Abstract
Digital distribution has surpassed physical distribution in key markets and will soon be the dominant music distribution model in Australia. Four different business models (free, ad-funded, pay-per-use and subscription-based) and two different music delivery methods (downloading and streaming) currently compete in the market place. The author analyses each distribution model available in Australia and evaluates advantages and disadvantages from the content provider’s perspective. The most striking development is the blurring line between promotion and distribution. Content providers can either lower the barriers to access music in order to facilitate rapid music circulation and create a strong promotional effect to support various revenue streams; or heighten the barriers to access music in order to install an artificial scarcity through excludability, which is essential to implement a business model based on selling musical recordings. In this regard, the variety of different digital distribution models provides a flexible toolbox for content providers to coordinate their overall marketing strategy.
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Notes
- 1.
For example, the online music provider Real Networks conducted an experiment on their music download platform Rhapsody in 2003. They lowered the price from 99 Cents to 49 Cents causing a threefold increase in music sales (Anderson 2004). Another empirical study advocates a price differentiation strategy whereas the optimal price for current hits should be 59 cents, older titles 60 cents, newcomers 55 cents and rarities $1 (Buxmann et al. 2005).
- 2.
Interestingly, all new music distribution start-ups emerged from outside of the recording industry’s environment – a pattern well known in the history of the music industry. Tschmuck (2003) explains the lack of innovation capabilities of the major record labels with the phenomenon that established players are locked in a traditional cultural paradigm and its attendant creative trajectories.
- 3.
The investigation of potential conflicts of interest between artists and record labels or other intermediaries that occur in the context of distribution would exceed the scope of this research. I will briefly mention eventual conflict of interest in the corresponding chapters.
- 4.
For a detailed list of 24 possible revenue streams of music composers and performers, see Thomson and Cook (2012).
- 5.
- 6.
The iTunes Discovery Download is a promotion tool where users can download a free song for 1 week (http://www.apple.com/itunes/freesingle).
- 7.
- 8.
- 9.
Ownership, here, does not refer to ownership of the master recording but ownership of the individual file in the same way as ownership of a physical CD entails specific rights for purchasers (e.g. consumption, restricted sharing rights).
- 10.
The survey was conducted by Mediavision which was commissioned by Musikverige, a Swedish music industry group.
- 11.
Utility here is measured by the number of listens assuming that every listen generates one unit of utility.
- 12.
Spotify, for example, can be integrated into Facebook using the social network to discover and share music with friends.
- 13.
Crowdfunding can be categorized as a distribution strategy in a wider sense because artists distribute some of their services and goods exclusively through crowdfunding platforms. In this regard, crowdfunding depicts a special distribution channel.
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Peltz, P. (2013). Digital Distribution Models Reviewed: The Content Provider’s Perspective. In: Tschmuck, P., Pearce, P., Campbell, S. (eds) Music Business and the Experience Economy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-27898-3_7
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