Académique Documents
Professionnel Documents
Culture Documents
of Music Industry
Module- I
Song
Musical Notes
Lyrics/ Words
Performance
Composer
Lyricist
Musical Work
becomes a
Sound Recording
Lyrics
Based on this, the Music Industry has two major lines of Business Recorded Music
The Popular face of Music Deals with the Sales, Marketing and Distribution of Recorded Music (CDs, DVDs, Digital etc) Deals primarily with Recording Artists Constitutes about 75% of industry revenues
Music Publishing
The Lesser known face of Music
Deals with the Acquisition and Exploitation of Music Rights (consisting of Lyrics & Music notes) Deals primarily with Songwriters Constitutes about 25% of industry revenues
and develops new talent by auditioning demos, attending concerts of emerging artists, and then recommending the signing of contracts with artists that he/she believes have potential
Contract
Recording Artist
Payout
Payout Finance
Packaging
Distributor
Contract
Songwriter
Publisher
Main Process
Departments
The traditional process of income generation in the industry begins with the creation of an intangible music composition and ends in a tangible final product embodying that composition and delivered to the consumer Notes: Manufacturing: The record company enters into an agreement with a manufacturer or distributor who is given the right to manufacture and distribute the finished product in different formats: vinyl records, cassettes, compact discs and mini discs. The manufacturing is considered to be the least costly part of the process on a per unit basis, excluding the physical plant and equipment setup. Marketing and Distribution: Bringing the product to the final consumer and the necessary promotion and advertising required to sell the product. This is the most capital intensive phase of the business.
Artists have the potential to earn through: Royalties paid by record label Royalties paid by a film, TV, or video company to use the recording in a production Touring i.e. performing live at clubs, concert venues, and private events A percentage of proceeds from ticket sales or fees Merchandising i.e. from sales of merchandise at clubs, concert venues, etc A percentage of gross sales or net profits
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Music publishing was originally about the manufacture and sale of sheet music, but now the sale of printed sheet music is a very small portion of the publishers income
There are various kinds of publishing companies: Full-Service Companies, Independent Publishers (One person shops), Recording Company Affiliates, Specialty Publishers, Artist/writer-Owned Companies, Concert Music Publishers and Print Publishers
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To handle receipts and disbursements, accounting, data processing, insurance and purchasing
Copyright Department: To register claims of copyright and keep record of existing copyrights; Also to keep record of copyright ownership transfers Legal or Business Affairs: To negotiate the publishing contracts
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Music Group
Record Labels
Record Manufacturing
Record Distribution
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VP of A&R
VP of Promotion
VP of marketing
Publicity
New media
A & R Director
Sales
Art Department
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finance
Royalties
Responsible for promotion getting the records played on the Radio and Television
Continued
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New Media
Production
Business Affairs/ Legal
international Co-ordinates and releases records around the world and oversees all the above functions in foreign countries
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Distributors
Majors
Independents
Wholesalers
Wholesalers/rack jobbers
Retailers
Major Retailers
All the four majors have their own distribution companies: UMG owns Universal Music Distribution, EMI owns EMI Music Distribution, WMG owns WEA, and Sony/BMG owns Sony/BMG Distribution.
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Collection Societies
Major Collection Societies US: ASCAP and BMI UK: MCPS Germany: GEMA France: SACEM Japan: JASRAC
Note: Some collection societies may perform specialized functions such as collection of Performance Royalties alone. These may be called appropriately as Performance Rights Organizations (PRO).
