricted selection of Porter’s Diamond Model………. 43
5.1.2. Success indicators……….……… 44
5.1.3. Used variables, categories and key factors………... 45
5.2. Data collection & analysis……… 46
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6. HYPOTHESES……… ……… 49
7. THE DUTCH CONTEXT………50
7.1. Dutch deejay dominance……….. 51
7.1.1. Dutch awards in international deejay rankings……….51
7.1.2. Increasing digital popularity of Dutch deejays………. 57
7.1.3. Growing income levels of Dutch deejays ………58
7.2. Performing platforms: EDMFs and nightclubs……….60
7.2.1. Growing number of Dutch EDMFs………... 60
7.2.2. Declining number of Dutch nightclubs……….61
8. ANALYSIS………..62
8.1. How do deejays create international success?……….. 63
8.1.1. Improving technology: a shift towards digital production-, marketing- and distribution models ……….63
8.1.2. The relevance of live performances……….. 66
8.1.3. Network relationships: network equals net-worth………67
8.2. What kind of influence has the Netherlands’ creative climate on the EDMC?... 71
8.2.1. Historical cultural heritage………... 71
8.2.2. The influence of drugs on EDMFs ……….. 72
8.2.3. Powerful Dutch RLCs and entrepreneurships……….. 73
8.2.4. The Netherlands’ high market demands………... 75
8.3. Can deejays’ successes in the EDMI be reproduced?... 76
8.3.1. The presence of a strong, locally developed technology sector……….… 76
8.3.2. Institutions for deejays and productions………... 77.
9. CONCLUSION………... 80
9.1 Findings research question……… 80
9.1.1.Findings sub-question 1………. 80
9.1.2. Findings sub-question 2………..…………..81
9.1.3. Findings sub-question 3………..………..82
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10. LITERATURE REVIEW………... 86
11. APPENDICES ………... 91
Appendix I. List of interview respondents ………... 91
Appendix II. Interview schedule for responding deejays…….……….. 92
Appendix III. Interview schedule for responding related actors……….95
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“I want to show everyone that if you pursue your dreams, they can come true no matter what. That's what I want to do.”
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1. INTRODUCTION
Twenty years ago very few people in the Netherlands had ever heard of Electronic Dance Music (EDM). But today the Netherlands are playing a dominant role the global EDM scene (Mather et al, 2018). World’s number one deejay Martin Garrix was performing at the February 2018 Winter Olympics Closing Ceremony in PyeongChang in South Korea after following the footsteps of his greatest inspiration, Trance deejay Tiësto, who has been the first Dutch number one deejay in the world. “I cannot believe I get to close The Olympics tomorrow," Martin Garrix wrote. “At nine years old I was watching The Olympics in 2004 with Tiësto opening the event which inspired me to do what I do today. Being part of the closing ceremony tomorrow, I can only hope and dream that I can inspire someone the same way he did. Life is crazy" (Powell, 2018a).
Only a few months ago, the late Swedish deejay Avicii has taken over the Spotify Global Top 50 and Sweden’s Top 20 hit list. Music platform Spotify lets the world know that as of today, Avicii has 23,703,006 monthly listeners. The tragic unexpected death of the 28 year old deejay, caused a 6 million listener increase of just on Spotify alone. Two of his tracks, “Wake me Up” and “Levels” currently hold the fourth and fifth place in the Global Chart, with respectively over 4.8 million and 4.4 million streams a day (and counting). It’s clear that Avicii had a massive impact all around the world, argues Powell (2018b).
The EDM events have reached a very high global success over the last ten years. Electronic Dance Music Festivals (EDMFs) have become an increasingly important sector of the current world leisure and tourist industry (Dineen, 2015:53). On global scale, the EDM Industry (EDMI) is estimated to be worth more than 7,3 billion euro (IMS, 2018). According to the Dutch official music company Buma Cultuur, the Dutch EDM performances have been growing exponentially, with a value of 6,9 million euro in 2004 to a value of 140 million euro in 2014. This leisure product even reached a top in 2016, when the export value of electronic music in the Netherlands was estimated on 200 million euro. And researchers expect this sector to grow even further (ING, 2016).
New Dutch deejay talents continue to manifest across national borders. When we think of worldwide famous Dutch dance, trance and house deejays, we think of names like Martin Garrix, Tiësto, Afrojack, Hardwell, Armin van Buuren, R3Hab, Sander van Doorn, Oliver Heldens, Quintino, Laidback Luke, Sunnery James & Ryan Marciano, Nicky Romero, Don Diablo, Sander
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Kleinenberg and so on. After deejay Tiësto (Tijs Verwest) won the DJ Magazine (DJ MAG) Top 100 title of the number one deejay in the world in 2002, 2003 and 2004, many other Dutch deejays followed a similar path of success. As Armin van Buuren was voted best deejay in in the world in 2007, 2008, 2009, 2010 and 2012, deejay Hardwell (Robbert van de Corput) became the third Dutch number one deejay in the world in 2013 and 2014. In 2016, the twenty year old Dutch superstar Martin Garrix became the youngest ever number one deejay in the world, and he retained this status in 2017 and also this year he remained his status as best deejay in the world . Moreover, for the seventh year in a row, the Netherlands have delivered half or more than half of the Top 10 best deejays worldwide, according to the British electronic music magazine DJ MAG (Trouw, 2017).
