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Technology shocks and the restructuring of an industry: a social network analysis application for the music business

Abstract and Figures

The music industry has seen aggressive mergers and acquisitions in the past 180 years, favoring an oligopolistic model insisting on controlling the entire supply chain from content producer to consumer. However, technology disruption and convergence has influenced the path dependency of the industry and led to a drastic redefinition of business models. New alliances were formed, and market forces were shaken, opening the door to an influx of tech companies taking control of the distribution channels and eventually becoming content producers. But how are tech companies restructuring the music industry? We examine industry relationships using Social Network Analysis (SNA) and determine that new technology agents in the digital era are displacing the traditional distribution channels within the music industry. The use of SNA in this article reveals the changing power center in the music industry. We show that the industry experienced technology shocks contributing to the phasing out of traditional elements of the industry's value delivery, creating three areas of opportunity in the music industry for tech entrepreneurs: (1) manufacturing, (2) distribution, and (3) transaction(s). Currently, the post-shocks music industry is dependent on technology companies for the connection to consumers. These relatively new technology companies in the digital era are significantly reorganizing the network. They are now expanding their control of music consumption including music sales, ticket sales, and publishing rights management. These insights have implications for strategic action, including the need to recognize Technology Intelligence (TE) as a source of competitive advantage.
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Int. J. Technology Intelligence and Planning, Vol. 12, No. 2, 2018 173
Copyright © 2018 Inderscience Enterprises Ltd.
Technology shocks and the restructuring of an
industry: a social network analysis application
for the music business
Stan Renard* and Cory Hallam
The University of Texas,
One UTSA Circle,
San Antonio TX 78249, USA
Email: stan.renard@utsa.edu
Email: cory.hallam@utsa.edu
*Corresponding author
Abstract: The music industry has seen aggressive mergers and acquisitions in
the past 180 years, favouring an oligopolistic model controlling the entire
supply chain from content producer to consumer. However, technology
disruption and convergence has influenced the path dependency of the industry
and led to a drastic redefinition of business models. We examine industry
relationships using social network analysis (SNA) and determine that new
technology agents in the digital era are displacing the traditional distribution
channels within the music industry. We show that the industry experienced
technology shocks contributing to the phasing out of traditional elements of the
industry’s value delivery, creating three areas of opportunity for tech
entrepreneurs: 1) manufacturing; 2) distribution; 3) transaction(s). Currently,
the post-shocks music industry is dependent on technology companies for the
connection to consumers. These relatively new technology companies in the
digital era are significantly reorganising the network expanding their control of
music consumption.
Keywords: technology shocks; music business; technology entrepreneurship;
disruption; social network analysis; SNA.
Reference to this paper should be made as follows: Renard, S. and Hallam, C.
(2018) ‘Technology shocks and the restructuring of an industry: a social
network analysis application for the music business’, Int. J. Technology
Intelligence and Planning, Vol. 12, No. 2, pp.173–208.
Biographical notes: Stan Renard is an Assistant Professor of the Music
Marketing Program in the Music Department at the University of Texas at
San Antonio (UTSA). He is also the Assistant Director of the start-up incubator
Center of Innovation, Technology and Entrepreneurship (CITE). As an active
performer, he is a touring and recording artist, and the Founder and Arranger of
the Grammy-Nominated Bohemian Quartet. He holds a Doctorate in Musical
Arts (DMA) from the University of Connecticut as well as a Doctorate in
International Business (DBA) from Southern New Hampshire University.
Cory Hallam is an Associate Professor of Entrepreneurship and Technology
Management, the Director of the Center for Innovation, Technology and
Entrepreneurship (CITE), and serves as Chief Commercialisation Officer of
UTSA’s Office of Commercialization and Innovation. He holds a PhD in
Technology Management and Policy, an MS in Technology and Policy, and
MEng in Aeronautics and Astronautics from the Massachusetts Institute of
174 S. Renard and C. Hallam
Technology. He has worked as an Aerospace and Telecommunications
Engineer, Program Manager on manned and unmanned aircraft programs, and
in lean enterprise transformation with small, medium, and large companies.
1 Introduction
In the past several decades, the music industry (MI) has undergone radical changes
(Moreau, 2013; Taylor, 2014). Traditionally, the recorded MI was characterised by
physical inventory with products manufactured and distributed through retail sales
channels (Graham et al., 2004). However, since 1996, the distribution of recorded music
has been disrupted with its shift towards online digital exchanges [Figure 1(a)] (Fairchild,
2016). Today, due to this shift, many new technology companies are reshaping the MI
(Table A2). We assess the relative importance of music technology companies supporting
the distribution and sale of music and how they are displacing traditional industry
structures with the technology displacement factors at play (Benner and Waldfogel,
2016). This article adds on to the technology entrepreneurship (TE) literature related to
disruptive technologies and the entry of entrepreneurial technology firms into the market
(Abernathy and Clark, 1985; Abernathy and Utterback, 1978; Christensen, 1997; Walsh
and Kirchhoff, 2002; Walsh, 2004; Walsh and Groen, 2013). It also intends to initiate
bridging the gap between the MI and TE literatures. In addition, we examine industry
relationships using social network analysis (SNA) and determine that new technology
agents in the digital era are displacing the traditional distribution channels within the MI.
It was not until the end of the nineties that four significant technological developments
and their convergence changed the industry. Those four shifts are the MP3 compression,
high-speed internet, multimedia computing and low-cost software for copying and
distributing files. We observe that ‘technology shocks’ (Landes, 1969) lead to a
restructuring of the MI causing it to go through a sequential process of ‘bundling,
unbundling and rebundling’ (Hagel and Singer, 1999). We explore the dependence of
traditional industry agents, namely music publishers and record labels, on
technologically-based service providers since 2000. Also, we establish a dependency map
using SNA to review mergers and acquisitions (M&As) to understand the ongoing shift
in the industry operating model and changes in firm control. Finally, we develop an
understanding of the trajectory of the industry and suggest strategic actions that are
necessary to capitalise on these techno-centric industry shocks, including the need for
major labels to adopt technology intelligence processes (Lichtenthaler, 2006).
2 Literature review
The MI was one of the first of the cultural sector to develop mass production using new
technologies (Goodwin, 1988; Jones, 1992) and it has continued to be at the forefront of
technological change (Towse, 2003). ‘Successive technologies’ determine the way music
is created, produced and delivered to consumers (Rogers, 1995; Tellis, 2006). However,
technological change profoundly affects the economic organisation of the industry
(Mansfield, 1968; Marino, 1996; Walsh and Linton, 2001; Walsh, 2004; Dolata, 2009).
Technology shocks and the restructuring of an industry 175
Firms in the music recording industry have traditionally preferred ‘technological
stability’ (Alexander, 2002), but have ultimately benefitted from ‘technological
disruption’ (Christensen, 1997; Walsh, 2004; Tellis, 2006). They have not, however,
demonstrated the use of strong technology intelligence processes (Huygens et al., 2001;
Chaudhuri et al., 2011).
2.1 Technology shocks
Technological convergence saw four fundamental ‘technological shocks’ that led to a
‘creative shock’ in the MI supply chain. Those ‘shocks’ transformed digital music sales
from theory into reality (Landes, 1969; Marquis, 1969; Abernathy and Clark, 1985; Shea,
1998; Francis and Ramey, 2005; Schilling, 2015). Landes (1969) was the first to
introduce ‘technology shock’ in the unbound Prometheus. Landes (1969) asserted that a
‘positive technology shock’ affects an industry or firm’s productivity by increasing the
output for a given set of inputs, whereas a ‘negative technology shock’ can decrease the
output for a given set of inputs. Contrastingly, several TE authors coined the term
‘creative destruction’ when addressing the effect of having new competencies displace
old competencies (Abernathy and Clark, 1985; Prahalad and Hamel, 1990; Kirchhoff
et al., 2013).