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Module- Ii
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Highly fragmented value chain participants Made up of broader group of actors, that are highly independent Tightly interwoven and interdependent cluster of activities Complicated revenue streams based on a web of payments for individuals rights Largely contracts driven payments that includes a multitude of claimants Complex organizational structures including dozens of labels and independents The industry has seen a string of acquisitions and mergers since its inception
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37 36 35 34 33 32 2005 2006 2007 2008
2009
2010
2011
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EMEA 36%
US 30%
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US$ billions
0.4 1.1 2.1 2.9
% Total of industry
2 5 11 15
Currently Digital sales contribute to more than 20% of the industry revenues (world markets)
South Korea was the first market where digital sales overtook physical sales. Over 60 per cent of the South Korean market is now made up by digital sales
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36 28.7 29.9
23.4
23.6
US
EMEA
-7.3
Asia Pacific
-9.2
Latin America
Canada
-7.3 -8.5
-13.2
Source: PwC
Expected Growth Rate of Physical Music Sales vs. Digital Music Sales across Geographies
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Note: The Artist commands a much smaller share than the Record Company, Retailer or Distributor
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Notes: Profits from a Digital Product tend to be much higher than from a Physical product Profits from catalogue sales (i.e. of existing recording; different from a new release) tend to higher than from sale of new releases
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Independents 34%
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Currently physical music sales contribute 92% of the industry revenue and non physical formats contribute the rest. Ringtones already contribute around 5% of industry revenues currently Revenues from Master Use Licenses contribute 2.5% of the total industry revenues
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Source: PwC
Indian music industry is quite unique compared to those in other countries as it is virtually dependent on new Film music for 40% of its revenues
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* Randomly ordered
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| |
Physical
CD Sales
Radio
Streaming Downloads (Rhapsody) (iTunes)
Discovery
Performance
Audience
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The New York Phonograph Company opened the first purposebuilt recording studios
1890 1894
The demand for recordings provides incentive for research and investment in the record business
1895 1900
Pathe Freres started the world famous French company making phonographs and cylinders
Establishment of His Masters Voice (HMV) as a trademark in the infant music industry by E R Johnson
Continued
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The Victor Companys Victrola model gramophone appears for the first time for consumer homes
1906 1919
The record business was becoming seriously depressed by the growing popularity of radio
1923
1925
United Artists formed by early film stars Charlie Chaplin, Douglas Fairbanks and Mary Pickford which eventually crosses into the record business by issuing movie soundtracks RCA is formed by GE and AT&T
Victor and Columbia introduces electrically recorded discs The Brunswick Label emerges as the most successful new independent label following the postWorld War I boom of new record labels
Invention of cassette tape cartridge The Brunswick Label is bought by motion picture company Warner Brothers
Continued
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Capitol Records becomes the first major label based on the west coast
1942 1943
Epic Records launched as a CBS subsidiary for jazz and classical music
1953 1954
American Recording Company (ARC) bought by CBS network founder William Paley. The Columbia name is retained.
Cinerama presents multi sound track replay to the public for the first time
Companies begin to provide the equipment for stereo recording in major studios. Vast improvements in sound quality.
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The Sony Company introduces the first pocket size transistor radio
1957
Stereo LPs become available and new releases issued in both mono (monaural) and stereo (stereophonic) versions.
Jack Warner, a founder of the Warner Brothers motion picture company, launches Warner Brothers Records
Philips introduces the record - Reel-toreel tape and the 8 track audio cassette
Dr Ray Dolby introduces the Dolby Noise Reduction System which becomes a universal standard.
Continued
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MTV (Music Television), a cable channel begins transmitting video clips. During the next few years, the music video became essential for the promotion of a recording and once established as a promotional tool it became an entertainment product in its own right.
1981 1982
CD is officially launched in the UK. It is hailed as "the most important development in the recorded music industry since the long playing record".
1983
WEA is formed under Warner Communications between the three labels Warner, Elektra and Atlantic to create a huge distribution operation
Sony introduces the Soundabout cassette player which was later renamed the Walkman
Michael Jacksons Thriller album released by the Columbia subsidiary Epic Records ultimately sold 40m copies world wide and becomes the most successful product in the history of recorded sound
Continued
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CDs become the most popular music format. MP3 is approved as the new medium of storage for computer audio files which approach CD quality
1992
Universal Music Group is formed by Seagram purchasing MCA. The first DVD (Digital Versatile Disc) product is showcased.
