cover

The Music Industry, 2nd edition

Digital Media and Society Series

Nancy Baym: Personal Connections in the Digital Age

Jean Burgess and Joshua Green: YouTube

Mark Deuze: Media Life

Mark Deuze: Media Work

Andrew Dubber: Radio in the Digital Age

Charles Ess: Digital Media Ethics, 2nd edition

Alexander Halavais: Search Engine Society

Martin Hand: Ubiquitous Photography

Robert Hassan: The Information Society

Tim Jordan: Hacking

Graeme Kirkpatrick: Computer Games and the Social Imaginary

Leah Lievrouw: Alternative and Activist New Media

Rich Ling and Jonathan Donner: Mobile Communication

Donald Matheson and Stuart Allan: Digital War Reporting

Dhiraj Murthy: Twitter

Zizi Papacharissi: A Private Sphere

Jill Walker Rettberg: Blogging, 2nd edition

Patrik Wikström: The Music Industry, 2nd edition

The Music Industry:
Music in the Cloud,
2nd edition

PATRIK WIKSTRÖM

Copyright © Patrik Wikström 2013
The right of Patrik Wikström to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2013 by Polity Press.
Polity Press
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Polity Press
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ISBN: 978-0-7456-4570-4
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For Pia

Contents

Tables and Figures
Acknowledgements
Introduction: Music in the Cloud
1  A Copyright Industry
2  Inside the Music Industry
3  Music and the Media
4  Making Music
5  The Social and Creative Music Fan
6  Future Sounds
Notes
References
Index

Tables and Figures

Tables

1.1  Levels of aggregation and the facets of the production of culture perspective
2.1  The music industry as defined by the British government
2.2  The music industry according to Engström and Hallencreutz
2.3  The domestic music share of the world’s 42 largest music markets
4.1  The average age of top-10 global superstars

Figures

0.1  The Cloud as an Internet metaphor
0.2  Increased connectivity causes the music firms to lose their ability to control the flow of information
2.1  Musical networks
2.2  Production/consumption systems of popular music
2.3  The organization of the recording industry
2.4  A music publishing industry value chain
2.5  Global music sales by format, 1973–2011
2.6  Milestones in the development of music distribution technologies and services
2.7  Share of the global recorded music market
2.8  Noteworthy mergers and acquisitions during the development of Universal Music Group
2.9  Universal Music Group, 2012
2.10  Sony Music Entertainment, 2012
2.11  Noteworthy mergers and acquisitions during the development of Sony Music
2.12  Warner Music Group, 2012
2.13  Noteworthy mergers and acquisitions during the development of Warner Music Group
2.14  EMI Group, 2012
2.15  Noteworthy mergers and acquisitions during the development of EMI Group
2.16  Sony/ATV Music Publishing, 2012
2.17  Live Nation Entertainment, 2012
3.1  The audience–media engine
3.2  Increase in licensing revenues, 1997–2011
5.1  The number of simultaneous P2P users worldwide continues to grow

Acknowledgements

First I would like to thank all the informants whom I have interviewed over the years. Your thoughts are at the centre of this work and without your involvement the project would not have been conceivable. I would also like to send thanks to my students, colleagues in academia and friends in the industry for helping me shape this book by giving me inspiration, encouragement and criticism along the way.

