University of Groningen, faculty of Management & Organization
Msc in Business Administration: Strategy & Innovation
Author: Meike Biesma
Student number: 1677756
Supervisor: Iván Orosa Paleo
Date: 11 May 2009
Master thesis
Abstract
Table of contents
1.
Introduction ... 6
1.1 Research topic ... 6 1.2 Research questions ... 6 1.3 Reading guide ... 72.
Research methodology ... 8
2.1 Research design ... 8 2.2 Data collection ... 93.
Facts and figures ... 11
3.1 The music industry ... 11
3.1.1 Worldwide and Dutch music distribution ... 12
3.1.2 Digitalization of the music industry ... 13
3.1.3 Types of digital music sales ... 14
3.2 The dance music industry ... 15
3.2.1 Historical overview of the dance music industry ... 15
3.2.2 Characteristics of the dance music industry ... 16
3.3 The Dutch dance music industry ... 18
3.3.1 Digitalization in the Netherlands ... 19
3.4 Music piracy ... 20
3.4.1 How to fight piracy ... 22
4. Theoretical framework: value appropriation ... 24
4.1 Capturing value ... 24
4.1.1 Selection system theory ... 25
4.1.2 The long-tail theory ... 25
4.2 Value protection ... 27
4.2.1 Intellectual property right (IPR) ... 28
4.2.2 MP3 and IPR ... 28
4.2.3 Creative Commons ... 29
5.
The Dutch dance music industry market structure ... 32
5.1 The Dutch dance music industry actors ... 32
5.1.1 Producers ... 32
5.1.2 Record labels ... 33
5.1.3 Distributors ... 33
5.1.4 Record stores (online and physical) ... 33
5.1.5 Dj’s and vj’s ... 35
5.1.7 Publishers ... 35
5.1.8 Buma/Stemra ... 36
5.1.8.1 Buma/Stemra initiatives ... 36
5.1.9 Online communities ... 38
5.1.10 Dance event organizers ... 38
5.1.11 BVD (Belangen Vereniging Dance / branch society dance) ... 39
5.2 Industrial frameworks ... 39
5.2.1 Interest groups ... 39
5.2.2 Live events industry actors ... 40
5.2.3 Recorded music industry actors ... 41
6.
Changes in the Dutch dance music industry: from recorded to digital
music ... 44
6.1 Selection system ... 44
6.2 The long-tail ... 45
6.3 A changed dance music industry value chain ... 46
6.3.1 Changes for producers ... 47
6.3.2 Changes for record labels ... 48
6.3.2.1 Vertical integration: 360 degrees model ... 48
6.3.3 Impact of the digitalization on the marketing activities ... 50
6.3.4 Impact of the digitalization on the distribution of music ... 50
6.3.5 Impact of the digitalization on actors in the Dutch dance music industry value chain ... 51
6.4 The use of intellectual property rights ... 52
6.5 The effect of music piracy in the Dutch dance music industry ... 53
6.6 Creative commons ... 53
6.7 How actors in the Dutch dance music industry look at legal and illegal file sharing ... 55
7.
Discussion and conclusion ... 57
7.1 Purpose of this research ... 57
7.2 Main research results ... 57
7.3 Limitation of research and future research suggestions ... 59
References ... 60
Appendix 1: Interview questions ... 64
9. Interview DjPromotion: Danny Kuik d.d. 13 augustus 2008 ... Fout! Bladwijzer niet gedefinieerd. 10. Interview Dospalomasnegras: Ton d.d. 14 augustus 2008 ... Fout! Bladwijzer niet gedefinieerd. 11. Interview Alles Los: Jeroen van den Bogert d.d. 15 augustus 2008 .... Fout! Bladwijzer niet gedefinieerd. 12. Interview Triple Vision: Marco Grijsen d.d. 28 augustus 2008 ... Fout! Bladwijzer niet gedefinieerd. 13. Interview Breakbeat Audio; Bertran van den Hoff d.d. 17 september 2008... Fout! Bladwijzer niet
1. Introduction
In this chapter, an introduction of the research is given. In the first paragraph the research topic is introduced. In the second paragraph the research questions are formulated and in the third paragraph an overview of what can be expected in the chapters of this report is given.
1.1 Research
topic
The digital audio format and the wide distribution network that has become available via the internet are driving changes in the music industry and are therefore having a major impact on the players in the music industry value chain. This aspect will be the main focus of this research, targeted at the Dutch dance music industry. It will be investigated how the digitalization of the music industry has affected the dance music industry value chain.
The reason that I chose to investigate the Dutch dance music industry is that I have a deep interest in the music industry. During the courses of the Master programme Strategy and Innovation many cultural industries have been investigated in terms of innovations and strategy making. Since my thesis supervisor, Iván Orosa Paleo, was researching the Dutch dance music industry the choice was made to devote my research to this industry. After examining the Dutch dance music industry in general, I got really interested in the case of the digitalization of the industry. There are some major innovations taking place in the music industry and the digitalization of the industry is the driving force behind these changes. I was interested in finding out how this has affected the industry and how the actors in the industry have responded to the changes accordingly. There is very little literature written about the specific case of the dance music industry and therefore I decided to devote my master thesis research to the topic of the digitalization of the Dutch dance music industry. In specific I am trying to write a thesis that explains the changes that have occurred in the music industry in general and apply these changes to the case of the Dutch dance music industry. By means of interviews I will try to describe how the Dutch dance music industry value chain and the industry actors have responded to these changes.
1.2 Research
questions
The main research question is:
What are the changes in the Dutch dance music industry value chain due to the digitalization of the music
industry?
To guide the research towards answering the main research question, several sub-questions are formulated. The sub-research questions are:
2. How does the value chain of the Dutch dance music industry look like?
3. What are the major changes that have occurred in the value chain of the Dutch dance music industry since the upcoming of the digitalization?
4. Has the impact of the internet and digitalization changed the business model of central actors in the industry?
5. How can the value creation process, the value appropriation and protection of the Dutch dance music industry be characterized?
6. Has the digitalization changed the value creation process and the protection of the music?
During this research, the main changes that the digitalization has caused are investigated by using primary as well as secondary data. The way the data is collected will be described in the next chapter. The data gathered will be discussed and tested by interviewing different actors in the Dutch dance music industry.
1.3 Reading
guide
In this paragraph an overview of what can be expected in this paper is given.
2. Research
methodology
This section will describe how the research is designed and how the data is collected.
2.1 Research
design
I was interested in finding out how and why the Dutch dance music industry has changed due to the digitalization, and how the different actors in the industry have responded to these changes.
In designing this research, a qualitative research design is chosen. The research aims not only to explore certain phenomena, but to understand them within a particular context. Qualitative research examines perceptions in order to gain an understanding of social and human activities (Collis & Hussey 2003, p. 13), it investigates why something happens and how, instead of describing what, where and when things have happened, which can be investigated with quantitative research. In this research the ‘what’ question is also examined to explain what changes have occurred in the industry. When this is investigated, the ‘why’ and ‘how’ questions can be answered.