1996 1995
For the first time sales of CD are higher than vinyl and accounts for over 200 million units and the LP begins to disappear from record stores
Invention of Moving Picture Experts Group1, Layer-3 (MP3) that compresses digital audio files by 12 times
RealAudio successfully launches the first major streaming audio service Philips introduces its Compact Disc Interactive (CD-I) based on a CD-ROM (read only memory) technology to industrial users before marketing it as an entertainment system for all consumers Continued
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Sony merges with BMG as the number of major labels shrink to four
2004
UMG becomes the world's leading music company by acquiring PolyGram Debut of the peer to peer file sharing network Napster
Apple launches iTunes and iPod Player thereby revolutionizing the music purchasing experience by offering 99 cent song downloads through the online music store
NY Attorney General Eliot Spitzer launches a crackdown on music industry payola. He successfully pressured two of the big four major labels to admit involvement in "pay for play" practices with radio stations.
Continued
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By the end of the 1960s the top major labels were CBS, Warner Brothers, RCA Victor, Capitol-EMI, PolyGram and MCA
By the end of the 1970s the top major labels were CBS, EMI, Warner, PolyGram and MCA By the end of the 1980s the top major labels were Sony, Warner, PolyGram, BMG, EMI and MCA Currently the record majors include UMG, EMI, Sony, BMG and WMG
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FR
Country Code (2 chars.) FR = France
Z03
Registrant Code (3 characters) Z03 = Mercury France
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Year of Reference (2 digits) 98 = 1998
00212
Designation Code (5 digits)
Country Code: The country of residence of the registrant Registrant Code: Code for the entity assigning the Designation Code in an ISRC Year of Reference: Identifies the year in which the ISRC is allocated Designation Code: Sequential numbering of recordings in a calendar year
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GRid Standard specifies the elements which help form the Reference Descriptive Metadata for a Release
Metadata Repository is system which meets the requirements of the International GRid Authority which is used for maintenance ,storage and access of Reference Descriptive Metadata
IFPI manages and administers the GRid Standard on behalf of global recording industry IFPI also identifies and assigns issuer codes to the parties assigning GRids to new releases and ensures their compliance with the standard Continued
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Identifier Scheme: Distinguishes GRids from other identifiers. In GRid, A1 always acts as the identifier scheme element Issuer code: This is the unique code given to each Issuer of GRids by the Registration Agency. Release Number: Unique number given by the Issuer to each release which they control. The Issuer is responsible for ensuring that each release number element that they use is distinct within their own Issuer code. Check Character: An algorithm is used to find the Check Character in accordance with the relationship i.e mathematical which exists with the other alphanumeric characters contained in it.
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Decline in physical sales of recorded music is a global trend (decreased by approx 9% inn 2006) The increase in digital sales has not been able to compensate for these losses Specialty music retailers (stores which exclusively sell only music) are depleting; and therefore the outlets for physical music sales is correspondingly decreasing Fuelled by increased broadband adoption and expansion of wireless networks, digital distribution is on the rise (expected to grow at a CAGR of 26% globally by 2011) Single track downloads continue to be the biggest chunk of digital sales; introduction of new services, bundled sales etc are gaining significance to address this trend
Continued
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This is causing an increasing dependence on leading online retailers (E.g. Apple) and mass in-store retailers (E.g.: Wal-Mart), who are in a better bargaining position than the music industry itself In 2006, the industry suffered a loss of approx. US$4.5 billion in physical piracy and loss on sales of over 20 billion songs in terms of digital piracy Proliferation of internet, lowering costs of technology (duplicators) and emergence of portable platforms such as MP3 players and mobile phones accelerate this trend Most Digital Rights Management software have failed to protect assets effectively
Continued
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Multiple emerging platforms to consider and address in short term E.g.: Wireless Devices With each emerging platform, complexities such as pricing, revenue sharing with retailer, royalties payouts, effective enforcement of digital protection, portability etc have to be addressed For a music major, on boarding of partners is a very frequent activity since unique entities have evolved along the digital distribution space that have to be tapped as potential sales channels via partnerships On average currently music companies deal with 500+ Digital or Mobile Sales Providers
Continued
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Lowered barriers to entry are promoting the entry of a larger number of artists, releases and even e-Labels (i.e. online-only labels) Improved competition from independent labels that are getting better visibility through the reach of the internet Upward pressure on marketing costs to differentiate and get visibility in an over-crowded market place, is creating downward pressure on pricing and margins The industry had not been very successful in identifying and tapping into new sources of revenue besides music sales (for e.g.: Merchandising) Music Companies are increasingly signing on artists on 360-degree deals that intends to exploit all aspects of their music and public persona to generate revenues
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A current release involves 200+ products being released simultaneously 80% of the products created for a new release are digital. This includes ringtones, wallpapers, online download tracks, music videos etc Music companies may soon venture beyond music and related content to explore new revenue streams such as licensing of long form videos (such as movies) Costs of talent acquisition, artist development and marketing keep rising
