This paper focuses on how digitalisation has influenced actors’ value determination and value creation in the Swedish music market. It draws on the service-dominant logic (SDL) and the service ecosystem perspective to conceptualise value as co-created through the integration of resources by multiple actors in service exchange, enabled and constrained by institutions and institutional arrangements. Empirically, we draw on a qualitative study of the digitalisation of the Swedish music market that consists of fifty-two interviews with various actors. The findings suggest that digitalisation has influenced service engagement and consequently value creation and determination for various actors, and especially for consumers and producers. This paper contributes by integrating SDL and the service ecosystem perspective into music business research in a novel way to promote a deeper understanding of value, value determination, and value co-creation. This paper also contributes to SDL by suggesting that both value-in-exchange and value-in-use are important aspects of value determination and value co-creation.
- music market
- service-dominant logic
- service ecosystem
- value co-creation
- value determination
The music market has undergone an extensive transformation as an effect of digitalisation in the last 25 years (Wikström, 2013). Due to digitalisation, new possibilities for creating, distributing and consuming music have emerged. In particular, digitalisation has entailed a change in how value is created in the music market, which has fundamentally changed the roles of music market actors, such as producers, distributors and consumers (Choi & Burnes, 2013). Understanding how actors’ value determination and value creation have been influenced in a particular industry is an important research endeavour, as it has implications for the creation of business models, the innovation of new offerings and the market orientation of firms, to mention a few areas of interest. However, the question of how value determination and value creation have been influenced by digitalisation in the music market has not been rigorously studied by music business researchers. Therefore, the present paper asks the following research question: How has digitalisation influenced actors’ value determination and value creation in the music market?
To answer this research question, this paper draws on the service-dominant logic (SDL) framework and the service ecosystem perspective to conceptualise value. SDL is a framework with roots in marketing research that facilitates understanding of how value is created, and as such, it emphasises the integration of intangible resources, the co-creation of value by consumers, firms and other actors, and the idea that value is contextually and individually determined. SDL stands in contrast to goods-dominant logic (GDL), which emphasises the intra-firm creation of value, the exchange of manufactured output, embedded value and tangible resources. Empirically, we draw on a qualitative study of the digitalisation of the Swedish music market that consists of fifty-two interviews with different actors. The paper contributes by integrating SDL into music business research in a novel way to promote understanding of value, value determination and value creation. It also contributes to SDL by suggesting that both value-in-exchange and value-in-use are important aspects of value determination and value co-creation.
The paper is structured as follows. Section 2 introduces the SDL framework and the service ecosystem perspective. Section 3 presents the method, which is followed by Section 4, which discusses our findings. Finally, in Section 5, we discuss the implications of the study and its contributions. Section 6 concludes the paper, and also discusses the limitations characterising the present work, together with offering suggestions for future research.
SDL derives from marketing research and was developed to understand the purpose and nature of organisations, markets and society. The logic involves five foundational concepts: actors, service, resources, value and institutions (Lusch & Vargo, 2018). These concepts can be drawn on to study how digitalisation has influenced actors’ value determination and value creation in the music market. The five concepts are elaborated by five foundational premises that work as axioms for the conceptual framework: (1) service is the fundamental basis of exchange; (2) value is co-created by multiple actors always including the beneficiary; (3) all social and economic actors are resource integrators; (4) value is always uniquely and phenomenologically determined by the beneficiary; and (5) value co-creation is coordinated through actor-generated institutions and institutional arrangements (Vargo & Lusch, 2016).
To elaborate on the five foundational concepts, we start with actors. ‘Actors’ is a general term for entities such as consumers, suppliers, producers and other stakeholders. Researchers use the general term ‘actors’ to enable studies to take into consideration several contexts, such as business-to-consumer (B2C), business-to-business (B2B) and consumer-to-consumer (C2C). A key notion here is that interactions between actors are a central activity for value co-creation. And as suggested by Sklyar et al. (2019), interactions between actors have increasingly been mediated by technology, which may influence how value is co-created and determined by them. In SDL, service is not seen as a form of intangible output; rather, service is the application of resources by one party for the benefit of another or oneself (Lusch & Vargo, 2018). Service, as the application of resources, can be provided both directly and indirectly (Lusch & Vargo, 2018). A direct service may refer to an activity such as a dentist extracting a tooth, and an example of an indirect service would be taking a pill to relieve tooth pain. Money can also be an indirect service that provides rights to future services (Lusch & Vargo, 2018). Expressed otherwise, in SDL, service is understood as the value created between actors (i.e. the customer, firm, public organisation or any other beneficiary); value is not created in a closed manufacturing process, as GDL suggests.