Dance music is becoming an increasingly important cultural export product for the Netherlands’ economy (NU, 2016). And the performances of the Dutch deejays abroad are accountable for the largest part of the dance-export. The Dutch economy isn’t the only one who is profiting from the flourishing dance industry: the deejays’ wages are still increasing every year. According to the ING research, the top ten greatest deejays collectively earned 247 million euro a year in 2016, which is 2.5% more than in 2015 (ING, 2016).
But how has this large concentration of Dutch deejays become so successful? And why is this cluster located in a relative small country like the Netherlands? How come that the creative clusters, like the EDM industry, continue to grow? These are all questions that economic and geographic thinkers are working on for years.
This explorative research tries to identify the key factors that contribute to the competitive advantages of the Netherlands in the global EDMI. The structure of this thesis is as following. First, the scientific and societal relevance of this research will be explained. Secondly, a theoretical framework is presented to clarify how the EDMC has developed itself in the past decades and to understand where the competitive advantages of deejays in the EDMI derive from. Then, the research question and three sub-questions will be presented. Moreover, a conceptual framework concerning the changing developments within the EDM ecosystem will be depict. Subsequently, the research method will be explained in order to show how this research is conducted. The success indicators and key factor variables will be given. Next, the research predictions will be present the expected findings. Sixthly, the analysis will be shown. Finally, the conclusion will show an overview of the identified key factors that play a role in proving deejays’ successes.
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2. RELEVANCE OF RESEARCH
2.1. Scientific relevance
Researches on cultural industries have become increasingly popular. This is a result of a growing economic importance of such sectors and by the introduction of cultural and creative policies (Peltoniemi, 2015). This economic-geographical research aims to explore key factors of spatial-organizational dynamics of innovation activities in music debates, using the Netherlands’ EDM scene as a case study. In order to examine why Dutch deejays seem to be more successful on global level than deejays from other nationalities, this thesis will be framed by a model based on economic competition. This paper will review the emergence of the EDMC and the meaning of improving technology in the EDMI. Furthermore I will discuss the importance of institutions, the role of geographical aspects as urban clusters in the production of music, and the relevance of network dynamics within the EDMI, as they shape the innovations of cultural practices (Cheng-Yi, 2013).
A growing body of geographical literature is attempting to discover the importance of geography and space in music studies, by focusing on local scenes, music production and the particularity of music eruptions in certain places (Watson, 2009). Because not much scientific research has been done on the elaboration of successful electronic deejays in the global EDMI, and the enlargement of musical talent in general, I wish to add academic literature concerning music studies in the cultural industry. The issues of creativity and music development are dealt with from many different viewpoints. The now well-established rave, festival and club culture constitutes one of the most popular forms of contemporary youth subcultures, yet remains both widely misunderstood and relatively under-examined by the social sciences (Gauthier, 2004:398; Redhead, 1999).
This research is meant to contribute to the debate where researches try to reveal how musicians commodify their talent into (inter)national success and what kind of role technology, place and space, spatial clustering, tacit knowledge, (organizational) connections and institutionalization play in this process.
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2.2. Societal relevance
The EDM scene is an incredible popular phenomena, not only in the Netherlands, but also on global scale. The Dutch deejays are outstandingly good in creating content what the market likes. According to ranking system of the electronic music magazine DJ Magazine (DJ MAG), Dutch deejays seem consistently being represented on top levels during the last several years. According to the DJ MAG Top 100 list in 2018, an amazingly two/third part was taken by Dutch deejays and for the thirteenthtime since the start of the magazine, a Dutch deejay has been given the honour to call himself the most popular deejay of the world(DJ MAG, 2018). Besides DJ MAG, there are also other online platforms, channels and institutions who praise the talent and popularity of deejays (Karnik et al, 2013). But music platforms are not the only ones who love EDM. According to the Central Bureau of Statistics (CBS), the Netherlands counts a little more than 17.2 million registered habitants (CBS, 2018). And many of them seem to attend electronic music events. Previous research showed that the Dutch EDMFs attract nearly 2.8 million visitors a year. Amsterdam Dance Event (ADE), the largest worldwide electronic music conference, attracts yearly 400,000 people to Amsterdam. The Flying Dutch festival, which has been held at three locations at the same time (Amsterdam, Rotterdam and Eindhoven), is now been seen as the largest one day outdoor event in the Netherlands. This event is promoting the best Dutch electronic deejays of that time and in 2017 it attracted 120,000 visitors. Seven out of ten Dutch people experience EDM as part of the Dutch climate and 47 percent of the Dutch people state to like the music style (ING Bank, 2017).
Dutch youth are typically visiting EDMFs in search of a fun, friendly experience that takes them away from normal, everyday life and allows them to experience the open, liberating feeling of life without borders and rules (Dineen, 2015:28). Not only young Dutch people claim to be a fan of EDM: 25 percent of Dutch people aged 60 years and older, also feel attracted to electronic music (ING Bank, 2016). Therefore, the purpose of this thesis is to contribute to the understanding of how the contemporary EDM economy has developed from a subcultural ‘rave’ industry to one of the most popular mainstream music styles for a now large part of today’s youth.
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3. THEORETICAL FRAMEWORK
This paper seeks to discover how electronic deejays from the Netherlands have gained a high competitive status in the global EDMI and how this success is being controlled. This chapter will provide the theoretic framework, which is needed to understand how the EDMI has developed itself and to understand where the competitive advantages of deejays in the electronic music scene derive from.
