The Music Industry & Its Consumers: A Potential Divorce through Technology and Shifting Market Linkages?

A large market exists of online users who desire online video and music content. However, recent developments have shown that some industries, such as music and videos are not fully utilising the market benefits that disruptive technologies can bring to organisations despite the change of value drivers (Chesbrough et al. 2008:264-265).

According to Christensen et al. (2004), and based on RPV theory, organisations may decide not to pursue disruptive innovative ideas for a variety of reasons, such as their values are set in another direction, processes do not support the new technologies and resources may become under-utilised or even obsolete.

Trying to pursue partly aggressive strategies, partly defence or avoidance strategies (Oliver. 1991, Moyon et al. 2006) it is suggested that the music industry has missed to reengineer its business so far (Benghozi, 2006, Benghozi et al. 2000, 2005, Kotler et al. 2002). At the same time music consumers have found various peer-to-peer models to execute their own avoidance strategies, i.e., avoiding to buy music but to share it. Various consumption platforms for music, such as, pandora, hulu or spotify, emerged, which themselves show significant innovative power.

As scholars’ research tested, innovation has two beams, technology and market linkages. While the technological part is inevitably developing further, the music industry erects legal barriers to bloc those sites by applying the presently unclear DRM, since the new ways of music consumption threaten their established ways of content distribution. At the same time barriers are placed, those consumers being online specialists find ways to circumvent them. The proposition is that by the salient marketing concept of CRM such behaviour increases the pressure on incumbents since risking market linkages with their customers.

This paper will contrast technology and market linkages, discussing how online innovations may alter the status quo of the music industry, especially its record business. Research provides evidence that technological implications are supporting a sustainable shift of consumers’ behaviour and the ways, by which consumers are able to overcome the legal and technological barriers for accessing P2P sites despite industrial prevention (Kusek et al. 2005, Adomavicius et al. 2008).

It is suggested that there is further significance this paper addresses, since what affects the music industry today, will likely have an impact on the movie, games, software and other industries in the near future (Chesbrough. 20061): Disruption of existing resources, processes and values and threatening market linkages by redefined ways of content distribution.

Key Words:
Disruptive innovation, RPV theory, P2P, technological barriers, market linkages