A case study is a qualitative research method. It implies a single unit of analysis, such as a company or a group of workers, an event, or a process or even an individual (Collis & Hussey 2003, p. 68). In this study, it involves gathering detailed information about the Dutch dance music industry.
Collis & Hussey (2003, p. 68) distinguish several types of case studies: • Descriptive: objective is restricted to describing current practice.
• Illustrative: the research attempts to illustrate new and possibly innovative practices adopted by particular companies.
• Experimental: the research examines the difficulties in implementing new procedures and techniques in an organization and evaluating the benefits.
• Explanatory: where existing theory is used to understand and explain what is happening.
2.2 Data
collection
A literature study as well as personal interviews are techniques that are used in this research. The theoretical part, chapter three and four, will describe the dance music industry of the Netherlands, by using literature that is appropriate for and written about the music industry in general. Since not much is written about the effect the internet has had on the dance music industry, theory about the music industry in general forms the basis of this research.
In the illustrative part, chapter five and six, personal interviews have been used to test the theoretical findings, it will try to find out which changes have occurred in the industry, why and how. The choice to perform interviews instead of other data collection methods was made because interviews provide in-depth information. An interview allows the researcher to ask more complex questions and ask follow-up questions, which is not possible in other types of research methods. Also, an interview may provide a higher degree of confidence for the interviewee, which benefits the interviewer. The negative aspects of interviews are that it is a time consuming process, the questions should be asked in the same way, and the interviewees have to understand the questions in the same way. When this is not the case, the answers of the interview questions are biased.
There are three fundamental types of research interviews: structured, semi-structured and unstructured. For the research, I have used a semi-constructed interview. I have prepared the questions beforehand, but a reaction to the answers of the interviewees was also part of the interview. As the literature mentions, semi-structured interviews consist of several key questions that help to define the areas to be explored, but also allows the interviewer or interviewee to pursue an idea or response in more detail (Gill et al. 2008, p. 291).
I chose to perform the interviews by telephone, since face-to-face interviews are enormously time consuming. Telephone interviews enable a researcher to gather information rapidly, but still allows for some personal contact between the interviewer and the respondent like with face-to-face interviews. Another advantage of a telephone interview is that it provides an opportunity to talk to participants who are reluctant to participate in face-to-face interviews or from groups who are otherwise difficult to access in person (Sturges & Hanrahan 2004, p. 109).
3. Facts
and
figures
In this chapter, data about the music industry in general, the dance music industry and the Dutch dance music industry in specific will be presented.
In the first paragraph, facts and figures regarding the music industry in general is provided to explain the changes that have occurred in the music industry worldwide and in the Netherlands. In paragraph 2, the characteristics of the dance music industry is explained, to give more information about the specific industry that is examined in this research. In the third paragraph the characteristics, as well as the enormous growth, of the Dutch dance music industry is discussed. In paragraph four, music piracy is explained. Due to the digitalization of the dance music industry, piracy has become a major threat to the industry. The consequences of music piracy and how piracy can be challenged in the Dutch dance music industry is declared.
3.1 The music industry
Since there is no information to be found regarding the changes that has been caused by the digitalization regarding only the dance music industry, information about the music industry in general is used to describe the case of the dance music industry. Although the dance music industry is a distinct part of the music industry, both industries deal with changes that have been caused by the digitalization. Therefore, to analyze the changes that have occurred in the dance music industry due to digitalization, data about the music industry in general is used.
3.1.1 Worldwide and Dutch music distribution
The IFPI, an organization that promotes the interests of the international recording industry worldwide, states that the change in music sales worldwide is enormous. Figure 1 shows that since the year 2000, the trade value of music sales worldwide is decreasing1.
Figure 1: Change in total music sales Source: IFPI2
In table 1, the development of the Dutch music market is visualized. In the table it is shown that the Dutch music distribution market is also declining.
Development of the Dutch recorded music market
Year Turnover * Growth of
turnover Volume ** Growth of volume 2000 494 1% 39.9 1% 2001 498 -1.5% 28.7 -5.5% 2002 467 -6% 34.2 -11% 2003 444 -5% 33.3 -3% 2004 411 -7% 31.7 -4.8% 2005 338 -18% 27.2 -14% 2006 307 -9% 24.6 -9% 2007 282 -8% 22.9 -7% Table 1: Development of the Dutch recorded music market * in million euro’s
Source: Auteursrecht 2007, p. 2 ** in million products sold
1 All of the figures were collected from IFPI members, which consist of 1400 major and independent companies in more than 70
countries, representing 100% of the market.
2 The data is drawn from several documents of the IFPI:
‐ Recorded music sales 2007: http://www.ifpi.org/content/library/Recorded-music-sales-2007.pdf ‐ Music market sales data 2006: http://www.ifpi.org/content/library/
‐ World sales 2005: http://www.ifpi.org/content/library/worldsales2005.pdf ‐ World sales 2004: http://www.ifpi.org/content/library/worldsales2004.pdf ‐ World sales 2003: http://www.ifpi.org/content/library/worldsales2003.pdf ‐ World sales 2002: http://www.ifpi.org/content/library/worldsales2002.pdf ‐ World sales 2001: http://www.ifpi.org/content/library/worldsales2001.pdf ‐ World sales 2000: http://www.ifpi.org/content/library/worldsales2000.pdf
The main cause of this decline is the decrease in cd sales, a decline of 37%, and dvd sales, a decline of 19% (Auteursrecht 2007). The decline of music sales can have various causes, but experts say that the main cause is the digitalization of the music industry. The decline in music sales worldwide and in the Netherlands has various consequences for actors in the industry. Since both figure 1 and table 1 show that the music sales is decreasing every year, actors have to change their strategies to stay profitable. In order to change a companies’ strategy, the cause of the decline should be investigated because the changes to be made need to match with the challenges an actor is facing. Since the year 2001 the digitalized music market is becoming more and more important, which is shown in digital music sales as well as in the online music trade (both legal and illegal). Therefore the actors in the music industry believe that the digitalization of the industry is responsible for the decline in record sales. The actors that were interviewed for this research also agreed that the cutback in sales in the dance music industry is caused by the digitalization of the music industry and music piracy, which is a result of the digitalization.
In the next sub-paragraph, the exact impact that the digitalization has on the dance music industry will be discussed.
