Categorizing Distribution Model Scenarios for Online Music

• Authors: Willms Buhse
• Venue: EC-Web 2001 Proceedings of the Second International Conference on Electronic Commerce and Web Technologies
• Year: 2001

This paper will examine the potential distribution models in the electronic market for online music. The goal of this paper is to categorize distribution models according to several case studies involving new distribution mechanisms like file sharing, streaming and super distribution. The virtualization of music leads to challenges on the supply and demand side. On the supply side, the main question is if the distribution of online music can be controlled by the offering party. On the demand side, the consumer preference for buying digital goods is being analyzed. Are consumers willing to pay directly for digital goods or will the revenue be collected indirectly by other public or private entities? As a result, distribution models for online music can be categorized into four scenarios. In the first scenario, online music is used to promote the traditional business of the CDs. Therefore penetration pricing and lack of additional security features are used to allow maximum distribution of the music. In the second scenario, again music can not be protected but consumers are willing to pay for a service that enhances their experience and makes it easier to browse, listen to and collect music. The third scenario is significantly different from the first two scenarios as music labels are expected to be able to protect their rights by technical means. Using digital rights management technology that allows to control the distribution of music files using encryption or watermarking, and revenues can result from subscription services. In the fourth scenario peer to peer technology allows consumers to use a mechanism called super distribution with which they can share and recommend songs. The paper concludes with a recommendation to music labels to position themselves in all four scenarios.