Within SDL, resource integration is central to the co-creation of value (Akaka & Vargo, 2014). Resources are classified as operand or operant and are the sources of service provision. Operand resources are often static and tangible, such as natural resources or tangible offerings. For operand resources to provide benefit, they need to be acted upon by operant resources that are intangible, such as knowledge, competence and skills (Lusch & Vargo, 2018). An illustrative example of operant and operand resources is given by Vargo and Lusch (2004) with the microprocessor, where a natural resource (silica) as the operand resource was embedded with knowledge through human skills (operant resources), and consequently enabled the development of the microprocessor as well as other technological developments.
One of the central concepts within SDL is value. Value is the reason for service exchange and is actor-specific, meaning that value is “
This paper focuses on two aspects of value: value determination and value creation. According to Gummerus (2013), value determination refers to actors’ assessments, judgements and evaluations of whether something is beneficial or not (i.e. whether it is providing value or not). Value determination is often studied through value-in-use or value-in-exchange. Value-in-exchange refers to the nominal value based on the price of a product or service, while value-in-use is associated with the utility of an offering, often including experience (Vargo, Akaka & Vaughan, 2017). Hence, actors determine the value of a service or product based on price and/or the use and experience of it. Within SDL, value-in-use has been given more emphasis when it comes to how value is determined (Lusch & Vargo, 2004; Vargo, Maglio, & Akaka, 2008).
Furthermore, value creation refers to activities, resources and interactions that lead to some benefits for the actors involved (Gummerus, 2013). In SDL, the term value creation implies value co-creation, where the creation of value
Service ecosystems consists of multiple actors that enable value co-creation through resource integration. Often, service ecosystems are nested and interconnected with other service ecosystems and consist of loosely coupled subsystems (Koskela-Huotari & Vargo, 2016; Vargo, Wieland & Akaka, 2015). According to Chandler and Vargo (2011), the service ecosystem perspective opens pathways to the analysis of various levels of aggregation, including the micro (e.g. individual and dyadic structures), meso (e.g. industry and community) and macro levels (e.g. state and national). This multilevel aggregation or systemic understanding of value facilitates an understanding of the connectedness and contextualisation of value co-creation (Chandler & Vargo, 2011). Furthermore, SDL also highlights the role of the sociocultural context in value creation. This allows us to understand the interplay of rules, norms and beliefs at various levels of aggregation, such as what is accepted and unaccepted by the actors of a service ecosystem.
Institutions are “
By applying the SDL framework and the service ecosystem perspective, this paper seeks to explore how digitalisation has influenced actors’ value determination and value creation in the music market. Next, we turn to our method of data collection and the analysis of the study of the Swedish music market.
To answer the research question, this paper draws on a qualitative study of the Swedish music market, which was chosen as the research context because it has been distinctively characterised by digitalisation for the past 25 years (Wikström, 2013). Hence, theoretical sampling (Glaser & Strauss 2017) guided the selection of the context for this research.
To collect the data, we conducted fifty-two semi-structured interviews (Kvale, 2008) between 2016 and 2019 with different actors in the music market, such as consumers, distributors, producers and other stakeholders. The industry actors included representatives from record companies, live organisers, music publishers, interest organisations, consumers and music pirates. To represent our data, we used interviews with thirteen key respondents in this paper. An overview of the key respondents can be found in Table A1 in Appendix. The lengths of the interviews varied from 50 min to 90 min, and convenience and snowball sampling characterised the selection of the respondents. First, we contacted people in central positions in the Swedish music market and interviewed those who accepted our invitations. Respondents were asked for suggestions of relevant actors for the study, who were then invited and interviewed. All respondents were offered total anonymity to ensure that they were confident and comfortable with providing sincere answers. An interview guide containing ten to fifteen questions was used. The questions were slightly adjusted depending on the type of respondent, allowing them to elaborate on their perceptions and experiences (see Appendix: Question sample).