Introduction:
Music in the Cloud

One Sunday in early March 2008, the industrial rock megastar Trent Reznor, a.k.a. Nine Inch Nails, released his seventh studio project, Ghosts I–IV. The project consisted in total of 36 instrumental songs recorded during 10 weeks in the autumn of 2007. Even though Nine Inch Nails was a global brand and Trent Reznor had millions of devoted fans all over the world, he was at the time without a contract with a major record label after having ended a relationship with the Universal label, Interscope Records. ‘As of right now Nine Inch Nails is a totally free agent, free of any recording contract with any label’, Reznor wrote on the band’s website. ‘I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate.’ For Ghosts I–IV, Reznor decided that the appropriate distribution channel would be the official Nine Inch Nails website ‘nin.com’. He also chose to release the songs under a licence that allowed fans to remix and redistribute the work in a multitude of different formats (cf. here). On 13 March, Reznor launched the second phase of the project. First, multitrack versions of a number of songs from Ghosts were added to the remix section of ‘nin.com’ where fans could upload their own remixes, listen to and review the remixes from other fans, vote for their favourites, and so on. Second, Reznor launched an Internet-based ‘Film Festival’ on YouTube where he invited fans to create and upload their visual interpretations of the songs. The fans’ reception of the Ghosts project cannot be labelled as anything but exceptional. By the end of 2008 fans had uploaded more than 2,000 videos to the Film Festival, and an unknown but large number of user-generated remixes had been posted to ‘remix.nin.com’. Besides remixing and uploading the tracks from Ghosts I–IV, fans were also able to download nine of the original songs for free from the website. They were also offered four other product packages, ranging from a ‘$5 Download’ which included all 36 songs in various formats to a ‘$300 Ultra Deluxe Limited Edition Package’ which included downloads, CDs, DVDs and glossy booklets, all signed by Reznor himself. According to Reznor, during the first week after the launch 781,917 transactions generated $1,619,420 in sales revenue. In addition, the ‘$5 Download’ version was released on Amazon MP3 Downloads and remained as one of their top-selling albums, at least during March and April 2008.1 It is notable that this result was achieved while the album, in its entirety, obviously also was available via various illegal file-sharing networks and services.

A few years later, in September 2012, Trent Reznor announced that his band How to Destroy Angels had signed with the Sony Music label, Columbia Records, to release a number of their upcoming albums (Reznor 2012). Reznor concluded in a Facebook post that ‘complete independent releasing has its great points but also comes with shortcomings’. It remains to be seen if this move marks the end of Reznor’s experiments in the DIY sphere, or if the How to Destroy Angels project requires a major label treatment in order to reach mainstream audiences via terrestrial radio. Nevertheless, and even though Reznor’s Ghosts I–IV stands out as a rather extraordinary case, it beautifully encapsulates the music industry about a decade after Shawn Fanning2 released Napster and peer-to-peer file-sharing to the masses and changed the music industry forever. The structure of the Ghosts I–IV project is fundamentally different compared to the twentieth-century music industry model where vertically integrated multinational music companies control how, when and where their albums are released, promoted and distributed. The core of the Ghosts I–IV project is not the set of tracks recorded in Reznor’s recording studio in the outskirts of Beverly Hills. Rather, it is Reznor’s relationship with his fans and in the thousands of remixes, videos, comments and blog posts uploaded to nin.com, YouTube, ninremixes.com and a host of other more or less shady places in the Cloud.

image

Figure 0.1 The Cloud as an Internet metaphor

‘The Cloud’ has been used as a metaphor to denote the Internet since the late 1960s and early 1970s, when Vinton Cerf, Robert Kahn, Robert Metcalfe, Leonard Kleinrock, Larry Roberts and many others invented the technologies behind the network of networks. A cloud was considered to be a useful and vague enough symbol that could be used to summarize all the resources, cables and gadgets connecting the computers at the nodes of the network (Figure 0.1). These days, ‘The Cloud’ is still used as a metaphor for the Internet, but it also conveys other meanings. For more than 20 years, the computer company Sun Microsystems (acquired in 2010 by Oracle) pushed the slogan ‘The Network is the Computer’. Sun suggested back in those days that the resources in the Cloud would soon become so powerful that the computers at the network nodes would no longer have to be sophisticated and expensive but could be made extremely simple and cheap. Eventually, technology did not choose exactly that path, but, in some respects, what during recent years has been promoted as ‘Web 2.0’ to a large extent is based on the basic principles suggested by Sun. Web 2.0 is a term that is usually employed to denote a family of Web-based services which are far more complex than the traditional, relatively static information-based Web pages. Web 2.0 services are really fully-fledged Web-based software systems which enable users to socialize with friends and family, store and edit photos, listen to and remix music and many other things. For instance, in the area of productivity software, Web 2.0 services make it possible for users to subscribe to word-processing, spreadsheets, email, calendars and similar resources, rather than having to purchase the traditional Office package from Microsoft (see, e.g., Carr 2008).

