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Reducing the digital divide in the music industry

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7. Reducing the digital divide in the music industry

Vasilios Yfantis, A. Usoro, D. Tseles, T.E.I. of Piraeus

Abstract

The music industry is considered to be one of the most important industries in terms of finance however issues like the rise of album price or digital piracy, made the industry decline. The financial loss in modern countries have lead music labels in trying to break into new music markets of disadvantaged populations with the help of technology. Digital operation of music is cost effective as the producer avoids additional cost from intermediaries and product shipments, but unless there is access and efficient use of technology from the new markets, a digital music model cannot be successfully implemented in developing economies. This project performs a critical review of literature on digital divide and the digital music industry, adopts or adapts with justification John Fisher’s theory of transition curve as a new research model, operationalises the research model into a questionnaire for empirical data collection, analysises and discusses collected data and recommends new ways to close the gap of digital divide in the music industry.

1.1 The change of the music industry and introduction to new technologies

The transformation of an industrial society to a post industrial is characterized by the fact that the new economy progresses from an economy based on manufactured products, to an economy based on virtual products, finance, services and the power of information.
The music industry as a part of the retail industries changed the music product’s lifecycle according to the needs of the Information Communication Technologies. The new post industrial product lifecycle is currently based on the communication of electronic information such as MP3 or MP4 music files by using the public network of internet. Thus, the transition from the industrial society to post industrial society affected the digitalization of the music in a great level:

• The physical music products like vinyl, CDs and cassettes became digital products with the help of the electronic information that simulates the audio files. Moreover, recorded music from music studios is directly transformed into electronic information and there is no need for any additional editing before the product’s distribution to the market.
• The storage needs for the music distribution are less since a computer’s hard disc can hold thousands of music albums instead of owning a large room to place inside all of your physical music products.
• The physical transportation of the music products became online communication with the fans who buy the electronic files.
• Fewer intermediaries exist due to the less phases of the music product’s lifecycle.

1.2 The current status of the music industry and SWOT analysis

According to a digital report by IFPI# in 2010 more than one quarter of the record companies profit (27%), came from the digital mediums (Kennedy, 2010). The market worth in trade value is about US$ 4.2 billion, up 12 percent on 2008 (Kennedy, 2010). Moreover, right now in USA the mobile and online sales are about 40 % of the total music sales (Kennedy, 2010). It is obvious that the revenues from the digital music have more potentiality in comparison with the revenues from the physical products of the music industry.
According to IFPI’s digital music report (Moore, 2011), the current summary of statistics in digital music is:

• 13 million tracks licensed by record companies to digital music services.
• +400 licensed digital music services worldwide.
• US$ 4.6 billion trade value of the digital music market worldwide.
• 6% growth of global digital music revenues in 2010.
• 29% the proportion of record companies’ global revenues from digital channels.
• +1000% the increase in the value of the digital music market 2004-10.
• -31% the decline in the value of the global recorded music industry 2004-10.
• 16.5% proportion of internet users digital music in the USA.
• US$ 5 billion the estimated amount record companies invested in artists in 2009.
• 30% the percentage of their revenues record companies invest in A&R# and marketing.
• -77% estimated fall in debut album unit sales in the global top 50 2003-2010.
• -12% fall in the revenues of the global top 50 tours in 2010.
• -17% fall in the number of people employed as musicians in the USA 1999-2009.
• 1.2 million jobs are projected to be lost in the European creative industries due to piracy by 2015.
• 4240 billion estimated cumulative lost retail revenues to the European creative industries from piracy 2008–2015.
• 0 the number of local debut artists in the annual Spanish Top 50 in 2010.
• -45% fall in the number of domestic releases in Mexico 2005–10.