3.1.2 Digitalization of the music industry
The greatest impact of the internet is that it enables the reconfiguration of existing industries that had been limited by high costs for communication, access to information, or making transactions (Porter 2001, p. 66). With the arrival of the internet and the upcoming of digital music, the traditional ‘old’ supply model that was dependent on physical distribution of music recordings, such as cd’s, changed to a more complex model (Graham et al. 2004, p. 1087). Figure 2 represents these changes. The new model includes not only physical music, but also digital music. Physical sales include: audio formats (single’s, lp’s, casettes, cd’s, dvd, minidisc) and music video formats (dvd, vhs, vcd). Digital sales include: single track downloads, album downloads, music video online downloads, streams3, master recording ringtones, full track audio
download to mobile, ringback tunes4, music video downloads to mobile and subscription income5. With
digital music, a new actor in the industry has emerged, the digital music retailer. Also, intellectual property rights protection becomes more and more important in the digitized music market. The exact consequences that the digitalization has had on the dance music industry will be discussed in chapter five.
3 Streaming is a method of delivering an audio signal to a computer over the Internet. It differs from downloading because with streaming you can listen to the music as it arrives to your computer, you do not have to wait for a complete download. For streaming, usually a software programme is necessary.
4 A ringback tune is the ringing that is heard on the telephone line by the calling party after dialling and prior to the call being answered at the receiving end.
Figure 2: Music industry market structure Source: Bockstedt et al. 2004, p. 10, p. 13
Due to the digitalization of the music industry, the industry can be characterized by innovation, experimentation and diversity of new business models (DMR 2008, p.5, par. 1). The consumer has the choice about how they would like to experience the music, they can buy a download, cd, mastertone, music video, wallpaper for their mobile phone, or register for a subscription service on the internet. Technology has enabled these changes. The digital market share revenue in the music industry is higher than in any other entertainment sector, except for the gaming industry (DMR 2008, p.5, par. 6). Figure 3 shows that in 2007 15% of all music sold was digital music, this is an increase of 38% compared to 2006, and 725% compared to 2004. However cd sales have declined and the digital sales have not compromised the decline in record sales in the worldwide market (p. 5, par. 11). According to music industry actors, music piracy is responsible for this. This will be further discussed in this research.
Figure 3: Digital music revenues worldwide Source: DMR 2008, p. 6
3.1.3 Types of digital music sales
format is mastertones6 (DMR 2008, p. 7). PriceWaterhoueCoopers estimates that by the year 2011, the
digital distribution of music has surpassed the physical distribution (Marketingonline 2008). According to Enders Analysts (Wipo 2008), this estimation is not correct, but they do state that digital distribution is winning from physical sales, see also figure 4.
Figure 4: Forecast of music sales in the physical and digital format Source: Wipo 2008
3.2 The dance music industry
The industry can be defined as a group of actors involved in a particular competitive process, offering goods that are comparable and that are compared in order to determine the value of each of them (Wijnberg 2004, p. 1415). In the dance music industry actors are involved with dance music; making music, selling music and earning money from the music that is sold or exploited in another way. To fully understand how the dance music industry value chain is characterized, in this paragraph a short historical overview is presented. The characteristics of the dance music industry will be described, and the application of the long-tail in the Dutch dance music industry is investigated.
3.2.1 Historical overview of the dance music industry
In the mid 1980s the sampler was introduced, an innovation that caused the dance music industry to develop. The sampler has had a major influence in the development of the dance industry (Dansinfo, n.d.). With a sampler, an artist can record a piece of music and do endless things with it, the music can be modified in many different ways.
Historically, electronic music was considered to be any music created with the use of electronic musical instruments or electronic processing (Wikipedia, n.d.). Today, that distinction has been lost because almost all recorded music, and the majority of live music performances, depend on the use of electronics. Dance music is the new name, for what was once called House music, which was formed in the ‘80s (Storm 2008). The word House comes from the Warehouse Club where Frankie Kunckles, a famous dj that is seen as the ground layer of house music, played his music in Chicago, USA. But another dj, Ron Hardy, was really responsible for the house explosion (Cheeseman 2003). In 1988 House music really began to diversify, and many new music genres were introduced , therefore, the name House music does not cover the variety of the music that exists nowadays. The main term that refers to the style of music is dance music. Therefore, in this report the music style is referred to as dance.
3.2.2 Characteristics of the dance music industry
Unlike conventional music, dance music is not played, it is programmed. Because of this, dance music depends on technology to make it what it is, and to make it better and different than what it was. Music instruments have remained the same since their creation, but electronic music is constantly evolving and changing its sound with the application of technology (Techno, n.d.). Technological innovation is therefore an important part of the dance music industry.
The Dutch dance music industry is divided in many genres. Lena (2006) argues that music genres emerge because producers react to the environment, which affects musical content. Musical content includes lyrical diversity, melodic and chordal structure, musical similarity and musical material. Different approaches to musical content leads to sub-genre development. Her research is based on the rap music industry. But Lena’s theory also applies to the dance music industry. In the dance music industry, many types of sub-genres exist, where House is one of. These genres have their own type of music, their own dj’s, own parties and events, own clothing style and their own culture. Most of the actors in the industry focus on one or a few genres that exist in the dance music industry. Genres and sub-genres emerge rapidly in the dance music industry and it is easy to get lost in finding the right sub-genre in which new music can be placed. However, the music genres are important for the dance music industry. A dj for example, has to place his or her music in a particular genre. For the promotion of a producer or a new track it is also important to categorize the music in a specific genre and sub-genre.
• Beats per minute (bpm): this indicates the speed of the music • Instruments used
• Use of vocals or not
• Use of break beat or not. Break beat dance music is: hip-hop, drum & bass, break beat, trip-hop. The other types of styles do not have a break beat.
As mentioned, dance music comes in many different forms, from disco to hip-hop. The music styles that can be distinguished amongst others are (Electronic dance, n.d.):
Acid, Ambient, Breakbeat, Big Beats, Club-Dance, Dance, Dance-Pop, Deep House, Detroit, Disco, Down Tempo, Electronic, Euro-Dance, Experimental, Freestyle, Gabber, Garage-House, Goa, Happy Hardcore, Hard-House, Hard Trance, Hi-NRG, House, IDM, Industrial-Electronic, Intelligent Techno, Latin Dance, Latin Freestyle, Minimal, Noise, Progressive-Dream, Rave, Techno, Teen Pop, Trance, Urban, Vocal House. These genres are only the tip of the iceberg. Every genre in the dance music industry also has their sub-genres and approximately every month a new genre or sub-genre arises.
In this research, there is no distinction made between music genres, and therefore no more attention will be paid to explaining the difference in genres. The dance industry in general is investigated. When necessary, a distinction is made between mainstream and underground genres.
As mentioned, the dance music industry is characterized by many genres and sub-genres. The focus on music style and sub-genre, rather than on authorship, in the dance music culture is visual in record shops. In the big stores, the main categories of music are pop/rock, jazz, rap and classical. The cd albums within these genres are arranged according to artist. But dance shops sell mainly 12-inch vinyl singles, and these are categorized according to a constantly shifting set of sub-genres (Hesmondhalgh 1998, p. 238).