The first and best well-known introduction of a disruptive ‘technology product
paradigm’ (Kautt et al., 2005) or ‘technology shock’ to the MI was the introduction of the
MP3 compression technology format (Mahoney, 2013). The Fraunhofer MP31 reduced
sound file size without losing too much quality2, otherwise known as a lossy-compression
technique. As a result, a 128 kbit/s MP3 version of a traditional CD track is 10 to
12 times smaller than the original file (Witt, 2016). It can be argued that the MP3 was an
‘incremental’ innovation (Marquis, 1969) battling the MP1 and MP2 standards, as well
as a ‘radical’ innovation (Schumpeter, 1942), finally growing into an ‘architectural’
innovation (Henderson and Clark, 1990) linking digital service providers (DSPs) to
consumers and their devices. The second development or shock was the growth of high-
speed, flat-rate internet connections [Figure 1(b)]. Integrated services digital network
(ISDN)3 was followed by cable and asymmetric digital subscriber line (ADSL)4
connections to reduce download time to a fraction of what it used to be. MP3 track
would take 24 minutes to download with the standard 14.4 KB modem while a T15
accomplishes the same function within 20 seconds. The third development was the
introduction of multimedia computers with more storage capacity and higher fidelity
sound playback capabilities. Hard disk capacity moved from 10–20 MB which was only
suitable for storing two to five tracks to 300–500 GB, capable of saving thousands of
songs [Figure 1(c)]. The last technology shock was the introduction of free, user-friendly
software to rip6, play and share CD tracks as MP3 files over the internet (Leyshon, 2001;
Goodrich et al., 2011). The importance of downloaded music reached its watershed in the
year 2000. The introduction of Napster in mid-1999 popularised internet file sharing,
which provided the ability to illegally download music files (Richardson, 2014). By
2000, the internet started becoming a fundamental force for change in the MI that led to
the creation of new economic resources (Mowery and Rosenberg, 1998). We can view
those four technology shocks as ‘discontinuous innovations’ (Moore, 1991) that “require
users/adopters to significantly change their behaviour to use the innovation” (Walsh,
2004).
176 S. Renard and C. Hallam
Figure 1 (a) Inflation adjusted music revenue by format (b) High-speed internet connectivity to
US homes (c) Data storage extends an illustration (Hayes, 2002) recording growth in
the areal density of disk storage, measured in bits per square inch (see online version
for colours)
(a)
(b)
Source: aRIAA (2017) and bNielsen//NetRatings broadband growth in the
USA adapted from [online] http://wirelessmapping.com
Technology shocks and the restructuring of an industry 177
Figure 1 (a) Inflation adjusted music revenue by format (b) High-speed internet connectivity to
US homes (c) Data storage extends an illustration (Hayes, 2002) recording growth in
the areal density of disk storage, measured in bits per square inch (continued)
(see online version for colours)
(c)
Source: aRIAA (2017) and bNielsen//NetRatings broadband growth in the
USA adapted from [online] http://wirelessmapping.com
Also, those four technology shocks allowed the industry to become leaner (Lewis et al.,
2005) and to integrate higher levels of ‘automation’ (Bright, 1958; Marquis, 1969). The
response to the technological shift raised questions about the social and legal
ramifications associated with the industry (Leyshon, 2001; Wong et al., 2005; Kirchhoff
et al., 2013). The issue was recognised early on by Leyshon (2001):
“Software formats have elicited a conservative, critical response, a discourse
founded in the existing social and technological hierarchies of the industry.
Meanwhile, […] software formats have been welcomed by others precisely
because they are seen to be a means to dismantle the industry’s established
hierarchies and power relations. Although in opposition to one another, these
two positions at least agreed that the rise of software formats such as the MP3
would bring about the end of the music industry as it [stands].”
2.2 Technology convergence
The four technology shocks discussed previously were the most significant technological
shifts of the past two decades in the MI. However, most of the historical innovations that
supported the MI were a result of ‘technology convergence’ (Blackman, 1998; Hacklin
178 S. Renard and C. Hallam
et al., 2004; Rao et al., 2006; Goodrich et al., 2011) that were not ‘radically’ disruptive
(Schumpeter, 1942; Nord and Tucker, 1987; Bower and Christensen, 1995; Christensen,
1997), but were instead ‘incremental’ innovations (Marquis, 1969) (Figure 2). Alexander
(2002) points out that “radio was threatened by television, motion pictures by video
cassette players, music recording by tape technology and so on.” Those predictions of
the imminent demise of the industry as result of new technologies were wrong
(Van Berveren, 1995; Rogers, 2013). In most instances, the new technologies displayed
strong complementarities (architectural innovations) within the existing structure
(Henderson and Clark, 1990). Also, the entrepreneurial firms developing those
technologies derived their competitive advantage partly on their ability to use new
‘technology product paradigm’ to provide a solution to a market gap (Kirzner, 1973;
Prahalad and Hamel, 1990; Kautt et al., 2005).
Figure 2 SNA representation of technology convergence in the MI from 1598 to 2009 (see online
version for colours)
Source: Goodrich et al. (2011)
Some essential innovations included radio broadcasting in 1920, electrical recording
pioneered by Marsh in 1923, the Lilienfield First Transistor in 1925, the path dependent
(Vergne and Durand, 2010) standardisation of the LP Value 78 rpm in 1925, the avenue
of television broadcasting in 1925, Armstrong inventing FM radio in 1935, the
Magnetophon in 1935, Reeves pulse code modulation in 1937, Bell’s two-channel stereo
in 1937 and finally, mass vinyl records production in 1939 (Goodrich et al., 2011). The
MI – in particular – has been in a techno-centric transitional stage (Hamelink, 1997;
Rogers, 2013). “Emerging technologies have left [existing] business models in disarray”
(Rossiter and Goodrich, 2007). The convergence of technologies has allowed unsigned
independent artists to produce high-quality records driving recording companies and
Technology shocks and the restructuring of an industry 179
performers to adapt to new business models to survive (Bockstedt et al., 2005). DIY7
artists were able to enter the market thanks to the four technology shocks lowering the
barrier for new entrants (Alexander, 1994a, 1994b; Lewis et al., 2005; Porter, 2008).
Windrum and Birchenhall (2005) offer another perspective. They propose a rich
framework for ‘technology replacement’ (Kreng and Wang, 2009). Windrum and
Birchenhall (2005) investigate the conditions under which technological successions
occur. Their research draws together two areas of inquiry that have, by and large,
previously been treated as separate subjects: competition between sequential technologies
and network externalities. The interest in sequential technology competition dates back to
Schumpeter’s (1939) proposition that new technologies are the fuel of long-run economic
growth and increasing welfare. Long-run economic development, he argued, occurs when
an economy moves from one technology-base to another. Windrum and Birchenhall
(2005) explain that for a new technology to displace an established dominant technology,
a new technology must overcome the ‘network externalities’ enjoyed by the established
technology. Their research supports that network externalities tend to consider
contemporaneous competitions between rival variants of the same technology. Windrum
and Birchenhall (2005) views are shared by several TE scholars (Arthur, 1989; Katz and
Shapiro, 1986; Farrell and Saloner, 1985; Walsh, 2004).
A notable exception is David’s (1985) empirical case study of the QWERTY
keyboard. The Dvorak simplified keyboard (DSK) was the main competitor to the
QWERTY keyboard. DSK allowed you to type 20% to 40% faster than QWERTY, held
most of the world record for speed typing and was praised by Apple, Inc. as a superior
technology. So why did the DSK fail to displace QWERTY? Arthur (1988) and David
and Greenstein (1990) list a range of significant supply and demand side factors that may
lock-out a new technology. Such factors are the switching costs faced by users, scale
economies in production, learning and competence creation costs for firms and the
marketing and advertising costs of establishing a market for a new technology. The
increased market share and size lead to increased marginal returns for each of these
factors. The first applications of a new technology are invariably crude and inefficient,
with poor performance compared to the existing technology (Christensen, 1997;
Windrum and Birchenhall, 2005). Some innovations are not ‘automatically’ capable of
diffusing (Bright, 1958; Marquis, 1969). Windrum and Birchenhall (2005) explain that:
“Given that the underlying process of innovation –improving the quality/price
characteristics a set of [existing] and new technologies – continues after the
technological shock has occurred, the best predictor of a post-shock succession
occurred is a probability. This process highlights an important difference
between the ‘innovation phase’ and ‘diffusion phase’ of the technology life
cycle. A technology may be able to survive in the innovation phase – even if it
is initially inferior in many respects to the [existing] technology – provided it
shows sufficient ‘promise’ or ‘potential’ to a [critical] group of supporters.”