In this book, I apply the concept of the Cloud to the field of music to emphasize how the music industry has completely shifted its centre of gravity from the physical to the virtual – from the Disk to the Cloud. Many years have passed since young party-goers relied on CDs for music, and today it is also less common to play MP3s stored on their computers or iPods. Instead, increasingly, they listen to music from YouTube, last. fm, Pandora, Spotify, remix.nin.com, or some other Web-based music service; or they download a party mix from a file-sharing network such as BitComet or LimeWire. Music is no longer something that mainstream audiences own and collect – music is in the Cloud.

The purpose of this book is to explore the transformation of the music industry as manifested by projects such as Ghosts I– IV. Of course, it is not the first time the music industry has been transformed by changes in the media environment. Changes in broadcast radio programming during the 1950s, the compact cassette during the 1970s and the deregulation of media ownership during the 1990s all had a tremendous impact on the structure and logic of the industry. However, the transformation that took place during the first decade of the twenty-first century is even more dramatic than the previous ones. Certainly, as I will stress in this book, there are many aspects of the old music industry that remain the same, regardless of whether the music is on the Disk or in the Cloud. However, the transformation is of such magnitude that it is relevant to talk about a ‘new’ music industry dynamics or a ‘new music economy’, as it sometimes has been referred to (D’Arcangelo 2007; Denis 2008; Goodman 2008). But what are the basic features of such a ‘new music economy’? I argue that three tensions or dimensions are fundamental in order to understand this phenomenon. I choose to refer to these as ‘connectivity vs. control’, ‘service vs. product’ and ‘amateur vs. professional’.

Connectivity vs. control

In order to make a living in the old music economy it was all about control – a music firm’s top priority was to maximize the revenues from each individual piece of intellectual property and to minimize unauthorized use. In the new music economy, it is still important to know how the audience uses intellectual property but it is more or less impossible to regulate and police that use. I borrow a term from network theory – connectivity – to explain the new situation. Connectivity is a measure of how well the members of a network are connected. A network is considered to have a high level of connectivity if most of its members are connected to each other, and vice versa. In Figure 0.2, the network to the left has lower connectivity than the network to the right. In a network with high connectivity, information, money, fads, norms, etc. easily flow between the members (see, e.g., Watts 2003).

In the old music economy, the network constituted by music companies and audiences had a relatively low level of connectivity. Basically, there were strong connections running between the music firms and the audience, but only weak connections between individual members of the audience (illustrated by the left network in Figure 0.2). Consequently, the music firms could control the flow of music with relative ease, since there was nothing to link the different elements that made up the audience.

In the new music economy, the importance of physical music distribution and mass media has been radically reduced, while the importance of Internet media has exploded. These new communication technologies have an entirely different structure from the previous hierarchical media. The technologies lower the barriers, which had previously restricted the capability to distribute information to the network, i.e. the capability to upload information to the Cloud. Now, the capability to upload is theoretically accessible to everyone connected to the network. As a consequence, the connectivity of the ‘audience–music firm’ network has increased, which in turn has resulted in the music firms losing their ability to control the flow of information. In a nutshell, the new music industry dynamics is characterized by high connectivity and little control.

image

Figure 0.2 Increased connectivity causes the music firms to lose their ability to control the flow of information

Service vs. product

In the old music economy, the content (music) and the medium (disk) were inseparable, and the music industry clearly was an industry made up of physical goods. In the new music economy, characterized by high connectivity and little control, it becomes increasingly difficult to charge a premium for discrete chunks of information. As soon as some kind of information is uploaded to the Cloud, it is instantly universally accessible to everyone connected to the Cloud. In such a ‘friction-free network’,3 the economic value of providing access to an individual track is infinitesimally close to zero.

But there are other things that remain chargeable. In a world where information is abundant, people may not be willing to pay a premium for basic access to that information, but they are most likely willing to pay for services which help them navigate through the vast amounts of information. If music is thought of as a service, it is possible to fathom consumer propositions that are both valuable to the audience and respectful to the work of the creative artists. More on that later in this book.