Firstly, the emergence of the Electronic Dance Music Culture (EDMC) will be explained. Then, new technological developments in the music Industry will be discussed due to an overview of digital progresses deriving after World War II. Furthermore, I will review how the technological changes in the EDMI have opened up a global market, and explain how this transformed the business models of supportive and relating industries as music publishing firms and Record Label Companies (RLCs), and consequently affected the production-, distribution-, marketing,- and income models of EDM artists. The roles of the basic actors that support the EDM artists’ career will be elaborated. Moreover, I will shed light on the increasing significance of geographical aspects as space and place in producing musical creativity. Finally, Porter’s Diamond Theory will be placed besides Adam Smith’s classical economic perspective in order to create a framework to examine how deejays are able to achieve a high competitive status in the global EDMI.
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3.1. The emergence of the EDMC
In order to give a better understanding what the EDMC entails, I will start with a brief summary of the emergence of this recorded music industry. The definition of EDMC used in this thesis is best described as the rave, festival and club developments evolving from dance, house, trance, techno to subgenres such as hardcore, gabber, dubstep, garage, jungle, psy-trance dance and other post rave forms (St. John, 2006:2). The current state of EDMC is the result of its early adaptation of digital distribution, which arose in its premature phase in the underground gay scene in New York, Chicago and Detroit in the early 1970’s and developed into a raving scene in the United Kingdom in the late 1980’s. In conjunction with mood-enhancing drugs as ‘MDMA’, (also called ‘Ecstasy’) and ‘LSD’, house parties spread quickly across London and Manchester, stumbling against England’s archaic club licensing laws, media moral panic and intense police repression (Gauthier, 2004:400; St. John, 2006:1). As though propelled by some unstoppable force, acid-house parties spilled out of the clubs and into the countryside and desolate industrial areas, becoming ‘raves’ (Collin, 1998). Nevertheless, the raving culture in the United Kingdom increased in popularity as information networks established through the use of web sites, fanzines, flyers, specialized record shops, and alternative radio stations which often published messaged with coded references concerning events. The clandestine EDM parties resulted in 2 divergent movements: (1) British travelers brought the rave culture abroad, as it was the case in the San Francisco and Ibiza scene (Gauthier, 2004:400). In the late summer of 1987 the three British deejays Paul Oakenfold, Nicky Holloway and Danny Rampling introduced the electronic music style on the Spanish party island Ibiza. From there on, the Argentinian deejay Alfredo, started playing electronic music in the outdoor venues Amnesia and Café del Mar with the intention to expand the music style to other parts of the island (Matos, 2015.). The second movement (2) of the underground EDM parties resulted in foreign travelers discovering raves while in England and Northern Europe, and brought the concepts back to their home town, outside Europe. This was the case for New York with deejay Frankie Bones from Brooklyn, who is now a major player on the international deejay circuit. The same happened in Montreal. It took a few years before the scenes spread from Scotland and the rest of Europe, to North America, from Argentina to Brazil, from eastern European countries to Israel, as well as from Australia to New Zealand and the sandy beaches of the ex-hippy colonies as Goa (India) (Gauthier,
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A new youth cultural phenomena had awoken by the early 1990s. As the technology improved, the musical landscape started to fundamentally change. EDMFs were organized more and more often to celebrate seasonal transitions and calendrical or celestial events (e.g. moon cycle, solstices, solar eclipse and other planetary alignments while simultaneously motivated by a desire to abscond from the passing of time) (St. John, 2006:6). The post-rave music events turned into EDMFs and nightclubs adopted the new music style. Nowadays, EDMFs are well known for their unique set-ups. This can be seen in all the major event promotion images for various EDM festivals. They often show large, elaborate stages with intricate designs and decorations as well as bright, intense and large-scale lighting effects. Most festivals are located outside, on geographical interesting locations (Dineen, 2015:31)
Today EDM has become one of the most popular music styles and turned into the standard music form for social media features and gaming devices (Towns, 2014). According to the business report of the International Music Summit (IMS), the global EDMI was estimated to be worth 7.3 billion dollar in 2017 and 7.4 billion dollar in 2016, which was 3 percent more than the prior year (7.1 billion dollar in 2015). In the year before, 2014, the EDM sector was valued on 6.2 billion euro, which was an annual growth of 38 percent up from 4.5 billion dollar in 2013. 68 percent (4.2 billion dollar) of the 6.2 billion dollar total revenues in 2014, were revenues earned from club gigs and festival appearances (IMS, 2018; Towns, 2014).
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3.2. New technologies: from phonographs to streaming
When the end of World War II created space for new prosperity, the entertainment business started to flourish. During the mid-twenty-first century, more artists, labels and records appeared. The recording industry exploded. Subsequently, retail stores increased in size and numbers and retail chains grew along with the growth of shopping malls. More radio stations and music videos on broadcast television were needed to keep up with the market demands. The expanding recording Industry elaborated with new technologies and devices. In 1963 Philips introduced the first music cassette, which became the recording replacement of the Magnetic Tape, Phonograph and Gramophone of the prewar period. In 1983 Philips and Sony joined forces and created the Compact Disc (CD) Player, a device that plays audio compact discs. The sale of CDs continued to reach new heights as it became the standard device for physical music storage. But once the revolution of the internet started off in the early ‘90s, ‘business as usual´ turned into ´transformational change´. The release of the soundcards for the consumer market in 1991 and the release of the first compressed digital music player MP3 in 1996, has transformed people’s attitude towards the use of computers to listen to music. The commercialization of the Internet became more evident: as people became able to purchase their music cheaper from the world wide web trough downloading, the retail industry of recorded music started to collapse. The sales of physical albums in stores decreased with high speed. As a result, major music chains and retail stores went bankrupted and the Internet took over (Hull, 2004). When software platforms started to provide locally-stored music files and peer-to-peer file sharing for end users in the early twenty-first century, the music distribution radically transformed. Napster and the Apple Itunes Music Store became front runners of the growing trend towards subscription-based music models, where listeners have access to large music libraries. Digital Music Services (DMSs) as Pandora, Heartradio, Last.fm, Spotify, Rdio, SoundCloud, Beats Music, YouTube and Google Play adapted this model and collected a fixed, periodic fee in exchange for unlimited data access to streamed content (Richardson, 2014:46). The role of broadcast radio turned into a ‘push’ medium, whilst internet radio and other DMSs became a ‘pull’ medium, because the end-user ultimately selects to which content they want to subscribe to and decides when the content is played. The wireless generation is growing up without the radio habit that was popular amongst the previous generations. This offers a threat to the broadcast radio services (Carter, 2005). Table 1 describes the profiles of the currently largest audio- and video streaming services in the global music market.
