Conceptualizing an Entrepreneurial Growth Model of the 21 st Century - PowerPoint PPT Presentation

Conceptualizing an Entrepreneurial Growth Model of the 21 st Century Music Industry By Jason Burchard The London School of Economics and Political Science jason@rootnote.co Vienna Music Business Research Days September 13, 2017

Contents • Introduction • Research Questions • Relevant Literature • Methodology • Data and Results • Findings • Concluding Remarks • Q&A • Appendix 2

Introduction 5,597 • The number of companies reported as “music and audio” related in crunchbase’s database of companies (as of September 5, 2017) 3 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Introduction $103.9 Billion • Goldman Sachs projected global recorded, publishing, and live music revenues by 2030 2030E Global Industry Revenue (Billion USD) 2015 Global Industry Revenue (Billion USD) Recoreded Music Recoreded $38.3 Publishing Music $56.3 $23.8 $24.7 Publishing Live Music Live Music $9.3 $5.4 $53.9 bn $103.9 bn Numbers sourced to Music in the Air: Stairway to Heaven – The Goldman Sachs Group, Inc. 4 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Introduction 45 • Number of revenue streams available to artists Revenue stream opportunities sourced to Future of Music Coalition 5 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Introduction This is Exciting! • New technologies and organizations are challenging traditional roles and functions within the industry • Music industry entrepreneurs are redefining boundaries and creating new business models • Artists are working with intermediaries in new ways and reaching new levels of success 6 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Research Questions What kind of model could be used to describe the types of entrepreneurial activity that we are seeing? What types of activities are independent musicians 1 and music industry entrepreneurs performing? Why are independent artists and music industry 2 entrepreneurs doing what they do? What kind of industry structure could support the 3 types of entrepreneurial activities being observed? 7 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature Scope of literature review focused on literature that might help explain entrepreneurial activity within the music industry • Academic work around music industry models • Theories regarding firm formation • Research on new ventures & entrepreneurial growth 8 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature Music industry models Music Industry Models Authors Phase Characteristics Top 40’s Radio (Hirsch, 1970) - aggregate of subsystems that are part of a “pre - selection process” where a significant amount of filtering occurs between each stage Pre- digitalization Loosely Coupled (Burnett and - interaction between two subsystems – the Systems Weber, 1989) production system and the consumption system (Leyshon, - network of sequential processes with four key Musical Network 2001) networks: creativity, reproduction, distribution, and Concurrent Model consumption DIY (Kusek, 2014) -characterized by artistic choice and ability to self- perform Post- Contemporary (Hracs, 2015) digitalization -intermediary guided industry; intermediary Manager functions include coordination, co-production, co- promotion, curation, consultation , and connection 9 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature Theories regarding firm formation • Transaction Costs Economics (TCE) – Firm boundary equilibrium (Coase, 1937) • Occurs where internal costs = external market costs • Costs include organizing, negotiating, and contracting – Asset specificity (Williamson, 1981) • Market contracting occurs when assets non-specific • Creativity networks have high asset specificity (Leyshon, 2001) 10 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature Theories regarding firm formation • Entrepreneurial Theories – Risk and likelihood of becoming an entrepreneur • Choice to operate risky firm or work for riskless wage (Kihlstrom and Laffont, 1979) • Risk neutral with variable “productive efficiencies” (Laussel and Le Breton, 1995) – Means / ends models • Artists conduct entrepreneurial activities through their means to achieve desired ends (Essig, 2015) 11 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature Theories regarding firm formation • Entrepreneurial Theories – “Creative destruction” (Schumpeter, 1942) • New products, production methods, markets, product inputs, and forms of organizations replace the old 12 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature New ventures and entrepreneurial growth • Entrepreneurial life cycles (Johnson et al, 2011) The Entrepreneurial Life Cycle as adopted from Johnson et al, 2011 13 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Relevant Literature New ventures and entrepreneurial growth • Artist taxonomies (Next Big Sound, 2016) 14 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Methodology Based on the scope of research and nature of the question, an exploratory and qualitative research methodology was employed. Focused on two groups of key actors: • Independent Musicians and Songwriters • Music industry entrepreneurs and professionals 15 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Methodology – Independent Musicians and Songwriters Independent Musicians and Songwriters • Multiple genres; based in Nashville and London • “Independent”  not currently signed to label or publishing deal 16 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Methodology – Music Industry Entrepreneurs and Professionals Music Industry Entrepreneurs and Professionals • Based in Nashville and London; senior management and founder level personnel • Interviewees included those in more traditional roles and emerging music technologist 17 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Data and Results Data • Conducted and recorded semi-structured interviews that followed organized topic guide • Analyzed transcripts by thematic analysis, using Leyshon’s Musical Network Model as a baseline • Grouped by industry function (18 identified) and summarized by emergent themes, perceived challenges, and new combinations 18 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Data and Results Results 19 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Data and Results Results: Artists are feeling pressures of an expanded market • Capital vs. control trade-off – Accepting more business risk at early stages in exchange for more ownership of anticipated future revenue streams – Facing operational challenges associated with more responsibility, choice, and selectivity 20 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A

Data and Results Results: Artists are feeling pressures of an expanded market • Low Entry Barriers – Focusing high quality content as mechanism to help overcome low market entry barriers • Exposure vs. revenue paradox – Incurring costs for the opportunity to build reputation and fan base in competitive market 21 ∙ Introduction ∙ Research Questions ∙ Relevant Literature ∙ Methodology ∙ Data and Results ∙ Findings ∙ Concluding Remarks ∙ Q&A