Focus on driving efficiency into processes (through initiatives in process and technology outsourcing) to address increasing pressures on operating margins
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Module- IIi
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Contract
Recording Artist
Payout
Payout Finance
Packaging
Distributor
Contract
Songwriter
Publisher
Licensing
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Understanding Copyrights
Copyrights provide the Legal and Commercial foundations for the Music Industry Unlike patents, basically the copyright is not issued but simply avered by the author or publisher The songwriter owns his or her copyright upon physical creation of the song According to U.S copyright law, some special rights are given to owners in their copyrighted content, which include: Work reproduction work performance in front of public Distribution of the works copies Create a work which is derived from the other work. Display the work publicly Copyrights protection is not same across the world and depends on legislation in each territory
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Understanding Copyrights
The core Copyright industries in USA contribute $260 billion to the economy and has by now bred over $60 billion in foreign exchange earning
Validity of Copyright Protection in US Works created as works made for hire lasts for 120 years from creation or 95 years from first publication , whichever comes to end first Works that are not created as works made for hire ends at 70 years plus the life of the author After copyright expiration, the work goes into public domain and reproduction is free
Copyrights on Music is as follows: Musical Work: Rights are with Songwriter (50% with Lyricist and 50% with Composer, unless stated otherwise) It may issued to a Publisher who has a contract with the Songwriter Sound Recording: Rights are with Artist, Music Company or Producer depending on contract
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Master Use License Gives the right to distribute and reproduce copyrighted sound recordings material onto any medium (i.e. CDs, records, tapes, and certain digital configurations) or any other uses of it (including synchronization) Obtained from the owner of the master recording, mostly a record company For specific exploitations of a sound recording, licenses from multiple copyright owners (such as owner of musical work, owner of sound recording etc) may be required For E.g.: To use a recording in a motion picture, rights will have to be obtained as follows: Sync Permission through the issue of a Master License of the Recording Synchronization license from Songwriter for usage of musical works that are part of the recording
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Publisher Royalty
Paid to the Publisher or Songwriter The various ways by which publisher royalty is paid are: Statutory (Stat) Rate: As decided by the US Congress Negotiated Rate: Negotiated and tied to Stat Rate (as a %) Fixed/ Contracted Rate: Negotiated rate NOT tied to Stat Rate Complexities: More than one songwriter for a song Differing ownership percentages
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Note: To exploit each of these opportunities, separate licenses are required for each song
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Record Companies
Distributors
Retailers
Producers
Royalties Share
Songwriters
Royalties
Publishers
Royalties
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Distribution
Clubs/Discos
Performance Royalty
Holds a contract
Record Company
Artists
Master Recording
Singers Musicians
% of performers Royalty A&R Artist Management Manufacturing Promotion and Marketing Packaging Marketing Promotion Manufactured recordings Distribution Licensing
Record Royalties
Distributor
Recordings
Retail Sales
Sales profit Sales profit
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Consumer
1
Grants copyright to exploit his/ her work (s) for commercial returns
6 TV/Radio
Song writer
Publisher
2b
PRO
Contracts with the music company for production, distribution and sales of a song
2a
Artist
Music Company
Licensee
Specifies the rates applicable and specific terms for royalties on Licensee payouts etc
Agreement with a third party (usually foreign sales) to produce, distribute and sell company products in specific territories
Note 1: PRO is Performing Rights Organization. A form of Collection Societies | Note: 2 can be either 2a or 2b
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Publisher-Songwriter Contracts
Because of the difficulties of publishing a song, many unknown writers have contracts to write exclusively for one publishing company. The contract will have a detailed description of a financial (royalty) agreement. Under exclusive writer's contracts, payments are commonly termed advances and are recouped from royalties which would otherwise be paid to the writer. If a songwriter has collaborated with another songwriter, the royalties will be split
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Publisher-Songwriter Contracts
Publisher - Songwriter Deal Types Full-Publishing Agreement
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Module- IV
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Prerelease Processes
Artist Setup and Management It involves the signing up of an artist i.e. establishing a contract and initiating all artist service related setups within the Music company. Artist services include primarily Contracts Management, Career Development (including development of products), Event Scheduling (Calendar Planning) and Royalties setup. Inefficient Artist Services is a good reason to be the sore point of contention and reason for Artists abandoning their original Music companies. Project Management A project may be defined as a budgeted piece of task performed by a specific Artist working with certain Producers and Engineers. Each release is defined as a project and budgets and workflows are setup accordingly to conclude the same. Closely tracking and managing such projects is critical since the bottom-line of the company will be significantly affected due to this.