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Table 1: Overview of the currently largest audio- and video streaming services on global level, measured in 2018.
Source: (Richardson, 2014; Forbes, 2018; IMS, 2018)
Now that companies and institutions have entered a global economy through the evolution of new technologies as the Internet, distance has become less crucial in certain ways. Faster transportation and communication between companies that trade in capital, goods, information and technologies on global scale, should in theory, decrease the role of location in competition. Whereas musical knowledge seems to move within and between cities through the mobility of skilled creatives and new technologies, networks are becoming more fluid (Watson, 2009). The world has become a highly interconnected place due to the elaboration of the Internet, and maybe even more importantly, the rise of digital music platforms (Potts et al, 2008). The digitalization of music has allowed the Industry to enter an economy of scale: an increase of overall demand for music and related musical activities by presenting the cultural products to a larger market (Florida et al, 2010). DMSs have gone global, enabling the recording industry to reach markets that it could not monetize through physical retailing and vinyl records (IFPI, 2017). The recording industry is now the dominant force in the music business (Hull, 2004). According to the International Federation of the Phonographic Industry (IFPI), an international active non-profit organization that represents the worldwide music Industry, RLCs and their distribution partners have been licensing more than 45 million tracks to hundreds of digital services worldwide in order to developing high performance systems that allow music to be accessed around the world. With Online streaming
audio- and video services
Year of origin Place of foundation Estimated net-worth (In US Dollars) Number of active users Number of paid subscriptions Spotify 2006 Stockholm, Sweden
20 - 27 billion 191 million 75 million
SoundCloud 2007 Stockholm,
Sweden
1 billion 175 million ?
Pandora Media 2000 California,
United States
3,5 - 4 billion 74 million 6 million
iHeartRadio 2008 Texas, United States -20 billion (declared bankruptcy) 100 million - YouTube 2005 California, United States 26 – 40 billion 1,5 billion ?
Apple Music 2015 California,
United States
? 50 million 40 million
NetEase 1997 Guangzhou,
China
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more than 176 million users paid subscriptions on global level, streaming has passed a crucial milestone. As you can see in Figure 1, the growth in audio streaming revenues in 2017 increased with 41.1 percent, compared to 2016, and streaming revenues now account for more than half (54 per-cent) of the global recorded market (IFPI, 2018). The growth of streaming revenues was 60.4 percent in 2016 compared to the prior year and accounted for 50 percent of the total recorded music revenues (IFPI, 2017). The global recorded music Industry grew with 8.1 percent in 2017, which comes down to 17.3 billion dollar in revenues, one of the highest growth rates that IFPI has measured since they began tracking the industry sales in 1997. Physical revenues keep decreasing since 1999.
Figure 1: Global recorded music industry revenues in US$ billions, divided by segments and measured in the period 1999 – 2017.
Source: IFPI (2018)
The revenues of the global EDMI, which accounts for a large part of the global recorded music Industry, decreased to 7.3 billion dollar in 2017. This is a decrease of 2 percent compared to 7.4 billion dollar on total revenues in 2016. A key factor behind the fall was a decline in EDM record sales. The IMS is stating that EDM still is an increasing music genre, but that the drop is caused by a reclassification of music genres, as many EDM tracks are now being classified as pop or R&B in sales data and the underground genre becomes deeper embedded in the mainstream music culture (IMS, 2018).
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3.3. Changing business structures
The digitalization of music has influenced artists’, music publishing- and RLCs’ traditional business models as demand and supply of creative industries began to operate in complex social systems (Potts et al; 2008, Dopfer & Potts; 2008). Due to the emergence of the Internet it became possible that music could be produced, recorded, promoted and listened to on the world wide web. Online music and video streaming platforms as YouTube, Spotify, Apple Music, Pandora and SoundCloud, provided people accessibility to listen to music almost anywhere on the planet.
