The impact of digitalization on competition in the record industry

The introduction of digital music has upset the foundation of the record industry. One of the main aspects the Canadian, and global, record industry faces is that consumer habits are changing, while the demand for music remains strong. The demand for music even continues to expand, but on the other hand piracy is also rising. The viability of the industry is threatened by the weaknesses in the traditional model. The players within the industries have to find new ways to ensure the long-term viability of the industry and of individual recording companies. The viability of the record industry is at stake here. Digitalization does not only form a threat for the industry, but also offers opportunities for new ways of production, distribution and marketing of music. How digitalization affects competition and the competitive position of record companies is the main subject of this research. This thesis examines the competitive position of the Canadian record industry and the impact of digitalization on competition. The main questions asked are: What factors influence the competitive position? What is the impact of digitalization? What is the current competitive position of the Canadian record industry? How can the competitive position of the Canadian record industry be improved? The competitive position tells us where the Canadian record industry can be ranked at this period of time within the global market place, where global competition is increasingly becoming more and more important. The research approach that has been chosen is a combination of quantitative and qualitative research, resulting in a mixed methods approach. In order to define the factors influencing the competitive position two theories are combined, namely the production of culture perspective of Peterson and the economic theory of Porter, which is formed by two of his models, the Five Competitive Forces model and the Diamond model. Combining these theories results in the creation of a new Diamond model, which consists of 8 possible factors that may influence the competitive position of the Canadian record industry, thereby forming the new Diamond model. These 8 factors are: factors of production, demand factors, industry structure, organizational structure, the presence of relating and supporting industries, domestic rivalry, technology and law & regulation. Examining the competitive position of the Canadian record industry using the new Diamond model has confirmed that the current competitive position of the industry can be considered weak. One of the main factors contributing to this weak position is the factor law and regulation, inherently related to the factor technology. The competitive position of the record industry can be improved by implementing a set of laws or rules that control copyright within Canada, such as the WIPO treaties, which Canada has failed to adapt. The new Copyright act should take into account the new digital distribution systems and platforms, thereby also protecting the rights of the copyright owners in the new digital market. Another conclusion of this thesis is that continuous innovation and adaptation to the emerging digital market place is important for the future success of the Canadian record industry and also needed to improve the competitive position of the industry.