Reviews of 2007 sales show that through iTunes, Apple, Inc. is now the number two music retailer in the country, beating out Best Buy and Target, but still lagging behind Wal-Mart. In 2007, ten percent of legally obtained music was downloaded, a 6% jump from 2006. Meanwhile, the average American spends $4 less per year on music and approximately 1,000,000 Americans stopped purchasing CDs.
These statistics speak volumes about the way the music industry is changing. Apple, originally a computer and software company, found a niche in the market for portable music devices, in the way other companies were developing slimmer cell phones and digital cameras at the beginning of the century. Apple was able to successfully advertise the iPod and its accompanying software, iTunes, and still largely commands the market on portable music devices.
However, portable music players are nothing new, so why is the iPod revolutionizing the music industry? What separates the iPod from the Sony Discman, and the Walkman before it, is that the iPod is completely dependant on computers in order to function.
The rise of the iPod has coincided perfectly with the rise of the Internet. People are getting used to transmitting information and communicating through the internet, so transmitting music is the next logical step. Transmitted digital music is cheaper, more efficient and less wasteful than CDs.
Through iTunes, Apple has 50 million customers and has sold four billion songs — and that is just music obtained legally through one music-purchasing program.
Leaders of the digital music industry and major record label execs gathered at the Digital Music Forum East, held in New York City on Feb. 26 and 27. They discussed the state of the music industry, such as falling CD purchases, and how to stop illegal music downloads. The overall theme of the event was to discuss how new digital and old physical media companies can coexist.
Most old media companies have held a lock on the music industry since the days of vinyl LPs. The newcomers are mostly web-based and offer cheaper alternatives to consumers. Artists prefer the new digital music market because it allows them to access to fans more easily. According to David Del Beccaro, founder and president of Music Choice, can collect 85 percent on products sold through digital music platforms after costs, while 40 percent is collected by artists from traditional media sales.
Independent artists are using the Internet through sites like MySpace and YouTube to reach large, international audiences. Offering digital music to web users increases exposure and decentralizes the music industry from corporate controlled to the consumer.
However, with the digitization of music comes piracy and illegal downloads. Peer-to-peer, or P2P, software allows users to share files, often music and videos, directly. Programs such as BitTorrent allow users to share music more easily distributing the costs of hosting and bandwidth, by splitting up files letting many users “time-share” resources. With this comes the ensuing controversy of copyright violation.
The Recording Industry Association of America is a trade group that represents old media corporate record labels and distributors. The RIAA is the toughest opponent to illegal file sharing, which it has claimed costs it $4.2 billion annually. As of July, 2006 the association filed about 20,000 lawsuits against American filesharers. In 1999 it bankrupted popular P2P provider Napster for allowing users to distribute copyrighted material.
The association is often at odds with civil liberties and pro-internet freedom groups for the way they conduct lawsuits. Typically, the RIAA seeks $750 per song illegally downloaded, roughly 1000 times the actual cost of a legally downloaded song. The RIAA has also been known to file lawsuits against the deceased and children as young as 12.
Opponents of the association often point out that an illegally downloaded song does not necessarily correspond to a loss of a sale, for it assumes that all illegally downloaded music would have been obtained legally if it wasn’t for the availability of illegal methods. In actuality, many people who download music illegally would simply choose not to purchase music if it was not obtainable for free. Therefore, actual losses due to illegal downloading cannot be appropriately determined.
In fact, artists can benefit from this type of music transfer, because it can increase their exposure to larger audiences. Bands who offer free music often make up for their losses by asking for donations or by selling more music later, to a bigger fan base.
Rapidly developing technology will only cause the price of music to keep dropping, and remove control of the industry from the hands of old media corporate entities. It is allowing artists to collect revenue and to communicate with their audiences. The globalization of the Internet is creating new digital markets overseas, giving rise to a wider variety of content.
While companies are seeking new ways to profit from these markets, they are learning how to integrate new technology and new distribution techniques and older business models. This has caused the music industry to become more Internet- and computer-oriented, giving even more control to consumers.
The world is coming upon a new horizon in the music industry. A computer company becoming a leading retailer in music tells us that not only are we are changing the way music is transmitted, we are changing the way we think about art in general. Since music can now be digitized and sent as information packets across a cable or through space, we treat it as another form of information. We are used to paying for art, but information is a collaborative effort in our society, from libraries to Wikipedia.
People love to share information, especially when the cost of transmission is cheap. Musical information, and the way it is transmitted, can reveal a lot about our society. Decisions about royalties and ownership versus the cheap cost of transmission will be all important in the coming years, especially as newly elected policy-makers take office. These decisions will decide whether we want to be a society that allows the cheap access to information, based on its demand, or whether we will restrict access to information for the benefit of corporate profits.
In the past, information has always been supplied based on the route of consumer demand. I strongly suspect it will do so now, and old media corporations will have to adapt or perish.