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Prerelease Processes
Clearances Management Clearance is a permission granted to use copyright-protected material for monetization purposes. Clearances Management is the process of owning or acquiring rights and approvals to exploit and market product manifestations of the same. Clearances should be acquired from both Publishers and Artists (for recordings which they own). Product Definition The Product Definition process determines the tracks that go into a particular release and all other aspects of it such as identifying key stakeholders, designing the CD layout, determining the contents of the Digital Package etc Products in Music industry terms is divided into two categories: i. Finished Goods: End products E.g.: Music CD; constituted of multiple components.
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Prerelease Processes
Components: Part of finished goods; Classified into two types: Printable Components: All printed material such as Inlay Cards, Stickers etc Non-Printable Components: Includes all other manufactured components such as CDs, Jewel (CD) Cases etc There are basically five owners to be identified for every Product Definition and Release. They are: Artist: who will perform the song Repertoire Owner: who owns the recording rights Marketing Owner: who will market and sell the product Distributor: who will distribute the product in various territories Publisher: who owns the song rights As mentioned earlier, present day music releases often result in the simultaneous release of over 400 products to the market. Over 80% of these may be in the digital form. ii.
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Prerelease Processes
Digital Content Production and Management The Content Production Process in the Music industry as in many other related Media industries is largely digital. This process involves the submission of master assets, management of the same and all its manifestations in the form of audio, video, ring tones and graphics content and quality assurance of the same. Audio Master Content is registered and encoded into all required file formats before making it ready for inclusion into product releases. This process also involves the application of audio watermarking to registered assets to track its usage in networks over time. Purchases/ Physical Production Purchase Orders are placed by Music Companies for Components and Products Present day companies may often outsource the actual production and printing of physical products (CDs, labels etc) to other external vendors.
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Prerelease Processes
The Purchases process involves vendor management that realizes the basic step of manufacturing the physical goods as per expectations and shipping it to warehouses owned by the Music company. A single vendor (usually the one manufacturing and pressing the CD) may coordinate the shipments from component manufacturers to include all parts that will be part of the final product. Pricing Pricing process determines the price of every good that the company sells. Price of any Product on any Sales Order is based on Price Lists mainly derived based on Customer, Product and Effective Date of Price Charges (for Freight, Packing, Services etc) and promotions affect the final price of a product Services are actions or processing that must occur for an order in the warehouse. For example, affixing special stickers onto the products for a particular retailer. These deem extra charges beyond the regular price.
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Release Processes
Inventory Management Inventory is essentially the stock of goods (Products or Components) that are for sale Inventory Management process deals with the workflows and procedures which manage and track inventory and all its related costs Warehouses hold inventory that comes in from the manufacturer before being disposed to customers as per orders Inventory gets updated in the following scenarios: Purchase Order fulfilled as manufacturer delivers goods Sales Order shipped to customers or trading partners Transfer of Stocks from one warehouse to another
New Releases Scheduling The New Release Scheduling process involves the creation, search and maintenance of new release schedules.
