mbm

Music Business Models

Patrik Wikström

Jönköping International Business School

After the lecture, you will: Know some basic business model

concepts and terms. Be familiar with a number of real-life

Internet-centric music business models.

Be able to analyze a music firm’s business model.

Be able to design your own music business model (sort of).

<1>

What is a business model?

“A business model is a framework for making money.”

“A business model is a story that explains how enterprises work.”

“A business model is a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business logic of a specific firm.”

Magretta 2002; Osterwalder 2004

Is it a fad?

E.g. Osterwalder 2004

A framework for making money

Types of business models

A business model of a specific firm

E.g. Osterwalder 2004

Business model building blocks

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

How do we get and keep our

customers?

Who are our main partners,

suppliers, alliances?

What are our key

capabilities and

resources

What do we offer?

Who are our

customers?

How do we reach our customers

?

A visual description of

how we operate,

collaborate and create

value.

E.g. Osterwalder 2004

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Value configuration (chain)

Production value chain Distribution value chain

Content selection & processing

Transformation of content into distributable form

DistributionMarketing & promotion

Content acquisition & creation

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Value configuration (network)

audience approval

risk willingnes

s

+

DELAYDELAY

oblivion

-

intellectual property

development

novelties?

DELAYDELAY

DELAY

DELAY

+

attractiveness of IP portfolio

+

+

marketing effort

licensing effort

+

+

DELAYDELAY

DELAYDELAY

profit

profit gap

pressure

required profit

+/-+/-

+/-

+

+

+-

DELAY

DELAY

DELAY

DELAY

DELA

YDELA

YDELAYDELAY

+

royalties

+

+

+

+

+

+

media presence

DELAY DELAY

DELAY

DELAY

+

+

technology &

regulation

audience fragmentation

marketing efficiency

-

+

content demand

+

media outlets

audiencevolatility

media riskwillingness

playlist entry barriers

+

+

+

-

+

-

+

DELAY

DELAY

DELAYDELAY

DELAY

DELAY

revenues

audience reach

marketing

licensing

audience action

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Value configuration (what to include?) Users & non-users

Members, users of different status and with different behaviour

Partners Suppliers, alliances, etc

Flows Information, goods, money, attention, …

Resources Stocks, IPs, staff, equity, etc, …

Business model building blocks

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Cost Structure

Revenue Streams

What are our

costs?

What are our

revenues? Our

pricing?

Is this a viablebusiness?

In practical terms– what does “the thing” look like The nine building blocks

Value propositions Customers, channels, customer relationships Partnerships, capabilities, value configuration

A financial model (Excel) A visual representation of the value

configuration

Business models vs. Strategy

Business models ignorecompetition & implementation

Business models vs.Business process models (1)

economiclogic

vs.implemented

activities

Business models vs.Business process models (2)

“businessmodeling” ≠

designingbusinessmodel

</1>

<2>

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Target Customer

•People who listen to music in the background while they do other work.•Fans of music that gets little radio airplay or major record distribution.

Target Customer

•People who listen to music in the background while they do other work.•Fans of music that gets little radio airplay or major record distribution.

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Customer Relationships

•One-off purchases•No subscription, no customer database•Word-of-mouth•”We are not evil”

Target Customer

•People who listen to music in the background while they do other work.•Fans of music that gets little radio airplay or major record distribution.

Target Customer

•People who listen to music in the background while they do other work.•Fans of music that gets little radio airplay or major record distribution.

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value ConfigurationValue Configurationaudience approval

risk willingne

ss

+DELAYDELAY

oblivion

-

intellectual property

development

novelties?

DELAYDELAY

DELAY

DELAY

+

attractiveness of IP

portfolio

+

+

marketing effort licensing

effort

+

+DELAYDELAY

DELAYDELAY

profit

profit gap

pressure

required profit

+/-+/-+/-

+

+

+-

DELAY

DELAY

DELAY

DELAY

DELAYDELAY

DELAY

DELAY

+

royalties

+

+

+

++

+

media presence

DELAY DELAY

DELAY

DELAY

++

technology &

regulation

audience fragmentation

marketing efficiency

-

+

content demand

+

media outlets

audiencevolatility

media riskwillingness

playlist entry

barriers

+

+

+

-

+

-

+DELAY

DELAY

DELAYDELAY

DELA

YDELA

Y

revenues

audience reach

marketing

licensing

audience action

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Partner Network

•Creatives• Non-exclusive• Creative Commons• 50/50 revenue split

•Technology providers

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Core Capabilities

•Relationship Mgmt•Public Relations•Supply Chain Mgmt•Roster development•People•Web Usability + Tech•…

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Channels (Comm & Distr)

•Streaming, downloads, CDs•Mainstream media•Web site•E-mail

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Revenue Streams

•Royalty fees, donations, merchandise

•Download pricing: Flexible $5 - ?•License pricing: Depends (low)•CD pricing: $16.98

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Value Proposition

•”We are not evil”•Flexible licenses (Creative Commons)•”High” sound quality•User friendly interface

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Cost Structure

•Royalties, based on sales revenues (50/50 split) •Technology•Marketing•Admin + Salaries

Value Proposition

Partner Network

Value Configuration

Core Capabilities

Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams

</2>

<3>

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Cost Structure

Revenue Streams

Value Proposition

Partner Network

Value Configurati

on

Core Capabilitie

sChannels

Customer Relationshi

ps

Target Customer

Cost Structure

Revenue Streams

Value Proposition

I. Music-to-Users vs.Users-to-Advertisers

iTunes; last.fm

User control: Playlists (formatted or personalized); On-demand

BBC; last.fm; YouTube

On-Service vs.Off-Service

YouTube; iTunes

Digital Rights Management:Locked or Unlocked

iTunes; eMusic

Sound:Quality; codec; compression

iTunes: AAC 128kbps/Lossless; Amazon: MP3

License:Temporary; permanent; creative

commons

Bundling:None, pure, mixed...