The appearance of cloud based data storage and computing had three major effects on the structures of the music publishing firms and RLCs: (1) To stop the digital distribution of millions of free illegal copies from the Internet, record labels, music-publishing-, and streaming companies needed to take immediate control over the online copyrights and intellectual properties (Rogers, 2013:7). The implementation of the Digital Millennium Copyright Act and the Copyright Term Extension Act enabled the recording music Industry to protect its main outputs from unauthorized duplication in order to maintain the industries revenues and profitability. The new legislation also protected artists’ live performances from unauthorized recording, distribution, or broadcast (Hull, 2004:15). Moreover, (2) the rise of the Internet led to segregation of the record label conglomerates. The world’s recorded industry has shifted from an international market to a transnational market. Music produced in the Netherlands, also got distributed overseas: there is not a market just for the Netherlands. The EDMI reached a global market with individual submarkets. Transnational enterprises therefore changed their strategy from the traditional ‘short-term profit maximization’ into ‘maximization of market shares’. RLCs started to divide up the world market by creating partnerships in manufacturing and distributing music on global scale (Hull, 2004:15). The five largest RLC’s in the early 2000s, Universal Music Group, Sony Music Entertainment, Warner Music Group, EMI Group and Bertelsmann Music Group, started buying out hundreds of autonomous independent labels from all over the world. The aim of the big 5 was to globally integrate horizontally and vertically and create more control over music publishing, film and television production, audio and video hardware manufacturing, and radio, television, and cable broadcasting (Hull, 2004:16). This process of aggregation has led to the fact that today’s recording industry is controlled by the big 3 largest RLCs: Universal Music Group, Sony Music Entertainment, and Warner Music Group (Repiton, 2013). Furthermore (3), due to the development of online platforms, any musician could be discovered by fans or record labels. Nowadays RLCs, artists and repertoire (A&R) and gatekeepers, do not scout deejays on the scene any longer. Musicians are able to market their recordings on a worldwide basis without the direct
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access of distributions channels of major labels. Deejays are expected to first build an online fan base themselves. In this way, RLCs can predict how successful a potential client will be by looking at the market expectations and the amount of streams on DMSs (Watson, 2008). “As there were just a few gatekeepers in the past who were in control of the few powerful network labels, A&R, radio-, television- and magazine executives, the Internet has now opened a network where it’s easier to find out what kind of music people on the other side of the world recommend,” argues David Haynes, founder of online music platform ‘SoundCloud’ (The Guardian, 2018). The shift from a producer driven to a market driven economy has therefore had a great impact on RLCs and its entourage.
Digital technology also had a significant impact on the creative inputs for the recorded music Industry (Hull, 2004:18). Before the twenty-first century, club and rave deejays primarily worked with turntables; most of the music was on vinyl records, and it was difficult to deejay effectively with any other recording format. After 2000, however, a number of new devices inverted the classic work methods. The CDJ-1000 , issued by Pioneer in 2001, was a compact-disc player that mimicked a vinyl turntable more closely and successfully than previous models had. FinalScratch, which was unveiled the same year and brought on the market in 2002, made it possible to play digital files on a traditional turntable through the use of a specially encoded record. In addition, in the early 2000´s new computer software programs as Ableton Live emerged, which enabled users to compose, cue, and blend digital tracks by way of a waveform display—thus eliminating the motor skills previously necessary to perform an effective deejay set. Through the assistance and accessibility of new digital audio technologies, imported electronic music aesthetics, advanced deejay techniques, and an absence of restricted label structures, deejays became able to publish their music on the Internet and digital platforms. These developments have dramatically changed the environment of today’s EDM fans and made the deejays’ careers become more competitive (Matos, 2015.).
Moreover, shaping the sound of modern recorded music has led to a division of labor in the production part. Until very recently, the equipment necessary to produce professional-graded recorded music was very expensive and the knowledge required to obtain good results from the new instruments was only known by few highly specialized technicians and engineers. Today, many more people are listening to recorded music than live performances and therefore the sound of the recordings are therefore of most importance. As a mediator between the two worlds of creative input and technological ‘know-how’ producers developed into central figures in the
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studio. The collaborative aspects in the studio are still taken in high account: artists, producers, recording engineers and other contributors to production closely work together by hybridizing their specialized skills. In recent times, more performers and producers play both roles, but to be a deejay doesn’t necessarily mean you also have to be a producer and the other way around. In figure 2 you see the different professional stages a deejay goes through in his or her career.
Figure 2: A deejay’s professional career defined in three different stages.
Source: Author (2018)
In order to create a good understanding of a deejays’ current position in the recorded music Industry it is important to know how the artists relate to the supporting sectors as record label- and music production companies, gatekeepers and other closely involved players, as cooperation is
Phase
1
First professional stage- Learning how to mix other peoples
records' - Often records tracks in studio's, bedrooms and other
informal places
Equipment:
-USB Stick/Headphone - DJ Set: Controller,
Mixer & Monitors - Recording device
for mixtapes
Phase
2
Professional Performer- Knows how to mix other peoples records - Is expected to create
her/his own story or concept
- Gets offered gigs in venues or festivals, rarely becomes an internalionally
acknowledged superstar
Equipment: - USB Stick/Headphone
- DJ Set: Controller, Mixer & Monitors
- Recording device for mixtapes
- Needs a phisical and/or online
fan base
Phase
3
Producing performer- Produces own music - Promotes own music and
'hits' via the Internet and possibly Record Labels
- Is expected to have her/his own story or
concept - Gets offered big (inter)national gigs, the
way to become an internalionally acknowledged superstar
Equipment:
- Laptop & production software
- USB Stick/Headphone - DJ Set: Controller, Mixer
& Monitors - Recording device for
mixtapes - Needs a phisical and
online fan base
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needed in order to gain musical success (Hull, 2004; Porter: 1998). Therefore, the underlying definitions are established to clarify the basic roles of the different components and actors surrounding the artist (see Table 2).
Table 2: Overview of the basic roles of important actors surrounding the deejay’s career.
Actors Main tasks
Record Label Industry:
Music Publishers:
Record Label Companies (RLC):
Artists & Repertoire (A&R)
Distributors:
Gatekeepers:
The main activity of the recording Industry is the production and distribution of symbolic content to widely dispersed heterogeneous audiences. It uses several technologies to do this, including digital recording and reproduction, analog recording and reproduction, video recording and reproduction, and the Internet.