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Release Processes
The date on which a product should be released into the market is called its Street Date. Releasing a product means making the product available for shipping and delivery. Physical and digital items are scheduled for release based on the territory/ cluster to which the product release has to occur. Release for a particular product can be uniform across territories or staggered. For e.g.: A US release may occur prior to an India release Digital Packaging and Delivery The Digital Packaging and Delivery process consists of three steps: Picking Packaging and Shipping Digital Pick phase involves picking schedules of New Releases and generating a manifest, which holds details of products across various customer accounts.
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Release Processes
A digital Bill-of-Material (dBOM) completes the configuration and verification of a release to make it ready for packaging. The Packaging phase prepares a product for the shipment process by validating and confirming all requisite business rules. A package contains an XML file with metadata and references to all digital assets, cover art graphic files and audio or video encoded assets. In Shipping phase, the digital content is provisioned to specific DSPs utilizing various transport technologies. Promotions and Advertising This process entails all activities surrounding the Promotions and Advertising initiatives at the Music Company. This process involves campaign planning, cooperative advertising, email campaigning, and promotions via free goods distribution Marketing Budgets are set of each project and activities are planned and undertaken to maximize sale of releases.
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Release Processes
Cooperative Advertising translates to specific activities undertaken at a
particular territory by specific retailers for which the Music Company shares the costs.
Physical Sales Management This process includes all the tasks involved in the fulfillment and processing of a sales order for physical products A Sales Order is an order from a customer for finished goods. The following are its types:
Shipment Orders: shipped to customers from warehouse Direct-ship Orders: shipped directly from the manufacturing plant Promotional Orders: shipped to customers, artists or employees at no cost
Prepack Orders: Orders from customers requesting for single products consisting of multiple finished goods
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Release Processes
Managing the Return of finished goods from customers is also a significant part of the Physical Sales Management process Digital Sales Management This process entails the monthly/weekly processing of sales data from Digital Sales Providers (DSP) and Mobile Sales Providers (MSP) Digital Sales Providers include players such as iTunes who provide online music sales and Mobile Sales Providers include players such as Digiplug who provide music sales via Mobile networks The processed data is included into downstream processes such as General Ledger entries, AR Invoices and Royalties.
Invoice Management Invoice is a legal document specifying an asset in relation to a customer or a debt in relation to a vendor due to a "forward" business transaction.
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Release Processes
Invoices are generated by a Music Company for Shipment orders and for Return orders. Pre-Condition for Invoicing Process is completion of Shipment Confirmations files received from Warehouses. An invoice to a customer is posted as an asset in the Accounts Receivable A music company also receives invoices from vendors. This is posted as a debt in the Accounts Payable.
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Mass production
Analogue recording
Compact Disc
Live Performance Video Production Encryption & Compression TV broadcast Recording
Mini Disc
Printing
Playing Devices
Publishing
Disseminating Records
Packaging
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Musical Work
Musical Work is the song to be produced. The producer decides the parts to be recorded, the instruments to be used in the arrangement and who play them.
