Recorded music supply network reconfiguration: the dual effect of digital technology

Abstract

Current literature on the impact of technology innovation has mainly focused on manufacturing firms and networks and has considered technology impact as having an immediate effect on the supply network. This paper analyses how digital technology has impacted the recorded music supply network, a fast moving supply chain, arguing that it had a twofold effect. It was initially applied to the production process, displaying a competency enhancing effect but not changing substantially the industry structure and governance pattern. It was only when applied to the distribution process, the governance-granting process, that its impacts were fully deployed, allowing the entry of new types of players adopting new business models and challenging the former governance pattern: the hierarchical governance was replaced by a pattern in which agents organise themselves in project-based, adhoc configurations, and market access is not controlled by large companies.

Digital music, online outlets and their business models

“…However, from the late 1990s, digital technology has severely challenged that practice and their dominance. Although digital technology has been used in recording and production since the 1980s, it has only changed the music business when it started to be applied in distribution (Nakano and Fleury, 2017). Large scale digital music distribution was initially unauthorized, performed by file sharing in P2P networks, which threatened recording companies' revenues: there was no need to buy a physical format to enjoy a phonogram or to borrow one to make a home copy; one could simply download it, for free, from the Internet.…”

“…On the content production side, it is comprised of big traditional companies (Majors) and small independent firms (Indies), independent artists, recording studios and specialized service providers. On the digital distribution side, it is now composed by content aggregators and digital outlets (Nakano and Fleury, 2017), with Apple Music and Spotify as the leading firms (Ipsos Connect, 2016).…”