Next, we address how technology contributed to the restructuring of the MI.
2.3 Bundling
The MI experienced many waves of aggressive M&As in the past 180 years (Wikström,
2013) (see Figures 3 and 4). The industry path favoured an oligopolistic model insisting
on controlling the entire supply chain from content producer to consumer (McCourt and
Burkart, 2003; Graham et al., 2004; Burkart, 2005; Renard, 2010; Tschmuck, 2012).
180 S. Renard and C. Hallam
Figures 3 and 4 show the consolidation in the recording industry since the 1800s. This
concentration is due to several technology disruptions related to mass communication and
the hardware needed to disseminate music (Renard, 2010). From a historical perspective,
we can argue that the MI is in the midst of a ‘Kondratiev wave’ (Schumpeter, 1939;
Kondratiev, 1979). The current ‘supercycle’ or ‘wave’ would then place the industry in a
rebound position of its economic cycle.
Figure 3 Recording industry mergers (see online version for colours)
Figure 4 Formation and bundling of music recording and publishing companies from 1811 to
2016 (see online version for colours)
Note: The graph is based on data displayed in Table A1.
Technology shocks and the restructuring of an industry 181
Technology ‘path dependency’ (David, 1985; Liebowitz and Margolis, 2000; Dolata,
2009; Vergne and Durand, 2010, 2011; Belussi and Staber, 2012) emerged in the
mid-1960s and led to a continuous stream of M&A in the recorded MI with record
profits. This stream of mergers started with the advent of the digital tape recorder in
1967, followed by the Sony Walkman in 1978, the compact disc in 1979 and Sony’s first
CD player in 1982 (Goodrich et al., 2011). However, technology convergence and
disruptive innovations in the late 1990s and early 2000s led to a drastic restructuring of
the MI resulting in decreasing revenues for physical sales (see Figure 5). Tech firms
providing the digital distribution displaced the traditional MI distribution channels, taking
a significant portion of revenue in the MI, while technology shock led to a reduction in
overall industry revenues (Leyshon, 2001; Premkumar, 2003).
Figure 5 Industry revenues (see online version for colours)
Source: IFPI (2017)
Historically, the large music conglomerates known as the majors created a tightly
controlled network by purchasing upstream and downstream in the supply chain, buying
new labels, manufacturing companies and distributing companies (Grossman and Hart,
1986; Hart and Moore, 1990). Their established distribution systems became highly
elaborate and expensive, creating a barrier to entry within the industry (Arthur, 1994;
Varian, 2001). Therefore, the majors maintained a competitive advantage by dominating
and sometimes even manipulating the industry. Some experts believe that more recent
technological developments, coupled with globalisation (Levitt, 1983), are transforming
the internal organisation of the firm (Acemoglu et al., 2010). Levitt (1983) said that: “A
powerful force drives the world towards a converging commonality and that force is
technology.”
Hagel and Singer (1999) argue that when a vertically integrated industry goes through
a significant change such as the one experienced by the MI with the digitisation of music,
it opens the door to the creation of many new specialised companies. The advantages of
the generalist (major label company) begin to wither due to its size, reputation and
integration. The new entrepreneurial and innovative firms have the advantage of
creativity, speed and flexibility (Poëttschacher, 2005). Much of the new venture
182 S. Renard and C. Hallam
capability derives from them recognising, creating and exploiting opportunities and
assembling resources around a technological solution (Spiegel and Marxt, 2011; Bailetti,
2012). While the incumbents focus on protecting their business model, innovative
technology introduces mechanisms that alter the landscape of the industry and thus the
source of competitive advantage for the incumbents (Francois, 2013). Also, some TE
authors argue that small firms that lack the capital, technology, history and the resources
of their larger counterparts can be as effective as large firms (Christensen, 1997; Ratinho
et al., 2015). Ratinho et al. (2015) gather that several TE researchers support the theory
that entrepreneurial firms often are “the underpinnings of Schumpeterian change or
cycles based on disruptive technologies” (Schumpeter, 1912; Linton, 2011; Mangematin
and Walsh, 2012). The lag in technology adoption response by the major labels (Koh et
al., 2015) suggests problems of core rigidities (Leonard-Barton, 1992) and absorptive
capacity (Cohen and Levinthal, 1990; Zahra and George, 2002; Spithoven et al., 2010).
From the managerial perspective, Kanter (2006) explains that each managerial
generation in the music business embarks on the same enthusiastic quest for the next
‘new thing’ and each generation faces the same vexing challenges. Indeed, most of those
difficulties stem from tensions between protecting existing revenue streams, which are
critical to current success, while supporting new concepts that may be crucial to future
success (Kanter, 2006). This tension is profoundly manifested in the digital era. The
major record companies were somewhat reluctant to license their music to these services
when the first legitimate online digital music retailers entered the market. They realised
that they had to offer file sharers an alternative to illegal downloading to limit the damage
to their revenues (Myrthianos et al., 2014). This option led to an increased willingness to
license content to online music services. However, digital music retailers failed to acquire
content from major record companies, who held copyrights to the most popular artists
and consequently did not initially attract massive consumer appeal. It was only with the
introduction of the iTunes music store (iTMS) in 2003 that the online music market
started to gain momentum. It was soon after that tech companies launched online music
services, creating a multitude of different types of music services available to the
consumers. Some of those companies included Amazon, Google, Yahoo, Microsoft,
Napster, Real and Sony. Most of those new online music services were at first only
available in the USA with larger European countries being fast followers, but would
eventually expand worldwide. However, the US MI aggressively maintains its
prominence in the global market, penetrating deeper into current markets, growing it
cautiously and incrementally (Miles and Snow, 1978).
Two views are of interest in the context of this paper. First, new information
technologies create a shift from incumbent, integrated firms, towards more delayered
organisations and outsourcing. Second, increased competitive pressure by both
globalisation and advances in information technology favour smaller, more flexible
companies that are more conducive to innovation.
2.4 Unbundling and re-bundling
The bundling process led the MI to fracture along the fault lines of customer relationship
management (Blank, 2013), product innovation (Linton and Walsh, 2003) and
infrastructure management (Onetti et al., 2012). This fracture is due to pressures of
dealing with non-standardised copyright laws (Allarakhia and Walsh, 2011), global
competition (Yoshino and Rangan, 1996) and a changing technology landscape (Walsh,
Technology shocks and the restructuring of an industry 183
2004). The major record companies divested many of their physical distribution channels
and unbundled elements of their enterprises (Koh et al., 2015; Guichardaz et al., 2016).
This ‘unbundling’ process removed a portion of control that previously enabled the
oligopolistic market and resulted in broadening the pool of industry players and
influencers that set the stage for redefining the industry (Hagel and Singer, 1999;
Mangematin et al., 2014). It led to the creation of partnerships and alliances with
technology companies such as Google, Apple, Amazon, Spotify and Pandora (Renard et
al., 2012).
The application of new technologies and architectures in the MI will drive the process
of substitution, creating a possible shift in power (Dobusch and Schüßler, 2014).