The research process was characterised by iteration between data collection and data analysis. Our data analysis was informed by our theoretical conceptualisation from the perspective of SDL and service ecosystem. Further, we remained open to new emergent themes that could inform our understanding of how digitalisation has influenced actors’ value determination and value creation in the music market. Our data analysis was inspired by emergent design and the constant comparative method (Corbin & Strauss, 2008), but rather than being purely inductive, it was also framed by our SDL-based theoretical conceptualisation as described above. Our data analysis started with open coding, whereby we identified concepts and codes and their dimensions and properties that existed in the collected data. We focused on identifying codes with respect to how digitalisation has influenced actors’ value determination and value creation in the music market. Open coding was followed by axial coding, where we grouped similar codes into categories and overarching themes related to the research question. This part of the data analysis process created the structure for the findings. Finally, we conducted selective coding to integrate our findings with a focus on how digitalisation has influenced actors’ value determination and value creation, and the results are outlined in the discussion section.
To secure the trustworthiness (Lincoln & Guba, 1985) of the data, we triangulated or compared the fifty-two interviews in relation to each other. Deviant positions on the digitalisation of the Swedish music market by respondents were not accounted for in the presentation of our analysis. We also applied member checks to secure the trustworthiness of the interviews, meaning that we had some respondents read through the transcripts of their interviews and asked them to make corrections if needed, and only a few made minor rectifications.
In this section, we report the findings on how digitalisation has influenced actors’ value determination and value creation in the Swedish music market. We draw on SDL and the service ecosystem perspective to interpret the data.
In this section, we draw on the service ecosystem perspective to interpret how digitalisation has influenced actors’ value determination and value creation in the Swedish music market by focusing on the micro (e.g. individual and dyadic structures), meso (e.g. industry and community) and macro (e.g. state and national) levels of the music market (Chandler & Vargo, 2011). Through the service ecosystem perspective, we also highlight the governing role of institutions in guiding value creation and determination, both in the form of laws and regulations, as well as shared cognitive schemes from which meaning to service exchange is derived.
Infrastructure and the omnipresence of tools are seen as precursors to the digitalisation of the Swedish music market. Many of our respondents mentioned governmental initiatives to develop the broadband infrastructure and tax relief for buying personal computers (PCs) as factors that influenced the digitalisation of the Swedish music market. As one respondent emphasised, “
From a service ecosystem perspective, new digital resources such as broadband technology and PCs became available and were integrated by actors to provide service offerings early on in the Swedish music market. A prime example is the service provision offered by file-sharing sites, and in particular The Pirate Bay. The Pirate Bay was a Swedish file-sharing internet site that allowed users to share media content for free, such as music, movies and software. Our respondents emphasised that the music market in Sweden took a significant turn towards digitalisation with the introduction of file-sharing sites – referred to as piracy by many respondents – to the Swedish music market. One consumer described, “
Another respondent emphasized that digital music offerings by The Pirate Bay provided both value-in-use and value-in-exchange for consumers. A chief executive officer (CEO) of a record company expressed the opinion that file-sharing sites were much better for music consumption (value-in-use) as well as free of charge (value-in-exchange): “
According to the empirical data, downloading music for free soon became a new norm associated with the convenience of consuming music. Hence, new meanings to music consumption became institutionalised as a new cognitive scheme developed among actors. A CEO at an interest organisation emphasised, “
In later years, the service exchange of The Pirate Bay was eventually constrained by new regulations, where the governing role of legal institutions came to influence the music market. A CEO of a music publisher informed us of the following: “
Although The Pirate Bay services were criminalised due to copyright infringement, the norm of free music consumption was still prevalent in the Swedish music market. A CEO of a record company stated that the trend of consuming free music was still prevalent, where legal forces, although constraining illegal downloading practices, did not affect the preferences of consumers: “
An A&R specialist at a record company highlighted that Spotify's streaming services addressed the social norm of free music while also providing convenience of use: “
We found that within the Swedish music market, services were constrained and enabled by institutions. We also observed that Spotify as a new service seemingly bridged two opposing institutions – the norm of free music consumption and copyright laws against illegal downloading. Hence, Spotify enabled a service exchange that increased co-creation of value within the broader music market. On this point, a CEO of a record company stated, “