These factors altogether characterize the dance music industry from other music cultures.
3.3 The Dutch dance music industry
In the beginning of the 1980s Dutch people got familiar with dance music, and the first parties were organized in the underground scene in Amsterdam. The late summer of 1988 is known as the Summer of Love (Terphoven & Beemsterboer 2004, p. 28), where a lot of people in the Netherlands got familiar with dance music. After that, the dance music industry started growing, with clubs starting to open their doors for dance music.
Nowadays, the dance industry is the biggest leisure industry in the Netherlands (Terphoven & Beemsterboer 2004, p. 126), and therefore a very important cultural stream. Market investigation by De Vos & Jansen in 2002 showed that 2.3 million people in the Netherlands in the age of 15 to 35 are interested in dance music, that is 5.,6% of the people in this group.
Tom ter Bogt, a culture psychologist and an academic teacher in pop music, calls the dance industry the third major music stream. According to him ‘dance is here to stay’. He says that it is visible that the market is getting mature because there are all kinds of trends in dance music, like the mix with pop music (Dijksterhuis 2005, par. 7). From the information of the NVPI that is shown in table 4, it can be concluded that from the total spending of Dutch people on music, 8% was spend on dance music in 2007. Also, starting from 2007, dance music is the third category on which people spend the most money, in 2006 dance was the fourth category.
It can be concluded that the Dutch dance music industry is growing rapidly. Not only the spending of Dutch people are responsible for this growth, but also the spending of foreign people on Dutch dance music is responsible for the market growth. In 2006, 25% of the Dutch music export revenues came from dance performances, which was about 36 million euro. In 2005 the contribution of the dance industry was less than half of that percentage, namely 10% (Club Judge 2008).
Earlier in this chapter, the digitalization of the digital music sales were analyzed. In the next sub-paragraph, the digitalization of music sales in the Netherlands are discussed.
3.3.1 Digitalization in the Netherlands
According to sales data of both physical and digital music in the Netherlands in 2006 and 2007, which are shown in table 2, the revenue of music sales has decreased but the total number of music sold in 2007 increased due to the rising sales of music downloads. The data suggests that there is not more music sold, but the revenues made are lower. In 2007, the number of music downloads increased with 19%, but the music sales of albums and singles and music videos have decreased. A music download costs about € 1 per track. Compared to cd’s, which each cost between € 15 and € 20, the costs per track are lower. Also, when buying a cd you pay for all of the tracks of the cd. When buying a download, people are interested in a particular track and usually do not buy all of the music that is available on the cd. The consequence is that consumers buy in a different way, more targeted at particular tracks from different artists. People in the industry say that the decrease in revenue of music sales is due to the digitalization. Industry actors claim that the main reason why digital sales have not made up for the decline in physical sales is piracy; illegal downloading and peer-to-peer (P2P) file sharing. Not only is digital music downloaded for a fee, it is more common that the music is available on the internet for free. Industry actors believe that if music piracy did not exist and people would pay for the music instead of illegally downloading it, the industry would not face any damages due to the digitalization. In chapter six music piracy will be further discussed.
Retail value (in million euro’s) Units sold (in million)
2006 2007 % change 2006 2007 % change Albums 247.9 238.2 -3.9% 19.5 19 -2.6% Singles 6.4 4.2 -34.4% 1.7 1 -41.2% Music video 52.5 39.3 -25.1% 3.5 2.8 -20% Downloads 10.1 12 18.8% 10.1 12 18.7% Total audio 316.9 293.9 -7.3% 34.8 34.9 0.3%
Table 2: Sales data in the Netherlands 2006, 2007
Source: data 2006: http://www.musicaememoria.com/docs/ifpi-2006.pdf
data 2007: http://www.auteursrecht.nl/assets/nvpi/jaarcijferstabel%202007.pdf
Retail value (in million euro’s) Units sold (in million) 2007 2008 % change 2007 2008 % change Albums 96.8 91.7 -5.3% 7.8 7.5 -3.8% Singles 2.2 1.3 -40.9% 0.5 0.4 -20% Music video 17.1 15.5 -9.3% 1.2 1.2 0% Downloads 5.3 6.2 16.9% 5.4 6.3 16.7% Total audio 121.4 114.7 -5.5% 14.8 15.4 4.1%
Table 3: Half year figures 2008 of music sales in the Netherlands
Source: http://www.auteursrecht.nl/assets/nvpi/Halfjaarcijfers%202008.pdf
3.4 Music
piracy
Where the Dutch dance music industry is growing into an important cultural stream, the music industry, including the dance music industry, is dealing with a decrease of music sales.
As mentioned in paragraph 3.1.2, the decline of the music sales is believed to be caused by the digitalization of the music industry. With digitized music, music is available in a digital format that can easily be offered online. Digital music can be traded with friends and it is also offered online for people to download. This is illegal and refers to music piracy. Piracy occurs when an original video or sound carrier is copied and distributed without permission of the copyright owner. Piracy is not only a violation of the rights of the copyright owner but also harms the interests of producers, distributors and retailers. These actors all earn money from music sales, and when music is offered for free no money can be earned. Music piracy is one of the biggest threats for the music industry because the revenues that are usually made by several actors in the industry is lost, because the music is not sold but offered for free.
Figure 5: Diverse forms of piracy Source: IFPI 2006, p. 5
Illegal downloading, also called internet piracy, is one of the forms of piracy. While piracy on the internet is the most common form of music piracy, mobile music piracy is another threat facing the music industry. With a mobile phone, music can be traded by means of Bluetooth transfers, or by exchanging memory cards (IFPI 2006, p. 5).
There are three types of internet piracy that can be distinguished (IFPI 2002, p. 9, par. 4-6):
1- Offering copied files on the internet or via FTP7 server, which everybody with an internet connection
can download.
2- Offering files on links sites or hacking sites. Links sites are sites that contain numerous links to files from other servers. Hacking sites are sites that supply access codes, serial numbers, or software with which people are able to copy files that have copy-control technology.
3- Peer-to-peer services, like SoulSeeek, Kazaa, and Napster. These websites offer an online file sharing service that enables people to transfer MP3 files online.
The IFPI (2006, p. 4) estimates that the music piracy industry was worth 4.5 billion dollars in 2005 worldwide. In their 2008 report, the IFPI refers to research done by Jupiter (p. 18) that 28% of the internet users in the Netherlands are regularly sharing illegal files.
It is very difficult to estimate how many music files are shared on the internet, but the IFPI stated that approximately 99% of the music files that were available on the internet in 2001 was illegal (IFPI 2002, p. 9, par. 8). On their website, the IFPI states that about 80% of all of the file exchanges with the use of the internet, contains the distribution of illegal files (DMR 2008). This has tremendous effects on the music
industry. Income for many actors in the dance music industry is lost. This loss of revenue has the consequence that many actors in the industry have to change their strategies to stay profitable. During the interviews, the effect that piracy has had on actors in the dance music industry will be investigated.