However, technology and technology management placed as the foundation for
competitive advantage is necessary but not a sufficient condition for success (Adler,
1989; Pavitt, 1990; Barney, 1991; Prahalad and Hamel, 1990; Linton and Walsh, 2002;
Walsh, 2004). The case of the internet radio giant Pandora is a perfect example of a
technology company that could absorb new business ideas and models. Pandora started as
a technology company that moved into the music business, while the incumbent major
labels or promoters struggled to make their move from physical product sales to digital
distribution. Pandora Media Inc. was formed in 2000 and had a ‘first mover advantage’ in
the internet radio market (Gal-Or, 1985; Varian, 2001). By 2015, Pandora had acquired
the independent ticketing agency Ticketfly, officially entering the concert industry
market. Nowadays, ‘Pandora Presents’ promotes artists that are endorsed and represented
by Pandora and have introduced their artist marketing platform, Pandora Amp (Wauters,
2011). They have also signed direct licensing agreements with large labels and moved
aggressively to redefine their customer tiers that cover everything from classic
advertising streaming, to fully enable downloading and offline listening for premium
monthly subscribers. In effect, they have defined a new business model for each market
segment enabled by the underlying technology. Pandora is now branding itself as “the
world’s most powerful music discovery platform” and is evidence of re-bundling in the
industry (Pandora, 2017).
What causes some representatives of the MI to worry less about this aspect of
globalisation is the simple fact that the major conglomerates own pretty much every
sector of the entertainment market (Renard, 2010; Wikström, 2013). Lam and Tan (2001)
saw the new distribution channels as a threat to do away with intermediaries. However,
market forces were shaken with the e-commerce’s low entry barriers, opening the door to
an influx of tech companies (Friar and Horwitch, 1985). New entrants in the MI are
outpacing traditional record labels, which have limited experience with new technologies
(Bockstedt, 2005). Critical players in the MI must re-examine their value proposition to
remain relevant to address the shift towards online consumption for music. Such online
retailers have established a strong presence in the MI through aggressive promotion and a
track record in fulfilling internet orders at minimal costs, allowing them to adopt a
competitive pricing strategy. Record labels are realising their lack of technological
expertise and are forming alliances with Internet and media companies to encode music
in secure standards to battle piracy, which is a form of re-bundling. Indeed, the majors
seem to be re-bundling by creating alliances with new service companies, supply chain
management companies, digital distribution companies, mobile phone companies, social
networking sites and media and broadcasting companies (Guichardaz et al., 2016).
Ansoff and Stewart (1967) were the first to suggest that companies ought to align
184 S. Renard and C. Hallam
their technology strategy to their business strategy (Walsh, 2004). However,
multinational enterprises trap themselves in their rigid insistence on forming alliances via
wholly-owned subsidiaries (Yiu and Makino, 2002).
Huygens et al. (2001) suggest that “search behaviour drives co-evolution through
competitive dynamics among new entrants and incumbent firms and manifests itself in
the simultaneous emergence of new business models and new organisational forms” (see
Figure 6). They explain that the exploration of the MI at the industry level was a matter
of “explorative search by innovators and early imitators for distinct capabilities.” In a
multiple-case study, Huygens et al. (2001) conclude that record companies managed to
adopt a ‘strategic choice perspective’ (Child, 1972). This choice “enabled them to shake
off [existing] habits and routines and to renew their search for novel capabilities through
radical processes of organisational change, eventually resulting in the creation of new
organisational forms and business models.” They point out that “interaction patterns
among rivals and path dependencies at individual firms can have both a positive and
negative impact on the development of new capabilities. Interactive behaviour through
acquisitions, joint ventures and strategic alliances among record companies speeded up
the capability development process at these firms”.
Figure 6 An integrative framework of co-evolution of capabilities and competition
Source: Huygens et al. (2001)
Williamson’s (1985) transaction costs framework provides a unifying paradigm which
accounts for the common element among these seemingly disparate joint ventures
(Hennart, 1988). ‘Interaction costs’ represent the money and time that is expended
whenever people and companies exchange goods, services or ideas (Williamson, 1985;
Butler, 1997). Williamson (1985) explains that a company will tend to incorporate that
process into its organisation rather than contract with an outside party to perform it when
the interaction costs of performing an activity in-house are lower than the costs of
conducting it externally. All else being equal, a company will organise to minimise
overall interaction costs (Williamson, 1985). The convergence of disruptive technologies
enabled the digitisation of the MI, dramatically reducing interaction costs (Williamson,
1985; Hagel and Singer, 1999; Renard, 2010). The maturation of electronic commerce
created an industry shock all but eliminating the business processes associated with
Technology shocks and the restructuring of an industry 185
manufacturing, shipping, warehousing and retailing music media (Williamson, 1985).
Furthermore, web-based businesses became specialised, concentrating on a single core
‘competency’ or activity (Prahalad and Hamel, 1990, 1994). This development led to a
proliferation of niche firms dealing with customer relationship management (Blank,
2013), product innovation, infrastructure management and transaction management.
Indeed, Williamson and Kaiser (2005) support that technology startups derive part of
their competitive advantage from their ability to use technology to decrease their
transaction costs.
Addressing ‘competence’8, Walsh (2004) explains that the term is greatly misused
when the focus is on the production and technological aspects of a given firm. Unlike
‘competence’, the term ‘capabilities’ has come to be used to describe management
practices and procedures centred around ‘firm-based technologies’ (Marino, 1996;
Eisenhardt and Martin, 2000; Walsh and Linton, 2001). Walsh (2004) goes on to clarify
that:
“Strategic technology management considers firm-based capabilities,
management practices, and procedures needed to sustain the firm’s current
products and services, provide a basis for firm differentiation, provide the
foundation for unique technological competencies, develop new products and
services, understand competitors competencies and capabilities, understand the
marketplace more fully, and provide for the future strategic direction of a firm
as well as the tactical development of a firm’s strategic plan.”
More importantly, the industry has not demonstrated the use of robust technology
intelligence processes. The industry is struggling to handle an indisputable strategic
technology process or ‘strategic roadmapping’ with regards to disruptive technologies
(Walsh, 2004). Indeed, it appears that the MI lacks focus on its activities and struggles to
identify if it needs to be ‘product market focused’ or ‘technology focused’ (Ansoff and
Stewart, 1967; Walsh, 2004).
Nevertheless, the MI is moving from a product-based to a service-based industry with
increase customer-supplier interaction (Zairi, 1992), which is pushing the major music
companies to change to remain competitive (Kusek and Leonhard, 2005). Those
companies’ ability to reinvent themselves and to innovate depends on a range of factors.
These factors include financial resources (Lee et al., 2001), geographical location
(Krugman, 1993) and industry differences (Utterback, 1994). Normann (2005) explains
that the acquisition of and dependency on knowledge, competence and capabilities will
be essential for firms adapting to a changing music business landscape. Hagel and Singer
(1999) argue that “the secret to success in fractured industries is not just to unbundle, but
to unbundle and rebundle, creating a new organisation.” We detect empirical evidence
and insight into this process from SNA.
3 Methodology: SNA
We investigate the degree to which new music technology agents have displaced the
major labels in traditional distribution channels. We accomplish this task by examining
the strength of the relationships of the distribution channels participants. SNA is well
suited for this purpose as it suggests new methods for coping with evolving technologies
and the emergent complexity of a dynamic competitive landscape (Otte and Rousseau,
2002). In the social sciences, SNA has become a powerful methodological tool alongside
186 S. Renard and C. Hallam
statistics (Nooy et al., 2005). SNA focuses on ties among, for example, people, groups of
people, organisations and countries. These relationships combine to form networks,
which are then analysed. Social network analysts assume that interpersonal,
organisational and national ties matter because they transmit behaviour, attitudes,
information or goods. Therefore, SNA offers the methodology to analyse social relations
as it tells us how to conceptualise social networks and how to explain them. The primary
goal of SNA is detecting and interpreting patterns of social ties among actors and
potential changes in these relationships (Renard et al., 2012). It provides a means to
quantify relationships between all agents involved in the network, while its topology
provides direct information about the characteristics of network dynamics, allowing for
the identification of descriptive and emergent patterns.
We attempt to understand the inter-relations between agents involved in the digital
music distribution chain. We then assess whether control of information is correlated
with control over the supply chain as reflected by the SNA centralisation measure.
Finally, we interpret it via visual layout (ORA, 2011). The sample merger and acquisition
data used to generate the SNA is available to the reader in Appendix. Table A1 provides
the raw data for analysing the bundling of the music label industry from the 1800s, as
shown in Figure 7. Table A2 presents a list of M&As by music technology companies
associated with the MI since 1914, as shown in Figure 8. The data was collected from
known music business companies’ websites displaying their merger and acquisition
information, then coded and processed into graphic open-source software (ORA, 2011).