Amateur vs. professional

The role of the creative artist is the most respected and admired in the music industrial ecosystem. Nine Inch Nails, Regina Spektor, Stevie Wonder, Céline Dion: all are powerful brands that appeal to millions of fans all over the world. I praise these extraordinarily talented individuals and recognize their work as the music industry’s centre of gravity. However, in the new music economy, the relationship between these brands, their art and the audience has changed. The increased connectivity of the audience network combined with various kinds of music production tools enable ‘non-professionals’ to create, remix and publish content online. This does not necessarily imply that, in the new music economy, every music listener is also an amateur musician, but nevertheless a considerable share of the audience does create and upload content to the Cloud. For instance, research into the world of fan fiction shows that approximately 5 per cent of a user population creates and uploads content, 12 per cent comments on that content and 24 per cent actively reads the content and the comments (Olin-Scheller & Wikström 2009). Bradley Horowitz, vice-president at Google and formerly vice-president at Yahoo!, reports similar results from studies of user behaviour at Yahoo! Groups (Horowitz 2006). It is not entirely unrealistic to assume that those fans who create, remix and upload content are also the most dedicated and loyal. It is also quite likely that they are the ones who spend the most on concerts, merchandise, etc. Based on those two assumptions, it makes sense for music firms to secure a good relationship with this section of the audience, encourage their creative desires and do their best not to push them away.

To sum up: the new music industry dynamics is characterized by high connectivity and little control; music provided as a service; and increased amateur creativity. The driver of all these changes is primarily the development of digital information and communication technologies. The music industry started its journey into the ‘digital age’ a long time ago, during the 1970s, when digital technologies were introduced in the areas of music production and recording. During the 1980s, primarily due to the introduction of the compact disk, the use of these technologies expanded to music distribution. Lastly, during the late 1990s and early 2000s, Internet technologies became the most important drivers of change, and ultimately brought every remaining part of the music business, including promotion and talent development, into the realm of digital technology.

The number of technological innovations related to this third period of change has literally exploded: BitTorrent, Facebook, iTunes/iPod, Qtrax, SoundCloud, last.fm, LimeWire, MySpace, MOG, Rhapsody, Pandora, Spotify, Rdio, are only a few out of an overwhelming number of music technology brands. Although many of these innovations may be relevant as markers of the new music industry dynamics, this book does not analyse the details of any such specific innovation. My ambition is rather to stay above the level of these ‘technological ripples’ and try to discern the long-term patterns that are created by the innovations in aggregate.

During this period of change I have been able to meet a large number of music industry professionals and to discuss with them their understanding of the new dynamics. I use quotes from these interviews to illustrate and strengthen the reasoning. In order to ensure the anonymity of the informants, I conceal their identities in relation to their quotes and introduce them by their profession – for example ‘product manager’ or ‘producer’. I conducted interviews with professionals from the US, the UK and Sweden. Why these countries, one might ask? The UK and the US warrant the attention of this study since they constitute two of the largest and most influential national music markets in the world (IFPI 2012a), in terms of both consumption and production. Sweden is a much smaller market than the other two, but a nation with a ‘fantastically rich music culture’ (BBC News 2006) and a history as a strong exporter of popular music (see, e.g., ExMS 2005). Sweden is also interesting since it is a country with an advanced information technology infrastructure and a copyright legislation that has been slow to adapt to international treaties (Keller 2006). This combination has nurtured an environment, which has established Sweden as ‘a haven for copyright infringement’ (BBC News 2006; Reuters 2006).

This study does not try to explain any differences between the behaviour of the three markets. Rather, it focuses on the similarities between the three. When certain behaviour is seen to occur in all three markets, it is assumed to be indicating that the dynamics is of significance and should be included in the overall reasoning. The term ‘the music industry’ is often used in the text, and is formally a reference to the national music industries in the three countries included in the study. However, the music industry is one of the copyright industries in which national borders are of only minor significance. Most markets are dominated by a handful of multinational organizations, and, thus, innovations, practices, people and routines easily flow across national borders. It may consequently be possible to extend the validity of the findings presented by this study beyond the three countries. At least the European Union and North America could be included, and perhaps also the other members of the OECD. Finally, it should be noted that the three markets are examined on a national level only and no attention is paid to the dynamics of local markets within each territory.

The structure of the book

This is a book about the Cloud-based music industry. I argue that this industry is characterized by high connectivity and little control; music provided as a service; and increased amateur creativity.