Prior to digitalisation, many record companies operated with wide organisations that took care of almost everything, from signing artists to distribution to shops. According to a CEO of a record company, “
The change in the perception of value for most record companies and music publishers was influenced by the impact which digital services had on the distribution of music offerings. A project manager at an interest organisation highlighted that music producers who took care of almost everything, including distribution, were the ones who were most negatively affected by digitalisation: “
Many respondents expressed the opinion that as a result of digitalisation, their relationships with the market, in particular their perception of value, had changed. Our respondents informed us that they now focused more on consumers’ insights through data and statistics as a means of understanding and communicating with consumers. A CEO at a record company informed us, “
The shift in the perception of value and business activities due to digitalisation has led record companies and music publishers in the Swedish music market to prioritise operant resources, that is, the skills and knowledge of people. This is in contrast to previous business activities that relied more on managing physical distribution in terms of concrete resources, raw materials and products. A CEO at a record company emphasised the focus on operant resources in terms of how they now worked and developed music artists: “
A marketing manager at a record company indicated that business activities were now in need of a different kind of expertise: “
The increased focus on market statistics has led to better insights into how consumers use services and has motivated music companies to treat consumers as operant resources to support their consumption experience. A CEO at a record company informed us that consumer relationship building is an important aspect of value creation: “
Increased consumer insight has also enabled consumers to receive suggestions based on their individual preferences. Several consumers, such as R7, informed us that music suggestions were positively valued in the consumption experience: “
With the focus on operant resources for value creation, we observed how offerings had become more diversified to suit different types of consumers. We also found that consumers’ determinations of what was valuable had become a central focal point in a digitalised music market, as consumers were in a position to choose more broadly, and record companies, music publishers and music producers now focused more on understanding what consumers valued.
From a consumer perspective, digital music services such as Spotify enabled a value-in-exchange (i.e. free/low cost) as well as value-in-use (i.e. convenient use and experience). An A&R specialist at a music publisher described Spotify in the earlier days by highlighting both value-in-exchange and value-in-use: “
In addition to providing consumers with a broader set of options, we also observed that music offerings had become more accessible to consumers: “
With the advent of digital music streaming services in the Swedish music market, we also found business activities had become increasingly oriented towards personalisation where consumers had the opportunity to engage in their preferred manner (i.e. increased co-creation of value-in-use). The personalisation of music offerings is especially evident in digital playlists, which allow consumers to compile their preferred songs for particular occasions into lists in an easy way. Several consumers emphasised how they use playlists for personalisation of listening experiences. One consumer stated, “
Despite the increased emphasis on value-in-use, we also observed that low cost in the exchange of music offerings has become important. Low cost in the exchange of music offerings has notably led business activities to focus more on the time consumers spend in using and listening to the music offerings than on the prices they pay (which was the focus of vinyl and CDs as records sold). This is because of the pay-per-stream model in the music streaming market, where music producers and artists are reimbursed for how many times a track is played. As such, the focus is more on the time consumers spend in listening to a track repeatedly. A marketing manager at a record company highlighted this shift from price paid to time spent: “
To summarise, our findings show that digitalisation has influenced actors’ value perceptions (i.e. how value is created and determined), and record companies and music publishers have come to prioritise operant resources over operand resources. We also find that actors determine the value of music services based on value-in-use as well as value-in-exchange.
Understanding how digitalisation has influenced actors’ value determination and value creation in the music market has been an understudied topic by music researchers. Accordingly, our findings contribute to addressing this gap in prior research. By doing so, the paper integrates SDL with music business research to provide a better understanding of value in this context. This paper also contributes to research on SDL by suggesting that both value-in-exchange and value-in-use are important aspects of value determination and value co-creation.