3.4.1 How to fight piracy
As mentioned in the previous paragraph, music piracy has a negative effect on many actors in the dance music industry with many actors losing money because of it. Therefore, fighting piracy is a good option for these actors to diminish the consequences of music piracy.
Digital piracy causes the biggest threat to the dance music industry, according to the interviewees. Internet Service Providers (ISP’s) can have an important role in fighting online piracy. While most ISP’s refuse their customers to use the internet for illegal file sharing, they rarely punish their customers if they do. Fighting piracy can be done in several ways (IFPI 2006, p. 6-7):
• Providing new legal downloading services results in more legal online distribution, which will decline the online piracy.
• Educating people about copyright, and the vital role it has for the music industry. There are many people that are unaware of the damage music piracy has on the music industry.
• Spreading viruses with illegal files has played a significant part in fighting piracy. • Taking action towards illegal downloading sites and peer-to-peer networks. • Taking action against physical piracy.
An example of taking action against peer-to-peer services is the fight against Napster, which resulted in the determination of the service (Napster 2008). In 1999, Napster was sued by the metalband Metallica and in July 2001 Napster had to terminate their illegal file sharing services on the internet. Since 2004 Napster is online again and has become a website where digital music can be bought. The fight against Napster resulted in a change of strategy for the company, from illegal file sharing to a paid downloading website. Although closing down Napster was a very important milestone in fighting digital music piracy, there are still many peer-to-peer services that are still accessible like Soulseek and Kazaa. Soulseek is one of the biggest peer-to-peer services that is popular in the dance music industry (Soulseek 2008).
Governments can also take an active role in fighting piracy (IFPI 2006, p. 19). This involves: • Guarantee penalties for copyright crimes.
• Investing in resources to enforce intellectual property laws. • Educating the public about the importance of copyright. • Getting cooperation from internet service providers (ISPs).
4. Theoretical framework: value appropriation
Throughout this research, several theories will be used to explain the case of the Dutch dance music industry. In this chapter, the theories are discussed. These theories form the basis of the research about the digitalization of the dance music industry. The following chapters will be build upon the theories mentioned in this chapter.
In the first paragraph the value creation process of musical products is discussed and presents the ways that value can be created in the dance music industry. It is stated that value can be appropriated only when a product is selected by the consumers. There are different selection system theories that are discussed in paragraph one. The most common theory is the selection system theory of Wijnberg (2004). Another theory that has emerged in the digital era is the long-tail theory of Anderson (2008). According to Anderson, selection takes place on the basis of what is offered online. He states that according to the availability of music on the internet, the power of hits in the music industry is slowly disappearing and many niche markets are emerging. the long-tail theory of Anderson (2008) is introduced which has a close relation with the selection system theory.
Creating value and capturing value is important, but just as important is protecting the value. If the value of a product cannot be protected, no income of the created product can be earned. The second paragraph of this chapter will deal with the achievable measures that can be used to protect the value of a musical product. The use of intellectual property rights are introduced, as well as the use of the creative commons licenses.
4.1 Capturing
value
Producers who make music, want to earn money to be able to live from the music they make. Value refers to the importance or worth of something for someone, which can be expressed in terms of money. Producers of music have to create value, but to be successful in economic terms they also have to capture the value that they have created. Capturing value of music differs per exploitation form. For live performances, dj’s and artists capture the value they create by receiving a fee for their performance. For recorded music however, capturing value is much more complicated.
sub-paragraph, the use of Creative Commons is introduced, which is a value protection method that is relatively new to the music industry and bears no resemblance to the traditional IPR protection methods of music.
4.1.1 Selection system theory
To capture the value you create, the created product needs to be selected. According to Gemser (2008) it does not matter how much value you create, it is more significant how much value you capture. The value that is created is measured by the total amount of value that is acknowledged by the selectors of the final product. In the dance music industry the final selectors are the consumers, the people who buy the recorded music or the visitors of live performances.
To illustrate how the selection system works, the theory of Wijnberg (2004, p. 1415) is used. The selection system theory of Wijnberg can be divided into three variants of selection:
1- Market selection: the consumers are the selectors and the producers the selected. 2- Peer selection: the opinions of others determine the outcome of the competitive process.
3- Expert selection: the competitive success or failure is determined by the opinions of a category of people who are neither consumers nor producers but to whom particular knowledge or expertise is ascribed.
The selection system considers not only these three selection variants, but also recognizes that an actual selection system can also be a particular mix of these three selection types. It is not rare that all three selection types occur in one industry. To capture the value of a product, the selectors (final consumers) have to acknowledge value to the product. The selection system is an important indicator of how much value is created. Anderson (2008) has researched the selection system theory and argues that selection takes place on the basis of what is offered. In paragraph 4.1.2 the long-tail theory of Anderson is discussed.
4.1.2 The long-tail theory
more choice. The long-tail is nothing more than having unrestricted choice, that is enabled by the use of the internet (p. 193).
The focus on a small number of hits in mainstream markets and products shifts in the long-tail theory to the discovery of consumers’ own style that can be found in countless numbers of niches, as is presented in figure 8. The internet is making this shift possible because every music recording can be found on the internet, which enables people to find their own music style instead of harmonizing with the mainstream.
Figure 8: The long-tail
Source: Anderson 2008, http://www.thelongtail.com/about.html
Long-tails exist due to an economical trigger, that is the reduction of costs. Three features that characterize the long-tail are (Anderson 2008, p. 62-64):
• Supply and demand come together on the internet, which results in a shift from hits to niche products. As a result of digitalization, digital distribution and online search engines emerged which consumers can use to find music they might enjoy. Rankings of music and recommendations of peers are also available on the internet. The consumer has more choice and has access to an infinite number of music. The long-tail appears when a consumer is encouraged by a renowned dj, music rankings or by friends to listen to or buy music, that the consumer would otherwise not have access to or find in record stores.
• When more products are available, the tail becomes thicker.
Scarcity concludes in hits, if storage is scarce than it is wise to only have products in stock that sell good. However if there is enough storage to offer every product available, why not offer everything that you can, because Anderson states that there is interest for everything that is offered online. This theory is tested in the field research of this study. Anderson claims that because adding an extra file requires only a few megabytes of storage on a server, which barely costs anything, online stores have no reason not to offer everything that is available (2008, p. 101).
According to Nielsen SoundScan8, the strongest effect of the long-tail can be found in the music industry.
In 2005, the physical sales of new albums were responsible for 68% of the music sales, the other 32% of the music sales came from older music. In that same year, the online sales of music was the other way around, one third of the music sales came from new music, two third from older music (Anderson 2008, p. 142). This is twice the amount of physical sales. The CEO of Ecast9 states that 98% of each track that is
available on the internet, sells at least one time per quarter (Anderson 2008, p. 16).