A total-degree centrality (TDC) measure has been attributed to the sizes and colour of the
nodes in the network. The TDC measure of a node is the normalised sum of its in-degree
(links coming in) and out-degree (links going out). It is the social networker’s term for
various permutations of the graph-theoretic notion of vertex degree: in-degree of a vertex,
v, corresponds to the cardinality of the vertex set
{
}
N (v) i in V(G) : (i, v) in E(G)
+= (1)
out-degree corresponds to the cardinality of the vertex set
{
}
N (v) iinV(G):(v,i)inE(G)
= (2)
and total (or ‘Freeman’) degree corresponds to
N(v) N(v)
+−
+ (3)
Note that for simple graphs,
in-degree out-degree total degree / 2
=
= (4)
Degree centrality can be interpreted in terms of the sizes of a network actor’s
neighbourhood, within the broader structure (Freeman, 1979). Finally, the links
configuration does not include directionality to avoid adding clutter to the model. For our
analysis, we interpreted the results from the two SNAs from a visual perspective only,
looking at centrality and size. Also, please note that centrality takes predominance over
size in the present analysis. The node size is generated by how many in and out-degrees
flow from it, whereas node centrality indicates what nodes are genuinely the most
dominant in the model, thus central. Also, the SNAs presented in this article represent
Technology shocks and the restructuring of an industry 187
M&As and therefore it is necessary to interpret the results considering the temporality of
the data used to generate those models.
Figure 7 SNA representation of M&As in the recording industry from 1811 to 2013 (see online
version for colours)
4 SNA analysis
Figure 7 is a network representation of M&As in the recording industry from 1811 to
2013 with 99 nodes and 136 links. The nodes that are most central in Figure 7 are the
most influential with other nodes. Currently, the three most significant music labels also
known as the majors are most pivotal in this model [see Universal Music Group (UMG),
Warner Music Group (WMG) and Sony Music Entertainment (SME)]. Please note that
the SME node is relatively smaller compared to its counterparts, but this does not
ultimately matter because of its central position is undeniable. The SME node is indeed
smaller than the UMG and WMG nodes because the company pivoted its name several
times in a time frame that did not include many M&As (2004–2013), thus the
discrepancy in its size. Indeed, if the Sony/BMG and SME nodes were combined, a node
of a similar size to UMG and WMG would be there. Also, we can see that the Polygram,
Warner Communications, Columbia, ARC and CBS Records nodes are much larger than
SME. This phenomenon tells us that those nodes were indeed very influential before their
acquisitions by the current Majors, now controlling them.
188 S. Renard and C. Hallam
Figure 8 (a) SNA representation of mergers, acquisitions and alliances between the
music recording, publishing, distribution and tech companies from 1811 to 2017
(b) Zoom-in representation of Figure 8(a) focused on significant nodes (see online
version for colours)
(a)
(b)
Technology shocks and the restructuring of an industry 189
Figures 8(a) and 8(b) show an integrated model combining the data from the music label
mergers and the tech company mergers (Tables A1 and A2). Figure 8(a) is a complex
network with 250 nodes and 450 links. Over 150 technology companies are represented
here in addition to the 99 recording companies that can be seen in Figure 7. The purpose
of this second SNA is to assess if the major record labels retained their central position
within the model and where technology companies are positioned relative to those
traditional content producers. The tech companies’ hub revolves around the Android and
iOS mobile operating systems where music is mostly consumed today. The analysis
shows how technology companies place relative to the recording industry and supports
the hypothesis that tech companies have indeed displaced the major labels to drive the
delivery of music consumption. Figure 8(b) is a zoom-in of Figure 8(a) showing the
connections between the music tech companies and the major record labels. We can see
that top technology brands such as Apple, Google, PayPal, Amazon, Microsoft, Pandora,
Spotify, Facebook and so forth are closely tied to the tech hub driving music delivery
(distribution). Perhaps, the major labels’ last stronghold in the tech market is the platform
Vevo (sponsored streaming music videos on YouTube generating premium ad revenue
for the industry) that was created jointly by UMG, SME, Google and Abu Dhabi Media
in 2009. The third major label, WMG, joined Vevo in 2016.
5 Discussions and conclusions
Before the convergence of essential technologies in the MI took place, the major labels
operated in an oligopolistic market, centring on a few major players. Technological
convergence saw four fundamental technological shocks that led to a creative shock in
the MI supply chain. Those four shifts are the MP3 compression, high-speed internet,
multimedia computing and low-cost software for copying and distributing files.
Traditional elements of the industry’s value delivery chain disappeared. Areas of the
industry’s network that took the biggest hit include physical music production,
distribution and sales. The post-shock MI is dependent on technology companies for the
connection to consumers. Also, these relatively new agents (tech companies) in the
digital era are significantly reorganising the network as a whole and are now expanding
their control of music consumption including music sales, ticket sales and publishing
rights management.
It appears that the MI is morphing into the entertainment industry as consolidation
occurs. Some of the major players will have control of music, movies and books from the
development of the art to the equipment used to access the new mediums as well as the
delivery channels. However, music (and possibly the other forms of entertainment) will
be able to use some of these channels to deliver their art directly to the customer. But is it
the end of the big labels? Some argue no, but it may be more appropriate to say not yet.
They do have strategies available to defend their positions, as is becoming apparent in the
market. The first is the focus on mega successes and align their marketing and sales force
with the most prominent names and stars that generate the majority of their revenue.
Following this path, they would extract money from the most successful parts of their
library and discard the rest. Furthermore, they can rebundle around these stars and extract
rents from other sources, such as performances, tours, merchandising and access (VIP
clubs, promotions, etc.).
190 S. Renard and C. Hallam
Large music companies with the absorptive capacity and bankroll to do so can
proceed with a massive round of M&As with tech companies and service providers to
keep their non-product-based advantages. This last strategy requires a keen focus on
technology intelligence (Kerr et al., 2006) and may benefit the players with the most
robust technology intelligence processes (Wilbers et al., 2010). For the emerging
technology companies, they can quickly attack niches in the market. These opportunities
include every process step from talent discovery, to recording, post-production, PR and
sales and fan management. Some established artists have explored these options on their
own and many new and aspiring artists have immediate access to potential fans via
YouTube and social media channels. Perhaps, the best case to look at in the case for new
entrants is Pandora. While initially started as an internet radio company, its technological
prowess in online streaming helped reshape the radio industry and led it to eventually
become a festival promoter, removing all layers of go-betweens associated with reaching
out directly to the consumers such as advertising, ticket sales and content production and
distribution. Pandora has started to make forays into this mode of operation and others
may follow suit.
This article contributes to the TE literature on technology disruption of an industry.
We identify that entrepreneurs can initiate their firms focusing on technology gaps, thus,
redefining industry standard practice through technology. We identified that they have
three areas of opportunity in the MI that were made possible due to technology
disruptions:
1 manufacturing (Bahrami and Evans, 1995)
2 distribution (Kirzner, 1973)
3 transaction(s) (Williamson, 1985).
All three areas are aggressively engaged by high tech firms. A large concentration of
digital aggregators (i.e., Tunecore, CDBaby, Bandcamp), streaming platforms (i.e.,
Spotify, Pandora) and specialised tech firms (i.e., MerchCats) attempts to dominate the
digital distribution channels. Manufacturing is now carried out independently from the
major labels by small companies (i.e., OasisCD, United Record Pressing), while
transactions are the realm of lean startups (i.e., EEVET, Rumblefish, RoyaltyExchange).
The use of SNA in this article identifies how the power centre in the MI is
consistently changing creating those technology gaps. While the analysis herein is neither
complete nor exhaustive, it is adequate to investigate the influence of technology
convergence and creative shocks in the MI. It also suggests the potential for developing
management tools that can assist in the technology intelligence process (Pavitt, 1990).