In chapter 1, I start out by labelling the music industry as a ‘copyright industry’. I discuss characteristics and features that distinguish these industries from other, ‘non-copyright industries’. I then pay attention to the debate about the possible tension between profit maximization and creativity. Lastly, I present my theoretical platform, which is based on frameworks from organizational theory, social learning theory and the sociology of culture.

In the second chapter, I turn the attention to the inside of the music industry. It is important to understand the workings of the traditional music industry in order to recognize the significance of the change that has created the new music industry dynamics. I therefore use well-established models to explain and discuss the music industry and its three sub-sectors: recorded music, music publishing and live music. I give an account of the history of the industry and present some basic facts about a number of multinational organizations that at the time of writing can be considered as the industry’s most dominant players.

After having introduced and contextualized the music industry, I use the next three chapters to analyse different aspects of the transformation of the industry. In chapter 3, I analyse the relationship between recorded music, media and audiences. I start out by presenting a model of this relationship used to support an analysis of the changes in the media environment. I focus on how the increased connectivity of the audience–music firm network shapes the new music economy and I introduce concepts such as ‘audience fragmentation’ and ‘option value blurring’. This part of the analysis is particularly focused on the recorded music sector and the music licensing sector. In the area of music licensing, I examine the changing roles of music publishing and the music publisher in the new music industry dynamics. In the area of the recorded music sector, I focus on a range of new business models, which have been developed by music business entrepreneurs. I examine the models’ viability in the light of the shifting levels of connectivity and control and discuss the concept of music as a service.

Chapter 4 is focused on music-making. I have already noted in this introduction that one of the most important characteristics of the new music economy is the rise of amateur creativity and the increase of so-called user-generated content. However, in chapter 4, I will focus on the professional making of music, both in the studio and on stage. I explore the changes in the production system of popular music, primarily related to the roles and careers of songwriters, artists and producers, and to the changes in the institutions and structures of that system.

In chapter 5, I focus on the role of music fans, and how this affects every aspect of the new music economy, including distribution, promotion, production and talent development. I examine how fans’ desire to listen to music, use music and express themselves through music is sometimes in conflict with copyright legislation.

Finally I take the discussion into the future and reflect on how the trends of today will shape the music industry of tomorrow.

1

A Copyright Industry

In this chapter I argue that the contemporary music industry is best understood as a ‘copyright industry’. I explain why this is an important starting point in the digital age and argue for the necessity of this shift in perspective. I then develop a theoretical platform based on frameworks from organizational theory, social learning theory and the sociology of culture.

Defining industries

Most scholars, regardless of discipline, try to classify and label the objects they research. Music industry scholars do not deviate from this norm, and during the development of the field the music industry has been categorized as a ‘creative industry’, an ‘experience industry’ and a ‘cultural industry’, to name but a few. In this section I examine some of these labels, and I also say why I prefer to use the term ‘copyright industry’.

The oldest label, the ‘culture industry’, is usually traced back to the Frankfurt School of Critical Theory and its most recognized scholars, Max Horkheimer and Theodor Adorno. Between 1935 and 1949 the research institute was relocated to Columbia University in New York, and it was during this period that Horkheimer and Adorno wrote their most important work, the Dialektik der Aufklärung (1944).4 In this very influential and pessimistic book, the authors outline how the world is moving closer to self-destruction. One of the chapters examines the ‘culture industry’, which, it is argued, is the result of a process whereby an increase in media and communication technologies leads to the industrial production, circulation and consumption of cultural commodities. The industrialization of these processes results in formulaic, standardized, repetitive, pre-digested products, which reduce the audience to a ‘child-like’ state (Adorno 1941; Hesmondhalgh 2002; Horkheimer & Adorno 1944; Negus 1996, 1997).

During the 1970s, French scholars (e.g., Miège 1979) and policymakers (e.g., Girard 1981) decided to pick up the term. However, they also decided to revise its meaning considerably. First, they changed its form from singular to plural (cultural industries) to denote the diversity between different cultural industries. Second, they rejected the pessimistic and nostalgic position assumed by the Frankfurt School. Instead, they argued that the commodification of culture, facilitated by new technologies, also had its positive sides. For instance, the new technologies enabled innovation and, in addition, ordinary people were allowed access to culture that had previously been out of their reach. Third, while Horkheimer and Adorno considered the field of popular, industrialized culture as frozen and static, these scholars argued that the cultural industries represent a dynamic zone of continuing struggle between commerce and art (Hesmondhalgh 2002: 15–17; Towse 2001: 25).