Although the selection systems are an important aspect of the music value chain, protecting the value is just as important. Only if the value can be protected, money can be made for actors in the music industry. The next sub-paragraph discusses the various ways music can be protected.
4.2 Value
protection
The protection of the value that is created can be secured by formal and informal instruments to prevent imitation by competitors.
An informal value protection instrument is reputation (Gemser & Wijnberg 2001, p 565). Reputation is a set of economic and non-economic attributes ascribed to a certain actor in an industry related to the actor’s past actions. While a solid reputation can be an important intangible asset contributing to success, empirical research has indicated that it is also fragile in the sense that it can be easily lost or destroyed. (Gemser & Wijnberg 2001, p 566). A producer, dj or a record label can have a very good reputation. However, by one indiscreet activity, like copying another producer’s track, the actor’s reputation can be destroyed, because their credibility has diminished. Actors in the dance music industry find credibility and honesty very important according to the interviewees. If an actor lacks these qualities, their probability to work with other actors will recede. Therefore, the threat of losing one’s reputation inhibits an actor to be involved with imitative behavior and piracy.
The formal way of protection the value that you create is via the use of intellectual property right. This will be discussed in the next sub-paragraph.
4.2.1 Intellectual property right (IPR)
IPR consists of three different protection methods: patents, copyright, and trademarks (Gemser 2007, slide 15). A patent is a set of exclusive rights granted by a state to an inventor for 20 years. A trademark is any sign capable of distinguishing or identifying the product (goods and services) of a company from those of another company and that can be represented graphically. Copyright is a right that gives the author of artistic work the exclusive privilege of making copies of the work and publishing and selling the copies for a limited period of time. The purposes are to motivate the creators of the innovation, and to motivate investors. Copyright protection is the most applicable IPR for the music industry and will be discussed further in this paragraph.
A copyright is automatically created if an original idea is given a fixed expression. Copyright does not give its owner the right to prevent others from using the idea contained in the copyrighted work, it only restricts the use of the work itself. Protected is the form of expression, not the idea expressed (unlike a patents that protects ideas). In music, expression and idea are difficult to distinguish, but in short the idea must be fixed in a tangible medium of expression to be able to get a copyright (Kretschmer 2000, p. 213). The copyright has a duration for 70 years after the author’s decease or 70 years after the first publication if the author is an organization.
With the introduction of the internet, challenges regarding IPR emerged (Gemser 2008): • New types of works, publication and distribution emerged.
• Serious enforcement problems started to surface(piracy, DRM, stricter laws).
• The internet enabled a new type of creators and ways of producing content to appear.
Because of the new types of music that appeared because of the internet, like MP3’s, IPR protection also became more of a challenge. This is discussed in the next sub-paragraph.
4.2.2 MP3 and IPR
The MP3 is the worldwide standard for digital music. The MP3 is compressed to reduce the amount of data that is required and is therefore ten times as small as a normal music file. Because of this, MP3’s can be easily traded between people over the internet. Whether or not digital music trading is legal differs per country. The Dutch law says the following (Buma/Stemra):
• If you want to offer a song on the internet (upload the music), the copyright owner of the music has to give you permission. It is thus illegal to upload music without permission from the copyright owner.
Music is protected with copyright, which means that the owner of the copyright has to give permission to the internet service to offer the music file online. In most cases this permission is not granted, which makes the service illegal. This refers to music piracy. It is however legal for people to download the files that are offered online. The music industry is not satisfied with the current law because it only states that people who offer music are disobeying the law, but people who download illegal music should also be penalized. As a result of music piracy, the dance music industry deals with decreasing revenues of cd sales (Downloadvergelijker 2008).
Not everyone in the music industry considers piracy to have a negative effect on music revenues. There are also people in the industry that see piracy in a positive light. Studies suggest that consumers like getting products and services for free. Being free offers an incentive to consumers to try a new product. By giving away free music, artists can create exposure for their music. The distribution of free samples increases the probability that consumers would buy the product in the future, which makes the MP3 format and internet file sharing a new marketing tool. If people like the music, consumers are more likely to listen to more music of that particular artist, and they are induced to buy music that the artist will release in the future. According to Kusek & Leonhard (2005, p. 5) internet file-sharing is here to stay, and therefore the music industry should embrace it as a great method to market music. This marketing is free and can be the next biggest marketing tool in the dance music industry.
4.2.3 Creative Commons
Attribution (by): Work (and derivatives) can be used only if credit is given to the original creator.
Non-commercial (nc): Work (and derivatives) can be used only for non-commercial purposes.
No Derivative work (nd): Work can be used only in ‘verbatim’ form; new works based on the Creative Commons original are not allowed.
Sharealike (sa): Derivatives are allowed only if published under a license identical to that which governs the original work.
Figure 6: Creative commons conditions Source: Creative Commons Licensing (2008)
From these four conditions, six licenses can be chosen by a producer, ranging from very restrictive (1) to very open (6) (Creative Commons 2008):
1. by-nc-nd: Someone’s work can only be downloaded, but nothing can be modified or edited. 2. by-nc-sa: Peope are allowed to remix, tweak and modify the work non-commercially. All the
modified work is credited to the original owner.
3. by-nd: Work may be redistributed for commercial and non-commercial purposes, but it may not be modified and the original maker must be credited.
4. by-nc: The same applies as the above, but the new work may be licensed on different conditions. 5. by-sa: Others can remix, tweak, and build upon the work even for commercial reasons, as long
as they credit the original maker and license their new creations under the identical terms. 6. by: Others can distribute, remix, and build upon the work, even commercially, as long
as they credit the original maker for the original creation. This is the most open form of what others can do with your work.
In figure 7, the six CC licences are visualized, from restrictive to open.
Figure 7: Six licenses of Creative Commons
Buma/Stemra started a collaboration with Creative Commons to offer musicians the possibility to circulate their work on the internet for non-commercial activities. The three types of Creative Commons licenses that do not allow commercial use of the work used, the by-nc-sa, the by-nc, and by-nd. This allows Buma/Stemra to still make an income for musicians for their work for commercial means (CC 2007). The objective is to stimulate creative and legal reuse of another person’s work. Innovation is a very important criteria for stimulating this. In the dance music industry, reusing someone else’s record is frequently done, but it is not always done in a legal way. When there are no preservations for reconstructing someone else’s record, producers are stimulated to produce their own record by building on the work of another producer. Producers can have a slightly different approach of making a record, for example by using different types of techniques which can make a record unique, but it still will be an adaption from the original record. By stimulating the reuse of the musical piece, innovation is stimulated because someone can get inspired by the music, and be allowed to build upon the work of another producer and make something unique. This way, something new is created with an added value, which is the definition of an innovation by Jacobs (2007, p. 32).