It is very interesting to research how the digital music model operates and how it is related with technology. The changing technology has enabled almost every new device to play music, thus the new business model in the music industry does not focus on the potentiality success of specific artists but to the music’s availability. The number of available devices that play music is going to encourage the availability of music libraries that consumers will access under a small monthly subscription. While, back in the 1970s and 1980s the number of music albums you owned made you an opinion leader among the social teams, the easiness of finding free music today online does not encourage people buying music. The consumers of today want to have access to a large variety of music and then will decide upon buying a specific music track. The music labels today license their catalogue not only for downloading but they enable access to the music for various reasons and with different price strategies. Web 2.0 and the world of social networking empower the music library’s access due to the culture exchange that is becoming a reality through social networking. The availability of new smart phones along with the agreements between ISPs and mobile providers contribute to the access of music from technology users that own the most popular devices. So the new business model is characterized by the opportunity to access the music library from anywhere by using the internet platform and then listen to the music everywhere on any device that plays music. The internet as a platform becomes the appropriate technology tool so as to implement the model of music anywhere – music everywhere.
The disadvantaged populations in Africa are a great market share for the music industry and iTunes has sold over 8 billion songs in this region (Online Africa, 2009) which is about 75% of the global online music sales. These numbers are small for Africa because the barriers of having poor network infrastructures prevent most of the population from using the internet for music access. The local population is focusing more on the old model of the physical products consumption and the local music labels in Africa remain in the non digital way of the music distribution. Until 2005 only 20% of the local labels had digital stores to distribute their music (Balancing act-Africa, 2005). According to Keith Lister, the managing director of Sony Music Entertainment in Africa: "Africa is the second largest and most populous continent after Asia, yet almost entirely unexplored as a market for digital music distribution, Africa is synonymous with wonderfully vibrant, original and diverse music traditions - despite its piracy and infrastructure challenges." (Lister, 2011).
In our case the use of SWOT Analysis will help us define a strategy in order to lead the music industry in finding new ways to gain profit. According to the details that we already have, these are the internal and external factors that affect the music business:

Table 1 SWOT analysis of the music industry

Subject of SWOT Analysis: The exploration of gaining profit in the new age of the music industry.
STRENGTHS	WEAKNESSES
Licensing of new digital music services Digital music market increases. Growth of the digital music revenues. Music anywhere –music everywhere business model.	Decline in the global recorded industry. Fall in debut album sales. Fall of the concert’s industry Fall in music employment.
OPPORTUNITIES	THREATS
Disadvantaged Population’s market. Mobile Phone’s market share. Globalization.	Potentiality for job loss in the total creative industry. Lost retail revenues in the total creative industry. Digital Divide. Music piracy.

The strengths focus mainly on the value of digital technology’s implementation in the music industry. The root of the weaknesses is the problem of the music piracy which is very important. The opportunities and threats feature two values that have not been discussed previously in the music industry: Disadvantaged Populations and Digital Divide.

1.3 Disadvantaged populations and digital divide

The term disadvantaged populations describes the groups of people that have denied access to the tools needed for self sufficiency (Mayer, 2003). The topics that featured here are autonomy, incentive, responsibility, self respect, health, education, information, employment, capital and much more (Mayer, 2003). Self sufficiency describes the state that the human’s survival depends only on personal soft or hard skills and not on external factors such as support or other kind of help. The prevention from the self sufficiency goal is usually caused by the lack of availability or low access to specific resources (Mayer, 2003).
Despite the great importance of technology in the music industry, the availability, access and use of technology in a worldwide level differs from country to country. The whole phenomenon has been termed as the digital divide by experts and according to NTIA (2002) is defined as: “The disparity of use of the internet and unequal access to information communications technology”.
According to a recent research from Miniwatts Marketing Group regarding Asia’s Internet Usage and Population (Miniwatts Marketing Group, 2010) we can view this imbalance between developed and emerging countries in the region of Asia. For instance Bangladesh that has an estimated population of 158,065,841 people in 2010 was found that in 2010, 617,300 internet users exist and there is an internet penetration of 0.4%. In comparison, Hong Kong which is a smaller country with an estimated population of 7,089,705 citizens, presents a significant number of users 4,878,713 and 68.8% internet penetration.
The same research shows that the digital divide exists in other regions of the world such as Africa (Miniwatts Marketing Group, 2010) where the statistics are more impressive and representative of the digital divide: Nigeria with a population of around 152,217,341 people has 43,982,200 internet users and internet penetration of 28.9% but Reunion (FR) with an estimated population of 822,986 people with 300,000 internet users has internet penetration of 36.5%. Another African country, Uganda, faces issues with the lack of technology and the inefficient use of internet by the web viewers or even the webmasters (Baguma, 2007).

1.4 The use of John Fisher’s model

The potential consumers in most of the emerging countries follow the old model of music consumption through physical formats of music such as vinyl, cassette or compact disks. Only recently, Sony decided to stop the manufacturing of cassette based walkman in 2010 (ABC News, 2010) but according to the same source of information there are still elder consumers in China and emerging countries of Asia that use this device which was first marketed in 1979! This is a living proof that the disadvantaged populations are still attached to the old model of the music industry and have not adopted yet the technology and the digital format of music. The question here is why the disadvantaged populations contribute in the digital divide of the music industry? Why do these people not want to change the way that they consume music, what makes them say no to the change? If these people are forced to change their behavior towards technology, then may demonize the use of technology and empower the existence of the digital divide in the modern world. Thus it is very important to realize what holds them back and how these issues are going to be resolved.
John Fisher developed a theoretical model about how people deal with the personal change and first presented this theory at the Personal Construct Congress in Berlin (1999), this model is based on the theory of the Personal Construct Psychology (Businessballs, 2011). According to John Fisher, there is a climate of emotional stages that the person has to deal with while he faces a personal change (Business balls, 2011).