It has been suggested that digitalisation has influenced value in the music market. In particular, it has been claimed that a transformational shift has occurred from value creation to value co-creation (Choi & Burnes, 2013). Our findings also suggest that value in the Swedish music market has been influenced by digitalisation, but we do not argue that there has been a shift from value creation to co-creation. Following the lead of SDL, which suggests that value is always co-created, we argue that value co-creation was more restricted and limited in scope in a pre-digitalised market compared to a digitalised one. For instance, in the pre-digitalised market, consumers found it valuable to listen to music through vinyl and CDs produced by record companies, and they consequently exchanged money for music consumption (i.e. value was co-created but in a limited manner). However, in a digitalised music market, business actors, such as record companies and music publishers, started to involve consumers in their production activities, going from standardised music offerings provided in the form of CDs or vinyls to flexible offerings in the form of playlists adapted to and created by consumers. We found that digitalisation has influenced value creation in the music market by enabling increased accessibility (Jones, 2002) and opportunity to personalise music offerings, which has led to the increased involvement of actors, such as consumers, in the value-creating activities of business actors; this idea is in line with that proposed by Choi and Burnes (2013). We further found that business actors within the digitalised music market have realised that it is the consumers, rather than themselves, who determine value in line with the normative prescriptions of SDL (Vargo & Lusch 2008, 2016). For example, our findings show that record companies and music publishers focus on gaining insight into consumers’ preferences and behaviours based on statistics from streaming services. We also found that business actors focus more on operant resources (i.e. skills and knowledge) compared to operand resources (tangible/concrete products, such as CDs and vinyl) in a digitalised music market. Hence, our analysis of the digitalisation of the Swedish music market shows how SDL may be used by music business researchers to understand value, value determination and value creation.
We also found that use value, which relates to the utility of an offering, and exchange value, which relates to the nominal value based on the price of a product or service (Vargo et al. 2017), are both important aspects of how actors determine value. For example, the importance of use value in the music market is observable through increased accessibility to music offerings, as well as an increased opportunity for the personalisation of music offerings. Furthermore, we found that both consumers and industry actors perceived exchange value, manifested in the form of market price, as an important aspect of how they determined the value of music services. The extent of the importance of exchange value is notable at the micro and macro levels of the service ecosystem. At the micro level, we found that consumers positively determined the value of free/low-cost services, while industry actors negatively determined the value of free services. We also found the importance of exchange value at the macro level, where regulative initiatives constrained earlier digital services (The Pirate Bay) based on copyright infringement to protect the right to exchange value. Although different value determinations can occur within a service ecosystem, we saw that value-in-exchange is an important aspect of how actors determine the value of a service. Notwithstanding that SDL emphasises value-in-use over value-in-exchange (Vargo & Lusch, 2004; Vargo et al., 2008), we discovered that both are important aspects of value determination and co-creation. Hence, we contribute to SDL research by illuminating the importance of exchange value in combination with use value.
This paper has explored the digitalisation of the Swedish music market from an SDL and service ecosystems’ perspective. The paper has contributed to music business research by integrating SDL in a novel way to facilitate understanding of value, value determination and value co-creation. This paper has also contributed to SDL research by suggesting that
As with all research, this study also suffers from limitations, one of which is that it only focuses on the digitalisation of the Swedish music market. The data collection and analysis also consist of more industry actors and consumers than music artists and other creative individuals. Our recommendation for music business researchers applying the SDL framework would be to include a balanced perspective of different actors, especially since multiple and different perspectives can enrich data analysis and interpretation. We also found that there are further possibilities for music business researchers to apply the SDL framework to focus on the topic of value determination. Through our study, it has become evident that studying digital contexts can make individual value determination more noticeable, as digitalisation often provides new experiences through new possibilities for production, distribution and consumption. Furthermore, as value can be determined differently by various actors, music business researchers can also investigate opposing value determinations in the digitalised music market and their implications for the creation of value. For instance, actors can integrate resources in an inappropriate and unpredictable manner, which could lead to value co-destruction rather than co-creation (Echeverri & Skålén. 2011).
|R5||Music publisher||A&R specialist|
|R6||Record company||Marketing manager|
|R11||Music publisher||General manager|
|R12||Interest organisation||Project manager|
|R13||Record company||A&R specialist|