The ability to dynamically track the relationships in the SNA could be useful as a means
of identifying and countering shifts in market power. The advent of in-depth data mining
tools in social media may assist in developing a more forward-looking tool for this
purpose (Lee et al., 2015), as opposed to a rearward looking post-merger and acquisition
analysis.
Technology shocks and the restructuring of an industry 191
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Notes
1 MPEG-1 or MPEG-2 audio layer III, more commonly referred to as MP3, is an audio coding
format for digital audio. Compared to CD quality digital audio, MP3 compression commonly
achieves 75% to 95% reduction in size. MP3 files are thus 1/4 to 1/20 the size of the original
digital audio stream. This is important for both transmission and storage concerns. The basis
for such comparison is the CD digital audio format which requires 1,411.2 kbit/s. A
commonly used MP3 encoding setting is CBR 128 kbit/s resulting in file of 1/11 (= 9%) of the
size of the original CD-quality file, that is with 91% compression (Brandenburg and Bosi,
1997).
2 Perceived quality can be influenced by listening environment (ambient noise), listener
attention and listener training and in most cases by listener audio equipment (such as sound
cards, speakers and headphones). Furthermore, sufficient quality may be achieved by a lesser
quality setting for lectures and human speech applications and reduces encoding time
and complexity. A test given to new students by Stanford University Music Professor
Jonathan Berger showed that student preference for MP3-quality music had risen each year.
Berger said that the students seem to prefer the ‘sizzle’ sounds that MP3s bring to music
(Dougherty, 2009).
3 ISDN is a set of communication standards for simultaneous digital transmission of voice,
video, data and other network services over the traditional circuits of the public switched
telephone network. Prior to ISDN, the telephone system was viewed as a way to transport
voice, with some special services available for data. The key feature of ISDN is that it
integrates speech and data on the same lines, adding features that were not available in the
classic telephone system. The ISDN standards define several kinds of access interfaces, such
as basic rate interface (BRI), primary rate interface (PRI), narrowband ISDN (N-ISDN) and
broadband ISDN (B-ISDN) (Aaron and Wyndrum, 1986).
4 ADSL is a type of digital subscriber line (DSL) technology, a data communications
technology that enables faster data transmission over copper telephone lines than a
conventional voiceband modem can provide. ADSL differs from the less common symmetric
digital subscriber line (SDSL). In ADSL, bandwidth and bit rate are said to be asymmetric,
meaning greater toward the customer premises (downstream) than the reverse (upstream).
Providers usually market ADSL as a service for consumers for Internet access for primarily
downloading content from the internet, but not serving content accessed by others (Troiani,
1999).
5 The T-carrier is a member of the series of carrier systems developed by AT&T Bell
Laboratories for digital transmission of multiplexed telephone calls. The first version, the
transmission system 1 (T1), was introduced in 1962 in the Bell system and could transmit
up to 24 telephone calls simultaneously over a single transmission line of copper wire.
Subsequent specifications carried multiples of the basic T1 (1.544 Mbit/s) data rates, such as
T2 (6.312 Mbit/s) with 96 channels, T3 (44.736 Mbit/s) with 672 channels and others (Davis
and Reilly, 1981).
6 Ripping is extracting all or parts of digital contents from a container. To rip the contents out of
a container is different from simply copying the whole container or a file. When creating a
copy, nothing looks into the transferred file, nor checks if there is any encryption or not and
raw copy is also not aware of any file format.
7 Do-it-yourself, refers to artist entrepreneurs.
8 For an in-depth discussion on competence and competence theory, please refer to Prahalad and
Hamel (1990 and 1994).
Technology shocks and the restructuring of an industry 199
Appendix
Table A1 Bundling of recording and publishing companies from 1811 to 2016
Date Companies Industry
1811 Chappell & Company Publishing
1835 Berte lsman n Mass media
1853 Vivendi Mass media, mu sic and entertainm ent
1857 Seagram Com pany Ltd. Beverages
1886 M. Witma rk & Sons Publish ing
1886 Volta Graphophone Company Manufacturer
1887 American Gramophone Company formed with Columbia Records Record label
1887 Columbia Phonograph Company Columbia Records aka Record label
1890 Pathe Records Record label and manufacturer
1895 Berliner Gramophone Company Record label
1896 Parlophone Record label
1897 The Gramophone Company Record label
1898 Deuts che Grammoph on Record label
1901 Victor Talking Machine Company Record label
1903 Odeon Record label
1910 Nipponophone Record label
1910 Thomas Edison Inc. Record label
1914 UK Decca Gramophone Record label
1916 Brun swick Record label
1918 Columbia Pictures Film
1918 Matsushita Electr ic Industrial Co., Ltd. Electronics
1918 Oksh Record label
1918 Vocalion Record label
1919 Radio Corporation of America (RCA) aka. RCA Records Record label
1919 Unite d Artists Entertainment
1921 Grigsby-Grunow Company Radio sets and household utilities
1922 Alfred Mu sic Pub lishing
1922 Cam eo Record s Reco rd label
200 S. Renard and C. Hallam
Table A1 Bundling of recording and publishing companies from 1811 to 2016 (continued)
Date Companies Industry
1922 Time Inc. Publicat ion
1923 Walt Disney Studios Entertainment
1923 Warner Bros. Entertainment
1924 Poly dor Record label
1925 Champion Records Record label
1925 Columbia acquires Oksh, Nipponophone, among others Record label
1925 Duo phone Record label
1927 Columbia Broadcasting System TV/radio network
1928 Thorn Electrical Industries Limited Electrical engineering
1929 American Record Corporation (ARC) Record label
1929 Decca Records Record label
1929 Music Publishers Holding Company (MPHC) Publishing
1929 The Music Publishers Holding Company launches and acquires M. Witmark & Sons, under its parent company,
Warner Bro s.