1. Anxiety and denial

2. Happiness
3. Fear
4. Threat
5. Guilt and disillusionment
6. Depression and hostility
7. Gradual Acceptance
8. Moving Forward

John Fisher’s theory model makes a point by showing that each change whether if it is small or big, it affects people in a different level and progressively they adopt the change by moving forward and getting involved in the implementation of the change. Of course, there is always the danger for someone to get stuck in a specific stage and not adopt the philosophy of the new system. That is why it is important to detect the stage that each person or social team belongs to and then define a strategy to solve the issue and make them continue to the next stage until they reach the last stage of moving forward.
Regarding the current academic effort, it is important to find the emotional stage of the disadvantaged populations that suffer from digital divide. Disadvantaged populations are considered the next big thing for the music industry due to the potential size of the music market but digital divide is a barrier which prevents them from joining the new digital music evolution. The way that people view technology and the change that is going to affect their current status of life changes their use of the technology as well. If technology is a value that meets their personal beliefs and satisfies the ideal goals, then the involved persons are going to adopt technology and use it efficiently by concentrating on how they can benefit by the technology’s advantages. On the other hand if technology is considered as a negative value for their life then these persons are going to insist on the non efficient use of technology. Technology adoption is a crucial factor that is going to affect the new model of the music industry which offers access to music from anywhere and in any device. If the disadvantaged populations do not escape from “the non efficient use of technology” part of digital divide, then the new business model of the music industry is going to fail. John Fisher’s model is going to focus on the disadvantaged population’s point of view about the change in the technology and how do they feel about it. The research results will show which emotional stage these people fit into, in order to recommend a new strategy so as to make them reach the next stage of John Fisher’s model and finally move forward by helping the implementation of the music industry’s new business model.

For the needs of the research, the figure of John Fisher about the transition curve has been transformed into a new one based on the technology adaptation by the disadvantaged persons.
The adaptation of John Fisher’s model in the current academic effort leads us to make 8 hypotheses based on the 8 emotional states that exist when a person is dealing with a personal change. In our hypotheses, when disadvantaged populations deal with the change of the music industry’s technology, they may find themselves in one of the 8 emotional stages. As long as the findings focus on the emotional stage that the disadvantaged belong, then a specific strategy is going to be recommended. Thus the research question here is:

1. How the populations that suffer from digital divide adapts to the change in the music industry?

And of course the 8 hypotheses are:

H1: The disadvantaged population feels anxiety and denial.

H2: The disadvantaged population feels happiness.

H3: The disadvantaged population feels fear.

H4: The disadvantaged population feels threat

H5: The disadvantaged population feels guilt and disillusionment.

H6: The disadvantaged population feels depression and hostility.

H7: The disadvantaged population feels gradual acceptance.

H8: The disadvantaged population feels moving forward.

1.5 Sample population and questionnaire items

I am based in Europe and in this region live 37 million disabled people which is about the 10% of the total European population (city of Athens, 2011). According to the World Health Organization, in Greece live about 1 million disabled persons and the majority of them has a mental disability (City of Athens, 2011). The 35% of this population lives in Athens and the percentage increases to 50% if we include disabled people from other cities that visit Athens in order to have access to hospitals, schools and other social services (City of Athens, 2011). Disabled people that live in Athens were my target group and the only thing that remained was to find a way to gather information through administering written questionnaires. The research was conducted in the city of Athens between 20th April and 20th May 2011, all the analysis and graphs were made with the help of software from the website Marketsight.com. The questionnaire’s questions were categorized in 3 different parts:

• Music consumption questions: Valuable information it is requested here that is related to the way that the target group consumes music. Most of the music managers are interested in finding the potential chances for profit inside the target group of the disadvantaged populations.
• Digital divide questions: These questions are looking to find information that will show the percentage of the digital divide’s existence in Greece.
• John Fisher’s theory question: This is the most important part of the research and features a question that it is based on John Fisher’s theory model. The research question of the current academic effort is: How can the population that suffers from digital divide adapt to the change in the music industry? John Fisher’s theory will be represented through a question that is looking to find the emotional state of the disabled people that face the personal change of adjusting to the digital music industry.