The early definitions of cultural industries and cultural products are not radically different from today. Hirsch defined cultural products as ‘nonmaterial goods directed at a public of consumers, for whom they generally serve an aesthetic or expressive, rather than utilitarian function’ (1972: 641) Three decades later, the definitions suggested by scholars such as Throsby (2001) and Hesmondhalgh (2002) were very similar to Hirsch’s explanation. Hesmondhalgh, for instance, considers the cultural industries as ‘industries based upon the industrial production and circulation of texts, and which are centrally reliant on the work of symbol creators’ (2002: 14).

Hesmondhalgh’s definition requires two comments. First, regarding the interpretation of the term ‘text’. All cultural artefacts could be considered as texts. However, some cultural artefacts can be mainly functional (e.g., cars, clothes, furniture) while others are mainly communicative (e.g., songs, images, stories, performances). In his definition of cultural industries, Hesmondhalgh is only referring to the latter, that is to say texts that are mainly communicative or symbolic in their nature (2002: 12). Second, instead of using the term ‘artist’, Hesmondhalgh uses the term ‘symbol creators’ for those who make up, interpret or rework these texts (2002: 4–5).

When explicitly defining which industries are cultural and which are not, Girard (1981) suggested that broadcasting, publishing, music and film should be included. Hesmondhalgh’s list of ‘core cultural industries’ is similar to Girard’s, but with the addition of advertising and interactive media (Hesmondhalgh 2002: 12).5 Girard did actually consider advertising as one of the cultural industries, and it is quite understandable why in 1981 he did not choose to add interactive media to the list.

The term ‘cultural industries’ is a rather appealing label with several strengths. The term has a long heritage and has been widely accepted by scholars. However, the term has also been criticized. For instance, Cunningham (2005) argues that ‘cultural industries’ is an out-dated term that is linked to analogue media, nationalistic cultural policies, neoclassical economics applied to the arts, etc. Several other alternative terms aimed at defining the same industries (including the music industry) have therefore been suggested. In policy circles, terms such as ‘creative industries’ and ‘experience industries’ have become widely popular. These definitions usually have a wider scope than the original term and include industries or activities such as architecture, design, fashion, performing arts, crafts and sometimes even tourism, sport and restaurants.

These newer concepts have radically changed the relationship between government and culture. As Hartley describes it:

The ‘creative industries’ idea brought creativity from the back door of government, where it had sat for decades holding out the tin cup for arts subsidy … to the front door, where it was introduced to the wealth-creating portfolios, the emergent industry departments, and the enterprise support programs. … Creative industries [helped] revitalize cities and regions that had moved out of heavy industry, had never developed a strong manufacturing base or who were over-exposed to declining IT industries. (2005: 19)

Manchester and Liverpool in the UK are two examples of such governmental reform initiatives (O’Connor 2000). This focus on regional development has also led to an increased interest in these industries by economic geography scholars (e.g., Hallencreutz 2002; Leyshon 2001; Power 2003). In addition, the mapping of these industries has turned into a lucrative business for scholars and consultants alike. Many regions and nations decide they need healthy creative industries and, in order to achieve that goal, the definition of what is actually a part of these industries differs from nation to nation and region to region. For instance, pundits and policymakers in Sweden have decided to use the term ‘experience industry’, which also includes tourism and restaurants. These two sectors combined account for almost 40 per cent of the entire ‘experience industry’ in Sweden and make the definition quite incompatible with many other nations’ industry definitions (Almqvist & Dahl 2003).