Publishing
1929 UK Brand Decca Gramop hone is renamed Decca Records and enters market with a flour ish, acquiring
Duophone
Record label
1930 Meloto ne Record label
1931 Electric and Musical Industries (EMI) Music entertainment
1931 MPHC licenses Brunswick, Voca lion and Melotone to ARC, which then consolidates the three as a separate
label: Brunswick Record
Record label
1932 U.S. Columbia is sold to Grigsby-Grunow Company, a manufacturer of refrigerators and radio sets Record label
1934 ARC acquires U.S. Co lumbia for $70,000 Record label
1934 US Decca buys Champion Label Record label
1938 Columbia Broadcasting System buys ARC, which includes the confusingly named Columbia, Brunswick,
Vocalion and Oksh
Record label
1939 American Decca Record label
1939 Blue No te Record label
1939 British Decca Record label
1939 British Decca sells its remaining interest to American Decca Record label
1942 Cap itol Records Record label
Technology shocks and the restructuring of an industry 201
Table A1 Bundling of recording and publishing companies from 1811 to 2016 (continued)
Date Companies Industry
1945 Mercury Records Reco rd label
1946 Metro-Goldwyn-Mayer Studios Inc. (MGM) Film
1946 Sony Corpo ration Computer software, finance, telecommunications,
mass media, entertainment
1950 Elektra Records Record label
1953 Columbia Records la un ches Epic Records Record label
1954 Kapp Records Record label
1956 Disney Music Publishing Publishing
1956 Walt Disney Records Record label
1957 Seven Arts Productions Film
1958 Ariola Records Record label
1958 Colpix Records Record label
1959 Buena Vista Records Record label
1959 Island Records Record label
1959 Motown Records Record label
1962 A&M Records Record label
1962 MCA buys Decca Record s Record label
1962 Phonogram Record label
1966 National Kinney Corporation Conglomerate
1967 Jack Warner sells his Warner Bros. stock to Seven Arts. Warner Bros/Seven Arts buys Atlantic Records Record label
1969 Kiney Corporation purchases Warner Bros. and names it Warner Film, TV, music
1969 Warner Communications Film, TV, music
1970 Asylum Records Record label
1970 Kinney National acquires Elektra Records and Nonesuch Records Record label
1970 Warner Communications negotiates its first major purchase: Elektra for nearly $10 million Record label
1971 MCA Inc. consolidates its indies such as Kapp and becomes MCA Record label
1971 MCA Records Record label
1972 Kinney National Company becomes Warner Communications Entertainment
1972 Polygram Record label
202 S. Renard and C. Hallam
Table A1 Bundling of recording and publishing companies from 1811 to 2016 (continued)
Date Companies Industry
1972 Warner Elektra and Atlantic are distributed under one label-WEA but act autonomously Record label
1972 Warner-Elektra -Atlantic (WEA) Record label
1973 Virg in Re cord labe l
1974 Arista Re cord label
1979 Columbia Pictures sold Arista to German-based Ariola Records Record label
1979 EMI acquires United Artists, which includes Blue Note Records. EMI merges with Thorn and becomes Thorn
EMI
Record lab el
1979 Thorn EMI Record label
1984 Def Jam Record label
1985 Priority Recor d label
1985 RCA/Ariola Re cord label
1986 Access Industries Conglomerate
1986 Ariola purchase d Gene ral E lect ric’s RC A Reco rds Reco rd label
1986 Combined company was renamed Bertelsmann Music Group, though Arista’s USA releases would not note
BMG until 1987
Record lab el
1986 Edel AG Music and entertainment
1987 Bertelsmann Music Group (BMG) Record label
1987 Sony Corporation acquires CBS Records for $2 billion Record label
1987 Warner Commun ication s, a cquire d C hap pell & Company Record la bel
1989 Hollywood Records Record label
1989 Interscope Record label
1989 Mammoth Records Record label
1989 Time Inc. and Warner Bros merge – Warner Music is born Entertainment
1990 Matsushita acquires Music Corporation of America (MCA) Record label
1990 Time Inc. merged with Warner Com munications to form the media conglomerate Time Warner Conglomerate
1990 Time Warner Mass media
1991 Cash Money Record label
1991 C BS R eco rds is fold ed into S ony Reco rd label
1992 Thorn EMI buys Richard Brasson’s Virgin Music for nearly a billion dollars Record label
Technology shocks and the restructuring of an industry 203
Table A1 Bundling of recording and publishing companies from 1811 to 2016 (continued)
Date Companies Industry
1993 Over a five-year period beginning in the late 1980s, Polygram acquires Island Records, A&M and Motown, a
trio of deals that cost Polygram just over $1 billion
Record label
1995 Seagram acquires MCA from Matsushita for $5.7 billion Record label
1996 Demerging Thorn from EMI Music and entertainment
1996 EMI Group Limited is formed Music and entertainment
1996 MCA buys a stake Interscope for $200 million. Seagram drops the MCA label and renames the division
Universal Music Group
Record label
1996 Universal Music Group Music and entertainment
1997 Disney Music Group (DMG) acquires Mammoth Records Record label
1997 Lyric Street Records Record label
1997 The Orchard Music Distribution
1998 Buena Vista Music Group (BVMG) Record label
1998 EMI buys Priority Records for $200 million Record label
1999 Seagram folds Polygram into Universal Music Group Music and entertainment
2000 Vivendi acquires Seagram Conglomerate merger
2002 Terra Firma Capital Partners Ltd. (TFCP) Private equity
2003 Independent Online Distribution Alliance (IODA) Distribution
2003 Mammo th R eco rds fold ed into Hollywo od Records Record label
2004 Sony BMG Music and entertainment
2005 BVMG signed with EMI for distribution of its album in the UK, Europe, South Africa and the Middle East
replacing Warner Music Group
Distribution
2005 Printed music operation, Warner Bros. Publications, was sold to Alfred Publishing Publishing
2006 BVMG launches a concert production arm, Buena Vista Concerts Music production
2006 Vivendi acquires UMG Music and entertainment
2007 Capitol Music Group (CMG) Music and entertainment
2007 Private-equity firm Terra Firma pays over $4 billion for EMI Music and entertainment
2007 Vivendi completed its €1.63 billion ($2.4 billion) purchase of BMG Music Publishing Publishing
2008 Matsushita becomes Panasonic Corporation Electronics
2008 Sony Music Entertainmen t (SME) Music and entertainmen t
204 S. Renard and C. Hallam
Table A1 Bundling of recording and publishing companies from 1811 to 2016 (continued)
Date Companies Industry
2010 Lyric Street Records folded into Hollywood Records Record label
2011 Access Industries acquires WMG for $3.3 billion Music and entertainment
2011 Citigroup breaks EMI apart and sells its recorded-music operations to Universal Music Group and the music-
publishing division to Sony and others
Music and entertainment
2012 BMG acquired Sanctuary Records for close to 50 million Euros Record label
2012 BMG becomes part of UMG with the EMI acquisition Music and entertainment
2012 IODA merges with Orchard Music Distribution
2012 Sony/ATV acquired EMI Music Publishing, making Sony/ATV the world’s largest music publisher Publishing
2012 UMG acquires EMI’s Recording Division and some song catalogues Record label
2012 WMG adds its content on Google Music Distribution
2013 Gospel music divisions of Motown Records and EMI merged to form a new label called Motown Gospel Record label
2013 UMG announced the worldwide extension of their exclusive distribution deal with the Disney Music Group Distribution
2013 WMG acquired Russian label Gala Records Record label
2013 WMG acquires the Parlophone Music Group from UMG consisting of Parlophone Records, Chrysalis Records,
EMI Classics, Virgin Classics and EMI Records
Record label
2013 WMG closed a deal with C lear Chan nel Media for preferential rates for streams by iHeartRadio Distribution
2013 WMG closed on its acquisition of Parlophone Label Group Record label
2014 Island Records and Def Jam will now operate as autonomous record labels Record label
2014 Universal Music announced the disbandment of Island Def Jam Music Record label
2014 Edel AG acquires the MPS catalogue from UMG Publishing
2014 WMG announced that it had acquired Chinese record label Gold Typhoon Record label
2015 Sony fully acquires its independent distributor The Orchard and Century Media Records Distribution
2016 Alfred Music acquires by Peaksware Holdings, LLC Publishing
2016 Warner Music UK launched The Firepit a creative content division, innovation centre and recording studio
located at their UK headquarters in London
Music production
2016 WMG acquired the Indonesian label PT Indo Semar Sakti Record label
2016 WMG agreed to distribute most of BMG Rights Management’s catalogue worldwide Distribution and publishing
Technology shocks and the restructuring of an industry 205
Table A2 M&A between music distribution and tech companies from 1914 to 2017
Date Compani es Industry
1914 American Society of Composers, Authors and Publishers (ASCAP) American not-for-profit performance-rights organisation
1920 Writer’ s Digest Magazine
1925 Canadian Performing Rights Society (CPRS) Canadian not-for-profit performance-rights organisation
1930 Society of European Stage Authors and Composers (SESAC) Am erican for-profit performance-rights organisation
1930 ASCAP acquires partial ownership of CPRS American/Canadian not-for-profit performance-rights organisation
1939 Broadcast Music, Inc. (BMI) American not-for-profit performance-rights organisation