Most Mobile Operators, e.g. Vodafone, Three, Telenor

Value Proposition (summary)

Customer Relationships

One-offYouTube

MembershipAmazon

SubscriptioneMusic

Vendor lock-iniPod + iTunes

Customer Relationship (summary)

Revenue Streams

Advertising revenues

User payments

Price levels (user payments)

Compulsory licenses E.g. Noank Media

Revenue Streams (summary) Advertising

Per Action, Per Impression, Per Time,… User payments

Based on access to a service [€/month] All-you-can-eat; blanket license A limited usage per month [e.g. X downloads]

Triggered by a specific action [€/album] Price levels

Uniform (incl. free), Tiered, “Freemium” Dynamic pricing schemes: E.g.: Demand based, Tip jar Loss leader

Compulsory licenses

Cost Structure

Royalties

Alternative compensation to rights holders

And all the other costs of course… Bandwidth, infrastructure Marketing Admin, salaries, overhead Etc, etc…

Cost Structure (summary) Royalties

Fixed amount per play or download. Pool of money

Percentage of advertising revenues, subscription fees, etc.

Distributed to rights holders based on downloads or plays.

Blanket license Less common: Barters, Advances, Stock Everything else…

</3>

<4>

Value Proposition

Partner Network

Value Configuration

Core Capabilities Channels

Customer Relationships

Target Customer

Cost Structure

Revenue Streams?

Three cases

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Revenue Streams

•Advertising• Premium CPM: $10-20?• Google Ads: $1.50-3?

Revenue Streams

•Advertising• Premium CPM: $10-20?• Google Ads: $1.50-3?

Customer Relationships

•Memberships•Users must visit the SpiralFrog service once a month to renew their license.

Customer Relationships

•Memberships•Users must visit the SpiralFrog service once a month to renew their license.

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Revenue Streams

•Advertising• Premium CPM: $10-20?• Google Ads: $1.50-3?

Revenue Streams

•Advertising• Premium CPM: $10-20?• Google Ads: $1.50-3?

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Value Proposition

•Users-to-Advertisers•On-demand•Off-Service (sort of)•DRM: WMA•Sound quality: 128kbit/s•License: Temporary•Bundling: None

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Cost Structure

•Publishing royalties• 8% of gross revenues

•Sound recording license• 50% of gross receipts (ad

sales)•Bandwidth & technology

• Assume: €100/TB

•Advances…

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Customer Relationships

•Brings the customer closer and closer…•From One-offvia memberships,and subscriptions,and eventually lock-in(heavy user investments).

Customer Relationships

•Brings the customer closer and closer…•From One-offvia memberships,and subscriptions,and eventually lock-in(heavy user investments).

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Value Proposition

•Music-to-Users (OTA downloads)•On-demand•Semi-off-service•Sound quality: AAC+?•MusicStation

• DRM: Locked OMA DRM 1.0 from Musiwave

• License: Temporary• Bundling: Telephony Service

•MusicStation Max• Microsoft PlayReady• License: “Almost

permanent”• Bundling: Device

Value Proposition

•Music-to-Users (OTA downloads)•On-demand•Semi-off-service•Sound quality: AAC+?•MusicStation

• DRM: Locked OMA DRM 1.0 from Musiwave

• License: Temporary• Bundling: Telephony Service

•MusicStation Max• Microsoft PlayReady• License: “Almost

permanent”• Bundling: Device

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Customer Relationships

•Brings the customer closer and closer…•From One-offvia memberships,and subscriptions,and eventually lock-in(heavy user investments).

Customer Relationships

•Brings the customer closer and closer…•From One-offvia memberships,and subscriptions,and eventually lock-in(heavy user investments).

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Revenue Streams

•Advertising• Premium CPM: €10-20?• Google Ads: €1.50-3?

•Subscription fees (basic) €2.50/month•Music Store Commission: 5%•Powerplay: £11.5 / 100 plays

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Value Proposition

•Music-to-Users & Users-to-Advertisers•Personalized (adaptive) playlists as well as On-demand•On-Service only•DRM: N/A (Streaming)•Sound quality:, MP3 128kbps•License: N/A (Streaming)•Bundling: None

•Other• Share, discover, listen, express

yourself

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

Cost Structure

•Publishing royalties• 8% of gross revenues,

minimum 0.1c per musical work streamed

•Sound recording license• Radio svc: 10% of net rev.• On-demand svc: 30% of net

rev.•Bandwidth & technology

• Assume: €100/TB•Fixed costs

• Staff: 60 people• Office in East London• Strong expansion

</4>

Patrik Wikström

Media Management and Transformation Centre

Jönköping International Business School

Jönköping, Sweden

patrik.wikstrom@jibs.hj.se