1.6 Research question’s results

Table 2 John Fisher's theory results

This is the most important question of the research because the answer of this question summarizes the disabled people’s behavior towards the change in the music industry and digital divide as well. Unfortunately most of the people (55%) are afraid of the new technology in the music industry. If John Fisher’s theory is right then it means that the personal values and beliefs of each disabled person are against the values and beliefs that the new model of the music industry represents. The antithesis between the two kinds of beliefs blocks the target group’s will to consume digital music and it seems to be the main reason behind the problem.

1.7. Recommendation of the mobile social networking

If fear is the feeling that prevents the disadvantaged populations from accepting the change in the music technology and their life, then this social group needs a way so as to trust technology. Social trust through the exchange of information will be the solution to the problem. Social trust is a phenomenon that will be implemented by the extensive use of the social networking.
The role of exporting information (and especially the way that information is treated) is very important in the current society. We live in an information society where information is considered the ultimate value for economic growth of humanity and a significant tool to build the future for the next generations (Infosoc, 2010). Information is therefore the key for raising the cultural capital. The movement of people within the hierarchy of the social classes is called social mobility (Devine, 1997) and the equal access to information is considered to be one of the pre-requirements for social mobility (Alonso and Oiarzabal, 2010).
If we consider the foregoing discussion with the most popular triggers of social mobility then we find the social capital that is produced through virtual communities and social networking. One of the latest trends in virtual communities is the mobile social networking where groups of people with common interests are connected with the use of a mobile phone (Butler, 2006).

The mobile virtual communities that are created have been very popular due to the increased rate of information sharing and social trust that is developed among users (Falcone, Barber and Singh, 2008). The knowledge that comes out of the community’s interaction is valuable because it is a product of a democratic process where everyone has the right to express his own point of view. There are usually one or more moderators of the forum that monitor discussions and make sure that there is no abuse of the community by users and that the operation of the community meets the initial mission. Each virtual community often has a unique mission and the outcome of the community usually depends on the creator. The majority of mobile virtual communities have a non-profit mission which could be medical help, art, society contribution, travel experience, philosophy, sports, technology and popularity and more. Moreover, the mobility encourages people to reply instantly to information. Thus, the speed of interaction increases the rate of the distributed knowledge and the received information is updated because people transmit knowledge the time it is created.
One of the most important outcomes of mobile virtual communities is social capital which triggers social mobility (Dasgupta, 2006). The social capital is a result of information exchanging between the users and the constant interaction between the members of the community based on trust. A study by the Society for the New Communication Research showed that people agree with the statement that “they choose products based on other customer’s experiences which were shared online (Gillin, 2009). Another research conducted by Nielsen showed that consumers referred to other customers about being their trusted source of information (Nielsen, 2009). There are mobile social networks that operate as an intelligent search engine and combine results from other virtual communities to offer the smartest reply for people’s questions.
The mobile virtual communities unite people with differences in race, age, and economic status under the umbrella of the need for information and understanding; so, it builds trust between the members of the community. Such understanding and familiarity with each other sometimes result in physical meetings which inevitably often enhance the trust relationship.
Social mobility fits perfectly with human mobility because they share a common ground in movement and there is always the need for information exchange. Mobile technology is playing the role of the intermediary between the two types of mobility, with the creation of mobile communities that preserve the ethics and democracy of the community culture. The character of virtual communities in mobile social networking creates two of the requirements that society needs to lead people in the upward movement within human society: trust and e-democracy. Social trust occurs because the mission of the forum is to share the power of knowledge by helping each other in a democratic way. The conclusion here is that the social trust of mobile virtual communities leads to social capital which enhances social mobility. The efficient use of ICT must include the improvement of the existing wireless networks by offering more free spots for mobile technology users and more bandwidth for exchanging of information. Also an interesting research could be conducted about the merging of the mobile virtual community with the satellite TV virtual community because the interactivity in satellite TV users defines them as the next major beneficiaries of the digital music industry.

Vasileios Yfantis (MSc)

Vasileios Yfantis holds a BA honors degree in Marketing from the Technological Education Institute of Athens and an MSc in Information Technology with Web Technology from the University Of The West Of Scotland. Mr. Yfantis is currently employed within the Greek Government in a position that is related to the use of ICT for the citizen’s service. He has also been a freelance journalist for more than 15 years by contributing content to both electronic and printed media.

As a conference speaker, he recently presented innovative research on the reduction of “Digital Divide in the Music Industry” at the International Scientific Conference eRA 6. The main areas of his research interests feature: Information Communications Technology, e-Tourism, Digital Divide in Developing Countries, e-Government and in the Digital Entertainment Industry.
Contact: Byfantis@yahoo.com

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