With a CC license, earning revenues from the product is still possible. Revenues can come from:
• Promotion/marketing. An example of this is Jamendo (2009). Jamendo is an internet community, which offers free music that is published under CC licenses. Jamendo shares 50% of their advertising revenue with the artists that sign up with Jamendo. The artists receive money on the basis of the number of page views they get in a specific timeframe.
• Selling other services or products. Open content can be used to stimulate the demand for other content that are not given a CC license, like other records of artists. It can also boost demand for life performances and other exploitation forms that artists and record companies use in the new business model (see also chapter six).
5. The Dutch dance music industry market structure
In this chapter the market structure of the Dutch dance music industry is discussed. In the first paragraph, the most important actors that are present in the dance music industry are differentiated, with an explanation of their function in the industry. In the second paragraph, an overview is given of the industrial framework of the dance music industry which consists of the different actors that are discussed in the first paragraph.
5.1 The Dutch dance music industry actors
An industry contains different actors that are involved with a certain product. Based on the interview data, the following actors play an important role the Dutch dance music industry:
• Producers
• Record companies
• Distributors (physical and digital) • Record stores (physical and digital) • Dj’s and vj’s
• Booking agencies / promoters / agents • Publishers
• Buma/Stemra (Dutch Intellectual Property Rights enforcement body) • Online communities
• Dance event organisers
• BVD (Belangen Vereniging Dance / branch society dance)
In the next sub-paragraphs the task and function that each of these actors have will be explained. The data is based on the interviews. In paragraph 5.2, the link between each actor is visualized in an industrial framework.
5.1.1 Producers
The producer is the one who makes the music. According to dj Tiësto, the best dj of the Netherlands, producing a record is more important than playing a record. Producing a record consists of different tasks. The music has to be written, performed, recorded, mixed10 and mastered11. In the dance music industry,
the producer can be represented by various people. An artist or a producer can write and perform the
10 Mixing a record refers to adjusting the music in such a way that the sound is recorded in a high quality, the music is fine-tuned
and made ready for distribution on cd, MP3 or vinyl.
music, the recording can be done by the producer, an artist, various artists, or the record company. This counts for both the original music track and the mixed track. Mixing and mastering can also be done by various people. As mastering is a very specific and complex task, it is likely that an expert will be hired to complete the mastering task.
With digitalization, it is possible for the producer to be the only person involved in the production of a record, since new technologies have made it possible for an artist to producer their record on a computer with affordable software. In that case, the artist is the same actor as the producer. On the other hand, a producer can be represented by various people with specific tasks.
5.1.2 Record labels
The tasks of record labels vary widely per label. The main activities of labels are producing, releasing and distributing music records in exchange for money. Also, taking care of the financial side of the music is an important part of a label’s business, which includes the collection of revenue from sales and licensing, providing support and ensuring that everyone who needs to get paid, gets paid. Other activities that labels fulfil are identifying new talent, artist management, promotion activities, and bookings.
5.1.3 Distributors
The distribution of music is undergoing a revolution. The cd business is gradually declining as more and more people switch to digital music, both legal and illegal (Tayler 2008, p. 4). Therefore, the distribution of music is divided in physical distribution and digital music distribution.
Physical distributors distribute music of record labels. The distributors take care of the pressing on vinyl or cd and the distribution of the music worldwide. The choice of the distributor depends on the music genre. In the dance music industry in the Netherlands there are several distributors, with each distributor representing certain dance music genres.
Digital distributors are called aggregators, they make sure that the music is available on music webshops. There are many record labels that arrange this themselves, but some have outsourced it to an aggregator.
5.1.4 Record stores (online and physical)
Physical record stores are shops that sell vinyl and cd’s in a traditional store, but in the dance music industry these stores are slowly disappearing. Major shops still exist, but smaller ones have closed their doors because of the diminishing music sales. Where the revenues of record stores used to be tremendous, nowadays the revenues are decreasing every year.
Online record stores are music downloading companies that sell audio files to end consumers on a pay-per-download basis or subscription based service (e.g., iTunes and Beatport). These companies provide music for music downloading services and other content users (e.g., mobile phone companies, film, TV, advertising, video games and webradios) (Gustavo 2006, par. 52). With the new digital technologies and the internet, artists can distribute music directly to consumers through the internet, bypassing intermediaries involved in the production and distribution of physical music media like record labels and music distributors (Bockstedt et al. 2004, p. 14).
Beatport is the world leader in dance music downloads. Beatport.com allows users to access the world of club music through secure, legal, hi-speed, high quality downloads in MP312, MP413, and WAV14 formats
on a pay per download basis. Wav-files cost €1 more per track compared to MP3’s and MP4’s, since the quality is so much higher. People that are interested in this high quality music formats are happy to pay the extra money, the CEO of Beatport explains that "it's actually so much cheaper than buying vinyl" (Brown 2007, par. 41).
Since Beatport started in January 2004, it has grown into a company that has a global presence in the dance music industry, with their website available in 7 languages and 70 employees in four offices (Denver, Berlin, New York, London). 350,000 users are registered with the site. 1,000 registered users are joining Beatport daily. 6,500 record labels are participating, providing tracks for download. For new content on the site, Beatport works exclusively with several electronic music labels. Beatport does not deal with artists directly and also not with small unknown record labels to maintain a certain music quality. 275,000 electronic and dance music tracks are available for users to download, and 4,000 tracks are added to the site weekly. A 10% growth in paid downloads is seen every month (Brown 2007, Par. 44). The revenue of the company has grown with 829% from $2.2 million to $20.4 million. These numbers show that the digital music sales has grown in the last couple of years.
12 MP3 stands for MPEG-1, Layer 3. A MP3 is a digital audio file that is compressed, to reduce the amount of data that is
required to represent the audio recording.
13 MP4 stands for MPEG-4 Part 14. A MP4 file can be seen as a MP3 file that is used for video files.
5.1.5 Dj’s and vj’s
A dj has various roles in the dance music industry. A dj can be an artist, producer, selector, consumer as well as a dj that plays records during live events. As an artist, a dj writes music. As a producer, a dj produces music. As a selector, a dj selects the music that he/she plays at a live event. As a consumer a dj can buy music to play it privately, at an event, or remix it for the production of a new record. Therefore, it is too short to state that a dj only plays records. However, originally dj is the one who mixes and plays a records during live events. The music that a dj plays can be a record of the dj itself or a record made by another producer. The dj is free to play another dj’s record. No money has to be paid to the copyright owner of the music by the dj because the event organizers pay money to Buma/Stemra for this specific reason (see also 5.1.8). How a dj plays music during live events differs per performer. The records are mixed together in a certain order, speed, and with special effects, which makes it a musical piece instead of different songs. The dance records do not exist on their own, they are all part of the mix. A good dj plays his mix in waves, the audience is taken on a journey towards the explosion of the music. Therefore, a dj can be seen as an entertainer instead of an artist.