The term ‘experience industry’ stems from Pine and Gilmore (1998) and, according to the creators, it may include many business sectors, including retailing, transportation, tourism, banking, media, etc. Pine and Gilmore did not use the term experience industry, but referred to the ‘experience economy’. The experience economy emphasizes how an activity is executed rather than what that activity is all about. The term ‘creative industries’ (Caves 2000; Hartley 2005; Howkins 2001) has, since the early 2000s, largely replaced ‘cultural industries’ as the most frequently used industry label, especially in Anglophone countries. It differs from ‘experience industry’ since it is not focused on how an activity is executed, but on the input required for that execution. However, the problem with this term is almost the same as with ‘experience industry’: it is far too inclusive. Most definitions of the creative industries include architecture, design and fashion. The same arguments motivating the inclusion of these industries could be used, for instance, to include the consumer electronics industry, the automotive industry or the pharmaceutical industry, where creativity also is of great importance. The scope of the definition is so wide that any attempt to produce knowledge which has validity across all the industries included becomes a futile endeavour. Proponents of the term answer this criticism by stating that creative processes are found across all industries, and it is not possible to define the ‘creative industries’ by their output, since it is focused upon the input of these processes (Hartley 2005: 27). That claim is true enough, but industries are not defined by input, or by the manner in which activities are performed. Industries are defined by the goods or services produced or supplied.

It is certainly true that creativity is an important part of many industries, perhaps it is even of growing importance to the entire economy, but, once again, it is questionable whether creativity is a useful label to delineate a part of the economy in order to facilitate structured analysis. The shortcomings of the term ‘creative or experience industries’ have been recognized by several scholars in the field. There is actually a tendency to link the prefix ‘creative’ to concepts such as ‘economy’, ‘class’ or ‘citizen’ rather than to ‘industry’ (see, e.g., Florida 2002; Hartley 2007).

Yet another term that also deserves some attention is the term ‘media industries’. Ferguson (2006: 297), Picard (2002: 12–17) and others all give the term a meaning which is very similar to ‘cultural industries’ but there are nevertheless some minor distinctions between the various definitions. Traditionally, the (mass) media industries include the newspaper, magazine, radio and television industries. However, due to the evolution of these industries, the definition of what is and what is not part of the media industries has been challenged. The ‘Internet industry’ is now often included, and other scholars choose to include book, film, videogame, music and advertising in the definition (Ferguson 2006; Picard 2002) – in other words, a definition which is almost identical to Hesmondhalgh’s listing of the core cultural industries (2002: 12).

The list of suggested terms that might be used to label the music industry continues and includes some fairly exotic terms, such as the ‘sunrise industries’. However, rather than using any of the terms discussed above, I believe a useful way to categorize the music industry is to consider it as a copyright industry. Copyright legislation is what makes it possible to commodify a musical work, be it a song, an arrangement, a recording, etc. The core of the music industry is about ‘developing musical content and personalities’ (Negus 1992), and, to be able to license the use of that content, they need to be protected by copyright legislation.

The use of this term is not new in any way, but has been used by several institutions, for instance OECD (2005), IFPI (2004a), Congress of the United States (CBO 2004) and of course by the WIPO. I argue that by considering the music industry as a copyright industry rather than a cultural or a creative industry, I emphasize the nature of the products that are created and traded within that industry. The term also has a clearer definition and is less ambiguous than many of the other terms, which makes it more useful during analyses of the dynamics of these firms and industries.

Now, when I have categorized the music industry as a copyright industry, a number of important questions need to be addressed, such as: What features characterize this kind of industry? What is known about the behaviour of the copyright industry? What approach should be used in order to be able to explain the dynamics of these industries in the digital age? Let us first start with the basic concepts of copyright.

Basic concepts of copyright

The Statute of Anne (named after Queen Anne) is generally considered to be the world’s earliest copyright legislation. This English law, which went into force in 1710, marks a shift from a system where printers were able to print books without compensating the authors for their creative labour to a system where authors would have the exclusive right to reproduce books. The Act explains its background and purpose:

Whereas Printers, Booksellers, and other Persons, have of late frequently taken the Liberty of Printing, Reprinting, and Publishing, or causing to be Printed, Reprinted, and Published Books, and other Writings, without the Consent of the Authors or Proprietors of such Books and Writings, to their very great Detriment, and too often to the Ruin of them and their Families: For Preventing therefore such Practices for the future, and for the Encouragement of Learned Men to Compose and Write useful Books.