Publishers acquire rights to songs from songwriters and then license the uses of those songs. Most music publishers sign songwriters to contracts agreeing to pay the writer a share of the royalties that the publisher makes from licensing the uses of the song.
These organizations employ artists by signing and developing recordings —not songs. They are also responsible for the promotion and distribution of their artists' works. Record labels usually sign the artist to a recording contract promising to pay the artist a royalty for recordings sold in return for the artist’s promise to record exclusively for that particular label. Nowadays, many record labels also have their own music publishing department. Employees in various departments of a record label oversee virtually all budgetary and creative decisions involved in the recording and marketing of albums. Final recordings must be approved by both an A&R representative and an artist's producer before being mass produced or made available to the public.
The A&R department serves as the ‘gatekeeper’ of a RLC. Their responsibilities include scouting, signing, and developing artists; helping artists to find the ideal producer to best capture their sound; locating hit songs for those acts who do not write their own material; overseeing song selection for those artists who are also songwriters and they generate excitement about the artists albums. The A&R have to keep up with consumers tastes and new music trends. If the A&R department has too many failures, the label will be in serious danger of dying.
This segment of the Industry handles copies of the recordings so that they can be conveyed to the end-user for purchase. For the most part, distributors wholesale the copies of the recordings made by the manufacturers to the retailers.
26 MC: Personal Managers: Promoters: Record Producers: Recording Artists:
Individuals through whom the intended message must pass on its way to the receiver. The gatekeeper “determines what information is passed and how faithfully it is reproduced.” Some consider gatekeepers to be only those who mediate between the Industry and its consumers. From a broader perspective, if the sender is the artist and the receiver is the listener or consumer, then there are other gatekeepers as well. If the artist is not also the songwriter, then the writer must get through the music publisher’s gate; the publisher must get through the producer’s gate; the producer must get through the label A&R department’s gate; and the recording must get through the radio and video gates. The retailer keeps gates as well, deciding what recordings to stock, how many to stock, and whether to feature a particular recording.
Master of Ceremony or Microphone Controller. A MC hypes up the crowed and raps on the beat during artists’ performances.
Managers assist artists in the development and coordination of their careers as performing artists and as recording artists. They are located in a deejay’s income stream because their day-to-day functions revolve around live appearances, not around recordings.
Promoters arrange and promote the live appearances of artists, by arranging the performer, the venue, the date, the production, and the marketing of the performance.
The musical creator or composer whose impulse is to create records. He plays central role in the development of phonography as an art. Producers assist the artists by helping select material, studios, and assistants, and by helping the artists give their best performance. They assist the record labels by taking care of the business aspects of the recording process and by delivering a marketable product.
Sometimes referred to as royalty artists, these are the people who perform for recordings by playing instruments and/or singing a particular performance that is recorded. The recording artist may or may not be a live performing artist, and may or may not be a songwriter. Most recording artists make money from the income stream by getting a royalty payment based on the sales of copies of the recordings that they make.
Recording engineers:
Talent/Booking agents: Venues:
These individuals assist the producer and artist by running the equipment necessary first to capture the performance on tape (or some other medium), and then to shape the final sound that the artist and producer ultimately want on the recording.
Agents that book live appearances for performers.
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VJ:
clubs, concert halls, arenas, and stadiums.
A video jockey is producing video recordings of the performing artist.
Source: (Hull, 2004; Author, 2018)
Finally, the improvement of technology has eventually led to a new structure of income streams for artists. Deejays have publishing interest and generate their income through different channels, depending weather they work as a songwriter, recording artist or a live performing artists, or fulfill all these different roles at the same time (see figure 3).
Live performances serve as an important medium to promote the sale of recordings. This way of promoting tracks and albums may keep an artist’s catalog of recordings selling long after the artist’s recording career has peaked. Deejays who are headlining EDMFs, playing at concerts or attend in nightclubs, create a source of revenue through the sales of tickets and other purchases of the public as food and (alcoholic) beverages.
Another important way to generate income for the artist is realized through the recording stream. This segment of the Industry handles copies of the recordings so that they can be conveyed to the end-user for purchase. The cash flow stream in this part is solely generated through royalties. If the public is not interested in the recordings and albums, there is little money to be made from the recording sector.
The third income stream is collected through Intellectual Property Rights (IPR). Many deejays write and produce their songs themselves and it can therefore be an important function to generate cash flow. Again, if broadcasters as television and radio stations, advertisers, moviemakers and the public do not like the creative input of the written song, there is little of no royalties to be made for the artists. Performance royalties are fees that EDM artists get when music is performed in public, as live music venues, festivals and radio stations. Mechanical royalties are government set fees that songwriters and publishers receive when units of music are licensed. The third sort of royalties that deejays can receive are synchronization royalties, which are paid to the right holders when music is used in visual formats as films, video clips and video games. The last form of royalties are print royalties, fees that right holders can receive when music is printed and sold (Quora, 2018).
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It is of great significance to note that recording and songwriting are two different parts of the process in creating music. Songwriting is the brainstorm part where musical ideas are put together in order to form a larger structure of coherent melodies, rhythm, harmony and vocals, containing a beginning, middle and end. In the recording part however, the musical concepts of songwriting will be captured. Various instruments that will be used in a song are tracked on tape or another medium and producers and recording engineers will assist the artist in capturing the song in the right format.
