DisruptionTechnology

The Dalton-Pierce Digital Disruption Quotient

By April 5, 2011 No Comments

This marvelous graph was produced by Michael DeGusta in an erudite post on The Understatement blog on the disruption the recorded music industry has endured in the last 40 years. It’s a gloomy picture, and working for a publisher (of books, magazines, video, apps and eBooks) gave us cause to ruminate on some of the underlying drivers of the collapse of music publishing.

In a nutshell, after a decade of economic crisis the music publishing industry no longer sells a lot of CDs, album sales have been replaced by sales of singles on iTunes, and pirating has been widespread. The only legacy format remaining is kept alive by the vinyl nerds (and I’m looking at you James).

There are a plethora of moving economic variables at play in this chart from the time CD sales peaked around 2000, but we think it’s possible to turn it into a mathematical formula that can be further explored by publishers in books, video, and newspapers. We call it the DPQ, short for the Dalton-Pierce quotient:

Where:

m State of economy (misery index): the misery index is the inflation rate added to the unemployment rate. It is a raw, but effective index of economic suffering.

f Format of content: in music, the arrival of the widely agreed standard of the MP3 file enabled recording, storage, playback, sharing and commercial transactions to take place over a single song.

a Atomisation of content into chunks: the single has replaced the album as the unit of consumption in the music industry. You can read all about that on the original post.

d Devices for consuming content: in music the arrival of MP3 players (notably the iPod, but remember the Rio?) heralded a major change. Cheap, portable players were supplemented mid-decade by cheap, gargantuan hard disk drives that could store a whole music collection. If you doubt the impact hardware can have on an industry, check out the arrival of the Sony Walkman and the consequent fattening up of the cassette market on the chart between 1982 and 1985.

c Control of distribution: a trip to the music store to buy the latest album or 45 was a great adventure for me in the 1970s and 1980s. Music publishers grew strong and controlled the retail supply chain with iron fists, including the complementary industries in radio and tv for promotion of songs and albums. Nobody controls the internet – the best you can hope for is to control part of it – like Amazon music and Apple iTunes.

So the maths is simple: disruption is accelerated overall by the context of poor economic times, when consumers are motivated to change their spending habits. When the denominator in the equation gets smaller (as in the internet becomes the channel, and you lose control), disruption gets bigger by a lot. The multiplier effect of the 3 components of the numerator is self-explanatory – and in music publishing all 3 were impacted. Hence, massive disruption.

The same formula can easily be applied to other publishers and media – I’m presenting a short paper on this subject at the 2011 AIMIA V21 conference (Digital DNA) in Melbourne on the 12th of April, and look forward to a robust debate. The good news is there is a solution to making the quotient work for you, not against you.

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