1945 CPRS becomes Authors and Publishers Association of Canada (CAPAC) Canadian not-for-profit performance-rights organisation
1946 Ballen Record Company Record label
1946 AVL Digital Group Self-publishing
1959 Disc Makers Record manufa cturer
1959 Ballen Record becomes Disk Makers Record manufacturer
1972 iHeart Media as iHeartCommunications Mass media
1972 Clear Channel Communications Radio, mass media
1975 Microsoft Computer software, hardware, digital distribution
1976 Apple, Inc. Tech co nglomerate
1976 Ticketmaster Ticketing services
1986 Performing Rights Organization of Canada (PROCAN) Canadian not-for-profit performance-rights organisation (PRO)
1990 Society of Composers, Authors and Music Publishers of Canada (SOCAN) Canadian not-for-profit performance-rights organisation (PRO)
1991 Oasis CD/DVD manufacturing
1993 SFX Broadcasting/Entertainment 1.0 Radio conglomerate
1994 Hit Media, Inc. Booking and record label
1994 RealNetworks Software, streaming
1995 PreSonus Manufacturer of DAW software
1995 S lin go Online mu ltiplayer game
1995 Audible.com Audio entertainment
1996 Cductive Online music store
1997 MusicMatch Online music store, internet radio, online jukebox
1998 CD Baby, Inc. Digital distribution, online music retail
1998 Emusic Online music and audiobook store
1998 eMusic and Nordic Music form a Joint Venture Online music and audiobook store
1998 Aspiro Group (provides services for WIMP and TIDAL) Subscription-based lossless music streaming services
1998 Google Internet and computer software
1998 PayPal Financial services
206 S. Renard and C. Hallam
Table A2 M&A between music distribution and tech companies from 1914 to 2017 (continued)
Date Companies Industry
1999 Napster Online music store, P2P file sharing
1999 eMusic acquired main rival Cductive Online music and audiobook store
1999 eMusic acquired Tunes.com Online music and audiobook store
1999 Aladdin Online jukebox
1999 Ticketnow.com Ticketing services
2000 Pandora Media Inc. Internet radio
2000 Hostbaby Web hosting platform
2000 Stu Hub Tic keting ser vices
2000 Clear Channel Acquires SFX Entertainment 1.0 Mass media
2001 iTunes Media player, library, online radio broadcaster, mobile device management
2001 Rhapsody Streaming on-demand music subscription service
2001 UMG acquires eMusic Online music store
2001 Listen.com acquires TuneTo.com Customised radio service
2001 Listen.com former name of Rhapsody Streaming on-demand music subscription service
2001 Aladdin was transformed into the Rhapsody Streaming on-demand music subscription service
2001 Xbox Video gaming
2001 RealNetworks launches MusicNet Online music store
2001 Pressplay Online music store
2001 MusicNet forms joint venture with EMI, BMG and AOL Time Warner Online music store
2002 Nimbit Web-based services for artists
2002 Anschutz Entertainment Group (AEG) American worldwide sporting and music entertainment presenter
2002 Medianet Digital originally founded as MusicNet Digital music distribution service
2003 JDS Capital Management, Inc buys eMusic Private equity
2003 RealNetworks acquired Listen.com’s Rhapsody music service renamed RealRhapsody Streaming on-demand music subscription service
2003 RealNetworks acquires Listen.com Streaming on-demand music subscription service
2003 Pressplay forms joint venture with UMG and SME Online music store
2004 Believe Digital Digital distribution
2004 ASCAP partners with Nimbit Web-based services for artists
2004 Yahoo! acquire Musicmatch renamed Yahoo! Music Musicmatch Jukebox Online jukebox
2004 Facebook Online social media, social networking
2004 MoodMedia Music branding
2005 Tunecore Digital distribution, music publishing
2005 Didiom Digital distribution of music
Technology shocks and the restructuring of an industry 207
Table A2 M&A between music distribution and tech companies from 1914 to 2017 (continued)
Date Companies Industry
2005 Eco Nest Music intelligence and d ata platform for deve lopers and m edia companies
2005 Youtube Video sharing website
2005 EmuBands Digital music distribution service
2005 Paypal creates Youtube Video sharing website
2005 Live Nation formed as spin-off Clear Channel Communication Promo ter
2006 Best Buy teamed up in with RealNetworks Inc and SanDisk Corp Electronics
2006 Spotify Music streaming service
2006 EastWest Sounds Recording studio complex
2007 Bandcamp Music streaming, music purchasing
2007 Amazon Music Online music store
2007 Three Six Zero Group Music management
2007 Jango Music streaming, social networking, internet radio
2007 Soundcloud Global online audio distribution platform
2007 Deezer Web-based music streaming se rvice
2007 C3 Presents Concert promotion
2007 Beatport EDM online music store
2008 Disc Makers acquires C D Baby from Hit Media Record manufacturer
2008 Best Buy acquires Napster f rom Noxia Online music store
2008 Yahoo! Music Jukebox went out of business Online jukebox
2008 Indiegogo Crowd funding
2008 Roc Nation Entertainment company
2008 Radionomy Internet radio
2008 Ticketfly Ticketing ser vices
2009 eMusic and SME make d istribution deal Online music and audiobook store
2009 PledgeMusic Crowd funding
2009 Kickstarter Crowd funding
2009 Vevo formed by SME, UMG, Google, an d Abu Dh abi Media Video streaming platform using YouTube
2010 eMusic and WMG make distribution deal Online music and audiob ook store
2010 eMusic and UMG make distribution deal Online music and audiobook store
2010 WiMP Music streaming service
2010 Rhapsody was spun off from R ealNetworks Streaming on-demand music sub scription service
2010 Gofundme Crowd funding
2010 Live Nation Entertainmen t Global entertainment company
208 S. Renard and C. Hallam
Table A2 M&A between music distribution and tech companies from 1914 to 2017 (continued)
Date Companies Industry
2010 Live Nat ion merges w ith TicketMaster to become Live Nation Entertainment Prom oter
2010 Songtrust Digital rights management solution for music publishing
2010 Rd io Intern et radio
2011 Bookbaby E-book publishing and distribution
2011 PledgeMusic and Nimbit partner Crowd sourcing platform
2011 eMusic and EMI make distribution deal Online music and audiobook store
2011 Rhapsody acquires Nap ster from Best Buy Streaming on -demand music subscription service
2011 Didiom is acquired by SnapOne, Inc. Digital distribution of music
2012 PreSonus acquires Nimbit Web-based services for artists
2012 Nimbit and Jango partner Web-based services for artists, internet radio
2012 Universal Music Distribution sold to Gaiam Music distribution
2012 SFX Entertainment 2.0 EDM concert promotion
2013 RealNet works acqu ired S lingo Online multiplayer gam e
2013 SFX Entertainment 2.0 acquires Beatport EDM online music store, EDM concert promotion
2013 Audiam Digital rights management solution for music publishing
2014 Bandcamp for Labels was launched Music streaming, music purchasing
2014 Tidal Subscription-based music streaming service
2014 eMusic drops EMI, UMG, WMG, and SME Online music and audiobook store
2014 Spotify acquires The Echo Nest Music intelligence and data platform for developers and media companies
2014 Writer’s Digest partnered with book publisher BookBaby E-publishing
2015 Tunecore is acquired by Believe Digital Digital distribution, music publishing
2015 eMusic is acquired by Israeli media startup, TriPlay Online music and audiobook store
2015 Project Panther Bidco Ltd / S. Carter Enterprises, LLC acquires Aspiro Streaming service
2015 Spotify powers SME’s PlayStation Music Service New m usic service
2015 Spotify acquired Seed Scientific Data science consulting firm and analytics company
2015 Pandora acquires Ticketfly Independent ticketing agency
2015 Pandora acquires Rdio Internet radio
2015 Songtrust launches first Music Publishing app Digital rights management solution for music publishing
2016 Rhapsody brand in favour of Napster Internationally Streaming on-demand music subscription service
2016 SFX Entertainment 2.0 filed for chapter 11 bankruptcy Concert promotion
2016 Audiam acquired by SOCAN Digital rights management solution for music publishing
2016 Medianet Digital acquired by SOCAN Software and database of rights metadata
2016 WMG j oins Vevo Video stream ing platform using YouTu be
... Tien and Berg (2003) highlighted that management theory radically improves when the research focuses on technology, especially in the service sector, i.e., the knowledge economy is highly service-intensive. The emergence of the Industrial upheaval's revolutionary transformation into knowledge economy has distinct requirements that can be fulfilled by the harmonious integration of technology, economics, and trade system (Renard and Hallam, 2018). MOT highlights that the competitive advantage and economic development depends on how well an organisation manages its technologies and innovations. ...
... Tien and Berg (2003) highlighted that management theory radically improves when the research focuses on technology, especially in the service sector, i.e., the knowledge economy is highly service-intensive. The emergence of the Industrial upheaval's revolutionary transformation into knowledge economy has distinct requirements that can be fulfilled by the harmonious integration of technology, economics, and trade system (Renard and Hallam, 2018). MOT highlights that the competitive advantage and economic development depends on how well an organisation manages its technologies and innovations. ...
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