Intellectual Property Rights and Industry Evolution: The Case of the Recorded Music Industry

Intellectual property rights are often the mainstay of industry structure in industries where the value of products is strongly dependent on technological innovation and the creation of new content. However, producing novel intellectual property and then ensuring adequate returns on investment is subject to uncertainties such as new technologies, change in property rights regimes, and illegal reproduction. These uncertainties often create threats that impact industry evolution. Faced with threats to their core intellectual property firms engage in defensive and offensive strategies that change industry environment, often triggering strategies that lead to wholesale review of market position, and new relationships with suppliers and buyers. When the threat persists, firms are often forced to change their core operations, in the process adopting new technologies and redrawing industry boundaries. We use the case of music industry over the last century to locate these threats and discuss their impact on industry evolution. The creation and protection of copyright material has been central to the industry’s economic viability in the 20 and 21 centuries. Periodically, however, the industry has experienced threats to its ability to protect intellectual property. The response of the industry to the threat posed by each of these developments has exerted a powerful influence on the evolution of the music industry. We examine the variety of the strategic responses, and evaluate their impact to make sense of the current crisis facing the industry and the scenarios that describe the future for the industry.