As a result, Figure 3 shows that the public is functioning as the most significant target group for deejays to generate an income. In each stream the public is the purchaser of the end-products. Nevertheless, the business system of deejays require strong collaborative elements with other related actors in the EDMI in order to gain profits for the artists. As songwriters or producers need a physical studio with equipment and sound engineers to write and capture the tracks, deejays need psychical and online platforms in order to perform and promote their content to the public. Furthermore, it is usually the case that artists have booking agents and managers who book the live appearances and guide the deejays through their careers. The role of RLCs is to scout talented deejays and wholesale their content to other actors in order for the public to hear the tracks on distribution platforms, such as the radio or online music services.
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Figure 3: Overview of the three main income streams of a deejay.
Source: (Hull, 2004; Author, 2018)
Live Performances
- Deejay performs live - Personal managers coordintate deejays' careers - Booking agents book live
appearances
- Promoters arrange the venue, date, marketing and often the
production
- Pulbic buys tickets and purchases drinks/food
Recordings
- Deejay performs for recording - Label signs deejay to record
- Producers, engineers and deejay make recordings
(mastering) - Distributors wholesale
recordings - Merchandisers retail recordings (online and vinyl)
- Public buys records
Songwriting
- Deejay/Producerwrites song
- Music puplisher signs the deejay/producer and song and
licenses the song - Performing right organisations licence songs for
broadcasts or other users - Broadcaster uses song and
other licencees use and distributes the song - Public listen, watches and
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3.4. Musical Creativity in Clusters
Space plays a crucial role in music studies. Studies of evolutionary economic geography suggest that the concentration of creative industries, in fields like music, stems from the fact that they learn locally but compete globally (Wenting and Frenken, 2007:11).
Although new technology seems to diminish the role of geography in the global music Industry, we state that firms’ competitive advantages increasingly lie in locational factors. New
technologies have made mobility of creative networks and distribution of products more accessible for a global market, but the creation and exchange of knowledge, relationships and motivations are aspects of the production segment that lack when rivals are connected through distance (Leyshon, 2001, 2003; Porter, 1998).
This ‘location paradox’ is based on the fact that knowledge-based industries in high-tech sectors, as the recorded EDMI, are highly connected to close geographical spaces as innovation benefits from face-to-face communication and firms that involve proximate partners in the process of knowledge creation (Florida et al, 2010;785). Firm competitiveness in production- and network clusters rely on the level of tacit knowledge as the exchange of new knowledge contains social elements: business operations in productive work communities are conducted through ‘a handshake’ or ‘a look in the eye’ in order to yield mutual trust relationships. While face-to-face interactions between actors develop into personal and organization relationships, micro communities start to establish an identity of their own. Communication within these clustered communities lead to tacit knowledge transfers. The exchange of tacit knowledge, the intangible and culturally bounded between firms and organizations, is necessary to enhance new business models (Porter, 2000; Kloosterman & Boschma, 2004:241). An important line of economic theory and research has found that knowledge-intensive industries generate benefits from proximate clustering, as knowledge spillovers increase the efficiency of both innovation and commercially effective forms of creativity (Jaffe, 1986; Lucas, 1988; Romer, 1986; 1990).
Several studies that have tried to document how knowledge spill-overs contribute to economic growth, concluded that knowledge transfers often lead locational externalities: knowledge that is discovered in a certain cluster is very likely to occur in a co-location of similar or related firms, as the knowledge is frequently industry specific. As firms develop similar language, interpretation schemes, technology positions and trust, clusters will be stimulated to peruse institutional structures (Kloosterman & Boschma, 2004:279)
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In order to create a successful production- and network cluster, two conditions are required: An effective cluster does not only include a so called ‘locational buzz’, but it must also contain ‘well-established global pipelines’. A locational buzz consists of an exchange of local networks, collaborations and learning processes among locally clustered firms, organizations and research institutes, as well as a stream of tacit knowledge between a market’s cultural traditions and technological developments, in order to establish conventions or institutional agreements (Kloosterman & Boschma, 2004:279; Bathelt et al, 2002:10).
The second requirement of creating a successful cluster is based on the fact that locally clustered communities must obtain new knowledge through building channels of communication networks outside the local environment (Bathelt et al, 2002:11). The more relations that clusters built up in trans-local and global pipelines, the more information and news about markets and technologies will be induced. Specialized skills from other locations or regions can be adapted if actors in the cluster can benefit. In this way, knowledge dynamics deriving from pipelines intensify local interactions and power relations between actors and thus support a cluster’s cohesion.
The distinction between the two conditions to build a successful network- and production cluster contains a geographical component: a successful cluster should not only depend on strong local networks in order to stimulate knowledge creation, but international connections should also make a cluster more effective. In Figure 4 is shown that local clusters, which create external knowledge transfers, mutually influence relationships and interactions in the global pipelines (Murdoch, 1995). Whereas local music sectors are described as scenes, the international and global music sectors are defined as the music Industry (Watson, 2009).
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Figure 4: A draft of the local buzz and global pipelines in the cultural sector of a city, in this case the EDMI.
