In the past quarter of a century, culture has become recognised as a macroeconomic asset, adding a new dimension to the historically established intrinsic value of artistic activity. As nations develop, the forces of economic growth supplant one another at an increasing tempo. The industrial revolution in the western world began to take over from the traditional agrarian economy a little more than 200 years ago, generating huge factory developments by the late 19th and early 20th century. As an economic locomotive, manufacturing began to run out of steam from the 1960s in many advanced nations, a development that was reinforced as other countries became competitive on quality and cost.
Through the value chain, a firm achieves a competitive advantage either by cutting costs or by developing a unique differentiated product or service. Most advantages in the music sector would be gained through differentiation, and ‘unique’ should be interpreted as ‘having sufficient unique features to attract consumers’, as in the case of a successful popular band. Differentiation, however, is not enough – cost is very important partly because there are so many near substitutes to any CD or live performance, and partly because there is a popular perception that CDs are overpriced. People use the high price of CDs as an excuse for illegal downloading, which remains one of the record industry’s main concerns.
Porter’s model is a highly commercial concept that would provide a woefully incomplete analytic base for a cultural sector like music if not modified. While economic factors are important, we need to view the music sector more widely to incorporate its social and cultural importance. This study introduces the parallel concept of a socio-cultural value chain to demonstrate that competitive strategy is not limited to commercial and financial variables. In this view, summarised from Chart 2.12 in Section 2.4.6, the music sector is driven primarily by two factors: technology and the socio-cultural environment. The primary factors in turn influence music-related media cultures and consumer behaviour, and the music industry itself. These again influence the policy choices that could be made to adjust the previous links in the value chain (red lines feeding back from the policy variables at the base of the chart). The feedback includes influencing the ‘exogenous’ technological and socio-cultural environments, though of course these continue to receive stimuli from many other sources as well.
Technology is clearly a very important factor in the development of the music sector, economic as well as social and cultural. This includes the digital online revolution over the past decade or more and the tendency for conventional products to converge (the music-playing, picture-taking and computing mobile telephone is just one example). The threats to the recording industry from piracy and illegal downloads (not to mention the growth in legitimate online distribution of recordings) are of prime concern to the international and domestic recording industry. Other technology trends include the continued development in telecommunications and new products generally, the greater access to affordable high quality do-it-yourself studio equipment, and technology for producing the music itself.
The other primary driving force is the socio-cultural environment, including the cultural ambience and diversity that provides space within…