The State of the Music Industry in the Digital Age
In 1999, the world's recorded music market had been expanding for almost 25 years. Global record sales peaked at one billion in 1974 and tripled to three times that amount by the end of the century. Music business leaders were optimistic in 1999. Few knew that a handful of young Internet geniuses, lead by Shawn Fanning, a student at Northeastern University in Boston at the time, would start the volatile process that would eventually erode the industry's roots.
Napster, a file-sharing service, was founded by Shawn Fanning in 1999. The business permitted customers to download and distribute music without paying the legitimate right holders. Napster was forced to shut down the service after being sued by the music industry establishment.
However, a number of additional music-sharing businesses swiftly adopted the model. The music business has attempted to control the growth of internet pirate services like Napster, Kazaa, Limewire, Grokster, DC++, and The Pirate Bay, but has been unable to do so. Sales of physical recordings of music (such as cassettes, CDs, and vinyl) had fallen back to their early 1970s lows by the end of 2013.
In the 15 years since its launch, Napster has transformed the music industry and made obsolete the model that used to be in place for most of the past century. The music industry is a prime illustration of how an innovation may upend an entire sector and make preexisting skills obsolete.
Before the popularity of the Internet grew, the music business relied heavily on its control over physical distribution to exercise power and influence. The main music businesses have been forced to reinvent themselves in order to survive as physical music distribution has become increasingly irrelevant thanks to the Internet.
Music industry structure
The music industry is divided into three sub-industries: recorded music (focused on recording and distributing music to consumers); music licensing (primarily licensing compositions and arrangements to businesses); and live entertainment (focused on producing and promoting live concerts, tours, etc.).
The biggest money was made by bands and recording artists in the old-school music business. The majority of aspiring musicians and bands hoped to land record label deals.
Compared to the recorded music industry sector, the second music industry sector, music licensing, was considerably smaller and less interesting. The industry of music publishers, which was active in this field, was mostly one of business-to-business transactions with little or no direct contact with consumers.
The live music industry makes money by selling concert tickets. Even though live music has a long and successful history, over the twentieth century, the recording industry began to overshadow it. Record labels typically viewed concerts as a vehicle to promote an album and were not overly concerned with whether or not the tour was lucrative.
How The Internet revolutionised everything
The distribution of recorded music to consumers was chiefly impacted by the Internet's impact on the music business. This indicates that while widespread illegal downloading and online piracy affected the recorded music industry, they did not affect the other two music industry sectors.
One of the main causes is that the music industry needs to reconsider new revenue sources and discover strategies to boost earnings from live performances and licensing as digital music sales fall. Revenues from music licensing have dramatically expanded over the past several years as a result of new and more active licensing strategies as well as developments in the media industries.
It's important to note, however, that since the introduction of the Internet, the distinctions between those three businesses have gotten fuzzier.
Digital Music Market: the beginning
Apple Computer, not a player in the music industry, was the first business to launch a successful online music sales and distribution service. In 2003, Apple persuaded the big record companies that if they offered customers a very straightforward service that allowed them to buy and download tunes for under a $1, customers would buy music legally. The program's name was iTunes Music Store.
The iTunes Music Store can be seen as a success since Apple correctly predicted consumer behavior. Since its launch in 2003, iTunes has sold more than 25 billion songs, making it the largest music retailer worldwide in 2013.
The logic of the conventional music industry has been challenged by digital download services like the iTunes Music Store, but there are other legal music services that are even more radical and controversial. Services like Pandora and Spotify offer a large library of music to their users, who pay a monthly fee to listen to as many songs as they want.
Online music streaming through a legal access-based music service may seem enticing to some people, but these services have had trouble persuading record labels and users that they are viable. A legal music service that could compete with illegal file sharing was a goal that wasn't first pursued by Spotify. Most of their predecessors had failed for a variety of reasons, such having little content or having difficult interfaces.
Conclusion
In the past 15 years, the recorded music industry has seen a drastic transformation, but there is still more to be done before it finally abandons physical forms. The transition to the digital age is well underway, and access-based music services are crucial to it. Other industry sectors, such live music and music licensing, grow more significant when a recording's role as an income source diminishes.
The associations people have with music evolve along with the way music functions in society. In today's digital music market, services and features that enable customers to interact with music rather than just play it take center stage. This is why in Calypsoroom, believing that music is the most powerful tool to bring people together, we created a digital place where people can meet friends or strangers listening to the same music, at the same time, connected by webcam. Discover more.
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Written by CalypsoRoom Editorial Team
The CalypsoRoom Editorial Team is a skilled and diverse group of writers, researchers, and industry specialists who have access to Calypso's data and information in order to give you broad knowledge about the music industry as well as helpful advice to help you manage your music and dancing career.
Updated January 2023