Source: Kloosterman & Boschma (2004)
High-tech sectors as the EDM scene are more likely to cluster around universities, networks of related firms, entrepreneurial talent, end-users, venture capital and specialized services. Porter emphasizes the importance of relationships between firms and associated institutions such a universities, consultancies, associations or R&D institutes in order to create economic spill-over effects. Such institutions within a spatial agglomeration can strengthen regional and local as well as firm competiveness. The relationship between spatial clusters and associated institutions should not just be based on solely the exchange of relationships, but it is crucial that the institutions are also embedded in the cluster itself (Porter, 2000). Specific creative industries like the EDMI, get the ability to take advantage of other related activities (Porter 1998, 2000). Musical knowledge has always moved within and between cities through mobile creatives, including musicians and deejays, producers and music Industry executives. (Pre-)recordings have been sent and continue to be sent throughout the world to be mastered and mixed in different studios by specific engineers (Watson, 2008). Several studies note considerable concentration in locations of music production (Florida & Jackson, 2008; Scott & Storper, 1978). Cultural entertainment economies can provide demand for artists who may be employed by or perform in cultural enterprises from dance to radio to television to commercial jingles. In this way, related artistic and creative producers and industries mutually benefit from locally constituted music scenes (Florida et al, 2010). This
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suggests that the gains from local spill-overs increase the number of firm entries (Wenting & Frenken, 2007). Consequently, actors within these agglomerations have to be interconnected (Porter, 1998;2000).
Moreover, musicians and music Industry enterprises as RLCs are attracted to larger places where scale economies can take place. This is reinforced by a shift in the economics of music Industry revenues from music recordings to live performances (Connolly and Krueger, 2005). Deejays are performers workers and besides creating good content, they seek to gain knowledge and interaction with their audiences in nightclubs or EDMFs in order to understand what the market expects from them (Florida et al, 2010). The EDM sector is defined as a creative Industry which produces intangible products that are idiosyncratic and for which demand is impossible to determine in advance. Such industries benefit from a geographically concentrated economic structure that includes different cultural producers, agents, gate keepers, and other market actors (Caves, 2002).
Musical creativity derives mainly in concrete places and spaces of cities, in areas where facilitates are present in order to encourage and support innovation and new ideas (Watson, 2009). A wide body of research shows that music scenes arise in multi-ethnic crossroad locations, so it is expected that musicians cluster around areas of ethnic and cultural diversity, like cities. (Connell & Gibson, 2002; Mark, 1998; Southern, 1997). As some cities are associated with one particular musical style, others provide a constant stream of musical creativity (Kloosterman, 2005). Certain spaces such as recording studios are specifically organized for a purpose to produce music, but music is also produced in many other spaces like bedrooms, garages, home studio’s, community- and youth centres, street corners, clubs and so on (Watson, 2009). In some geographical locations, production and consumption come together. Examples of these spaces are not just particular sites like nightclubs and concert halls, but also abandoned and reclaimed spaces such as empty warehouses, old schools and former factories (Gibson, 1999). Another reason why concrete places in cities attracts musical creativity, is caused by the fact that (social) networks come together in scenes where creativity and production congregate in order to find musical stability. For instance, live music venues as cafes, bars and nightclubs and other performance spaces as performer studio’s act as important channels for deejays to accumulate economic and social networks (Currid, 2007; Power & Hallencreutz, 2002). A scene arises once communities and subcultures begin to come together in particular niches focused around clustered creatives in a particular location (Currid, 2007). From a theoretical perspective, live music is highly distance sensitive, which means that producer or artist and consumer need to meet in the same place in order for production and
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consumption to take place. This implies that the market place needs to be big enough to provide a sufficient number of such meeting places (Florida et al, 2010).
Therefore, not only the quality of the particular cluster within a given city is of great importance, but also, the links between local production and international circuits of capital, distribution, and knowledge because they are embedded within global networks (Power & Hallencreutz, 2002; Kloosterman, 2005).
Studies on many cultural industries show that major new ideas, which may be the result of a random event, have a chance to develop scale and clustering effects and create a path of dependency, which may strengthen the position of that particular industry in a certain country (Hirsh et al, 2017).
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3.5. Porter’s Diamond Model versus Smith’s Wealth of Nations
The world's economic, social and technological changes with the acceleration of globalization, international trade relations, the removal of borders between countries, such as communication and transportation technologies have revealed the need for continuous self-assessments of the organizations (Bakan & Dogan, 2012:441). How do industries succeed in international markets? In a world of increasingly global competition, nations have become more, not less, important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown (Porter, 1990).
In order to discover why certain countries have distinct advantages over other countries when it comes to specific industries, Porter’ Diamond Model is being used as a foundation for exploration. Overall, researches use this model as a scientific framework in order to evaluate the performance sector in the discipline of geography (Curran, 2001). In this chapter, Porter’s theory will be placed next to Adam Smith’s classical economic perspective , as the 18th-century philosopher has been seen as ‘the father of Capitalism’, famous for his 1766 published book “An Inquiry into the Nature and Causes of the Wealth of Nations."
Porter’s Diamond Model refers to the Porter’s Diamond Theory of Competitive Advantages of Nations, a theory he conducted after discovering that a greater number of trade-related theories just had been focusing on costs. According to Porter’s new theory it was essential that “industries should attract a comprehensive understanding of competition that contain segmented markets, differentiated products, the technological differences and economies of scale”. He suggested that this new theory should be able to define why industries or firms from certain nations implement better strategies than others competing in certain sectors (Bakan & Dogan, 2012:442). The basic units of competitive advantages are activities that generate costs and create value for buyers. Related to the ‘cost of production’ theory of Adam Smith, Porter agrees that a value chain functions as a framework for thinking strategically about the activities in an organization, where the market sets a price in exchange for a certain good or service: “The difference between value, that is, what buyers are willing to pay for a product or service, and the costs of performing the activities, involved in creating it, determines profit” (Porter, 1985: Cho & Moon, 2000). Smith’s theory was based on a mercantilist point of view, where wealth was fixed and finite, and products and services of an Industry should only be exported, whereas Porter’s Diamond Model is meant as a basic tool to examine the advantages or disadvantages of shifting industries in nations.