Recording
Performances that make up the musical arrangement are recorded to any of variety of audio and MIDI recording hardware devices and software
Editing
The performances recorded can be edited in a variety of ways to change either the individual performances or the entire arrangement
Mixing
The individual tracks that make up a multi-track recording are combined and processed using effects, to create a final stereo recording to the song
Mastering
The finished stereo mix is prepared for distribution as either an audio CD, or a MP3 file, by making final adjustments to the overall sound of the recording
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Instruments and Production Tools Acoustic Sources: Performances by a purely acoustic instrument, such as a sax or a piano, or by vocals that isn't plugged directly into any recording apparatus will be recorded via a microphone. Special microphones may be used for individual instruments. Electric Instruments: Instruments such as basses, electric guitars and some electric pianos and organs can be recorded directly into an audio recorder
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Multi-Track Recording
Source Source
Musicians
Source
Source
CD
Mixer
CD
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Edit Edit the file to remove any unwanted sound from beginning and end of the mix
Equalize Make any final tonal adjustment to the mix using equalizer
Compress Make final adjustments to the overall level of the file using compression
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Production Technologies
Digital Audio Workstations (DAW) have simplified the Production technology landscape A combination of audio multi-track software and high-quality audio hardware designed to record, play back and edit digital audio Two varieties: Computer-based: consists of a computer, an ADC-DAC, and digital audio editor software E.g.: Adobe Audition, Tracktion ,Garageband, Pro Tools, Nuendo and Sonar Integrated: consists of a mixing console, digital interface and control surface in one device
ADC
Storage
Storage can be on a CD, an MP3 player, a hard drive, USB flash drive, or any other digital data storage device
DAC
DAC runs at a specific sampling rate and bit resolution but this sampling rate may not be the same as the initial rate
Playback
Playback occurs when the signal from the DAC is fed into a Player / Speaker system
ADC runs at a sampling rate and converts at a known bit resolution (OR) S/w Synthesizer generated
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Audio Formats
Media Formats
Recording Formats
Analog MECHANICAL | MAGNETIZATION DOLBY STEREO (1975) | PCM (1982) | AIFF (1985) | WAV (1992) | DTS (1993) | MP3 (1995) | DOLBY DIGITAL (1997) | WMA (1999) | TTA (1999) | FLAC (2000) | AAC (2001) | OGG VORBIS (2002) | ALAC (2004)
Digital
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File
File Structure
A Frame
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Digital Distribution
The birth of MP3 in 1990 changed the face of the music industry forever. The compressed size without compromising on quality and the convenience of easy transfer from computer to computer triggered its huge popularity. Digital sales via internet started in 2003, accounting for 2% of the total music industry in that year. High costs involved in physical distribution (such as distance to be covered and availability of stocks) have encouraged the digital distribution Digital sales traditionally included single track downloads, album downloads, whereas the recent trends include online and mobile subscriptions, mobile wallpapers, ring tones and videos. The number of tracks available online became twice in 2006 to about four million Portable player sales totaled around 120 million in 2006, an increase of 43% on 2005 There are currently 500 online music services available in forty countries IFPI predicts that by 2010 the digital sales would grow to 25% of the global sales
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Evolving Models
Artist Record Company Consumer
Artist
Consumer
Artist
Record Company
Online Retailer
Consumer
Note: The key drivers for the evolving models are: 1) Advances in technology and rapid consumer adoption of the same 2) Investments from Record companies to counter the increasing power position of online retailers
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Ad-supported Outlets
Free Music supported by Advertisements embedded into the songs E.g.: Spiralfrog
Online Radio
Webcasting of music over the internet by online radio entities either for subscription or ad-supported free music E.g.: Shoutcast
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Major Players
Napster
Essential Elements for Internet Distribution success: A large digital catalogue: to cater to the long tail of content High performance Internet Infrastructure Supplying safe and virus-free files Providing secure payment systems Development of a consumer-friendly digital rights management system Clearing recordings and compositions with various copyright holders
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Peer-To-Peer Distribution
The Napster revolution that initiated the large scale decline of the Music industry was based on a File Swapping Network, enabled by a Central Index Server
P2P Illustration
The technology shift and decentralization to Peer-to-Peer technologies triggered Piracy to new levels of popularity among internet users
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Peer-To-Peer Distribution
P2P Technology: Any software or system that allows individual users of the Internet to connect (directly, through the Internet) to each other so as to transfer or exchange computer files Contrary to the usual client/server concept, where one server will serve many clients, every computer with P2P software installed can act as a server and distribute files across the internet
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Music Usage Rights enforcement Secure Rendering Music Creation Rights Specification Labeling Protection Music Distribution Rights Authorization Tracking Label Management
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No Yes
PlaysForSure Devices
Audio Players Portable devices
Yes
Yes Yes
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Consumer Technologies
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Advertisem _ents
Devices
Catalogue
Recommen _dations
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Contract
Payout Finance
Packaging
Distributor
Contract
Songwriter
Publisher
Main Process
Departments
With the changes being brought about by technology and innovative business models, the music industry of the future could look very different from that depicted above
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Thank you
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