A vj is a performance artist who creates moving visual art at events. A vj does not only plays and mixes records, he or she also makes a show of their performance. Therefore, a vj is much more interesting to look at for visitors to live events than a dj.
5.1.6 Booking agencies, promoters and agents
Booking a dj or a vj mostly goes via booking agencies. A booking agency books artists for events, but also programs music for festivals and other shows. Programming involves making a day - or a more days - programme and also doing bookings for that particular festival or event.
There is a difference between a promoter/booker and an agent. A promoter or a booker is someone who books artists within one country. An agent is someone who coordinates a tour of an artist worldwide. Usually, the agent contacts bookers in specific countries to arrange bookings on festivals and parties, since the agent does not have the contacts and the network the booker has in those countries. Eventually, both are responsible for dj or vj bookings, depending if a dj or vj works in one country or worldwide an agent comes to assist the booking agency with their bookings task.
5.1.7 Publishers
5.1.8 Buma/Stemra
Buma/Stemra is a company that promotes the interest of copyright owners of a music recording. Buma/Stemra has been active in the Netherlands for decades in the field of musical performing rights, making it the longest established copyright organization in the Netherlands (Bumastemra 2002, p. 1). The main task of Buma/Stemra is to collect and distribute compensation and management of music royalties. Buma/Stemra grants users of music the right to the perform, record and/or reproduce a music recording for a fee, which Buma/Stemra distributes to the copyright owner of the music recording (Bumastemra 2002, p. 6). For example, event organizers of dance music events pay a certain amount to Buma/Stemra. Dj’s and vj’s are than free to play music of the artists they prefer and accordingly Buma/Stemra pay artists that are affiliated with Buma/Stemra a fee for their musical work.
According to the Copyright Act, copyright is “the exclusive right of the creator of a work of literature, science or art or of his assignee(s) to make such work public and to reproduce it, subject to the restrictions laid down by law” (Bumastemra 2002, p. 5). Buma/Stemra is split into two different fields of work. The ‘making public’ of a work belongs to Buma’s field of activities, whereas ‘reproduction’ belongs to the responsibility of Stemra.
Stemra is active in the field of mechanical reproduction rights, whereas Buma focuses on the performing rights of musical works. Performing rights consider concerts, but also broadcasts via the radio and television, music in shopping centres, discos, cafes and restaurants. So making music public entails more than live performances alone (Bumastemra 2002, p. 7).
Stemra’s clients include record companies, broadcasting organizations, audio-visual producers, video distributors, producers of background music and advertising firms (Bumastemra 2002, p. 9).
Composers, songwriters, and music publishers become affiliated with Buma and Stemra by concluding an exploitation contract. To join Buma/Stemra, a one-time entry fee must be paid, followed by an annual contribution. Artists who are affiliated with Buma/Stemra are obliged to transfer their musical performing rights and mechanical reproduction rights to Buma/Stemra for exploitation. Buma/Stemra collects the copyright royalties for the use of these works. The money must then be divided as fairly as possible among the rights owners. This is called distribution. Buma and Stemra do not realize a profit. All the money that is collected is paid out after a deduction of the expenses made by Buma/Stemra.
5.1.8.1 Buma/Stemra initiatives
Cooperation with Beatport
In July 2008, Beatport, signed a deal with Buma/Stemra for author's rights covering all of the world's music repertoire (Bumastemra 2008).
Fingerprinting
Buma/Stemra collects 5% of the revenue of ticket sales from event organisers. Although this is a good thing, most of the money does not end up with the originators of the musical work. Buma/Stemra and the BVD (see paragraph 5.1.15) wanted to change this and therefore they have developed the DJMonitor, a worldwide innovation in the dance music industry (Technology 2005 par.3). With the collaboration, Buma/Stemra and BVD adapted the monitoring system that already existed so that it is also suitable for monitoring music during live dance events. DJ Monitor started in the Netherlands, but it will set up a complete music database, which can be used all over the world so that all copyright owners of music can receive the royalties they deserve (Technology 2005, par. 6). Fingerprinting was used by Buma/Stemra to register the music sets of radio stations and television stations, by giving music a fingerprint that cannot be heard but can be traced. Together with BVD, the technique is also made available for the dance music industry. The fingerprinting technique includes a fingerprint on a musical piece. When a track is played during an event, the fingerprints will be compared to an exclusive song database. Once a match is found in the database, the music is identified. DJ Monitor creates reports for the organizations, who can submit these to Buma, who in turn will pay the rightful composer for using their music during events (DjMonitor, n.d.). With the fingerprinting technique, the owners of music are better able to protect their music and it can be traced when and by whom their music is used (Music Management 2008).
According to KPMG (2002, p. 31), Buma/Stemra collected approximately 1.5 million euro’s from dance organizers, the total fees paid by event organizers was 2.4 million euro’s. This means that the earnings from dance events is 62.5% of the total income.
Amsterdam Dance Event
There is an international agreement that copyright organizations may devote a maximum of 10% of the amount available for distribution to social and cultural activities. Buma supports the Conamus Foundation, amongst others, which aims to promote Dutch popular music nationally as well as internationally. The successful Amsterdam Dance Event is one of the events that is organized by Conamus.
features three networking lounges, over twenty panels geared toward new developments, a range of keynote speeches and discussions, and a night program. One day of the programme is especially organized for talented young dj’s and producers, which is called the D3. D3 is a day full of workshops, clinics and information by young aspiring dj’s and producers of dance and electronic music. Buma Cultuur and ADE organize this event to help young talent forwarding their career and knowledge of music, equipment and the music industry (D3 2008).
5.1.9 Online communities
Online communities are websites such as MySpace and Hyves that artists can use to expose themselves to the world. There are many artists and labels that use websites like MySpace and Hyves to promote themselves.
Myspace is an online community website that is renowned for the many artists and record labels that have a webpage on this site. Via Myspace, an artist or a label can open a webpage to promote their music, upload their latest tracks, and expand their network of people. Through this website, it is also easy for people to find new music, and for record companies to find new talent. The website also generates information about the artists and labels, a blog can be part of the website, and other information that artists and labels would like to upload to their personal Myspace site.
Mike Smith, Managing Director of Columbia Records, said “Ten years ago I would hear about a potentially great act and spend all day on the phone to everyone I knew. Eventually somebody would have a tape and I would send a bike across town to get it. I would listen to it and then try and track down the manager, get him on the phone and try to arrange to see the band playing live. Now, if someone mentions a potentially great act I check them out on YouTube or MySpace. You are immediately listening to their music, seeing what they look like and you have all of their contact details in front of you.” (DMR 2008, p. 13).
Another online community site is Hyves. Hyves has the same features as Myspace but is not as popular as Myspace and is only used within the Netherlands.
5.1.10 Dance event organizers
