Posted by & filed under business models, Digital Policy, IS ethics, peer file sharing.

Description: After another year of plunging music sales, record company executives are starting to contemplate the unthinkable: The digital music business, held out as the future of the industry, may already be as big as it is going to get.

Source: Informationweek

Date: Jan 23 , 2011

In each of the past two years, the rate of increase in digital revenue has approximately halved. If that trend continues, digital sales could top out at less than $5 billion this year, about a third of the overall music market but many billions of dollars short of the amount needed to replace long-gone sales of compact discs.

“Music’s first digital decade is behind us and what do we have?” said Mark Mulligan, an analyst at Forrester Research. “Not a lot of progress.”
“We are at one of the most worrying stages yet for the industry,” he continued. “As things stand now, digital music has failed.”
Music executives disagree, saying there is hope, as long as they can come to grips with piracy, which according to the industry federation accounts for the vast majority of music distributed online   Read rest of story

Questions for discussion:

  • Is the music industry as big as it is going to grow at this point? Why>? or Why not?
  • What is the biggest impediment to this business growing?  Are they using the correct business model?
  • Where do you see the future of the industry in ten years?

37 Responses to “Music Industry Braces for the Unthinkable”

  1. Hugh F

    The future of the music industry does lie mostly with the future of privacy laws from the perspective of someone wanting gain a profit from the industry. However, when looking at size as the number of artists being able to make a living out of music, this recent digital/piracy shift might actually help numbers. Looking at all the new independent avenues for information and media (Facebook, Youtube, piracy ect) you start to see strong alternatives to the old avenues of (Music video channels like Much and stores like HMV). This is of course because the internet in its modern glory has been able to let us see/hear what we want, when we want to and for our favourite price, free! Once again, for the producers of a top 40 artist this is terrible but for starving artists the internet is cost friendly and will reach far more of an audience than any previous conventional medium.

  2. Brett

    The days of the “big four” music companies forcing the consumer to pay $20 for an album that contains one good song are coming to an end. It is easy to blame piracy, but this has been in the works for some time. Apple’s Itunes allows the consumer to pay $1 for the song they want and ignore the “filler” songs that are usually required by the record companies. Consumers have never wanted to pay for them and now that they have the choice they don’t. The song is now only worth $1 instead of $20, and 30 cents goes to Apple, this shows that their profits are going down and will continue to do so, not really as “unthinkable” as the article states.

  3. Caley Sinclair

    Even if piracy is hit with newly created laws, there will still be people searching fora way to download their music for free; it is inevitable. The idea of being able to have something for free rather than pay a price is much to tempting. Instead of inforcing laws, why not go directly to the source of file sharing. Maybe it would be possible to charge a one time fee for a subscription, or even a yearly price.

  4. Rob Cooper

    As a music lover and fan, I think it is a difficult situation to deal with in regards to the effects that these modern day changes have had on the major record labels of today. Although they have enjoyed previous success for many years prior to these changes it is more notably sad for the artists who take their craft seriously and were once able to create influential music that they were once able to make a living from.

    But, I also feel that throughout time there have been shifts in revolutions that have led to incredible changes of pace in the way we live and function as a whole. This change in music industry is another one of those pace changers that have forced the digital music industry to convert to an internet based platform, which unfortunately has led to unauthorized copying.

    This new way of music sharing is only going to continue to evolve so instead of records companies who have made billions of dollars in the past off of record sales it may now just be time for these corporations to change with the times as well.

  5. katelynne.swenson

    Downloading music off the internet is something that is always going to happen. Even though the biggest program was shut down (Limewire), new programs will always keep emerging to take their place. I think record companies need to change their game in order to keep up with consumers. They need to accept that the digital age is growing. Not only are cd’s over priced, so are digital songs that can be downloaded. If someone want’s one song by an artist they are not going to buy the whole cd. They will head to internet to download it. Most prices are $1 a song. While this seems cheap if you are only getting one song, once you buy more, the cost really adds up. I think the big thing record companies need to do is lower their prices of the digital copies and cd’s. If you look at the major artists, it isn’t like they are lacking money by any means.

  6. Tara

    The music industry will not get any bigger than it already has unless the music companies choose to change the way in which they seek to gain revenues. By focusing on punitive actions towards free file sharing companies it cuts off any relations music companies may be able to build and create with them. Instead of music companies working against free file sharing companies perhaps they could re-evaluate and choose to collaborate with each other in a way that creates profits for both parties. I agree with Caley’s point above where perhaps the music companies could charge the free file sharing companies a subscription fee for each artist that they distribute music of. The higher the popularity of the artist could therefore create a higher fee incurred.
    Incentive for free file sharing companies to work with music companies could be that perhaps the music companies provide opportunities for listeners to win free tickets to concerts of favorite artists but these tickets are distributed through the free file sharing companies websites.This would encourage music listeners to continue seeking music from that particular free file sharing company.
    This is a very micro picture of how the two companies could work together opposed to against each other.

  7. Kuda

    The challenge faced by record companies concerning online sharing of music is one that is very hard to tackle. In light of the fact that the number of customers for music should have increased because of the global village created with the advent of internet and file sharing. Despite the success in South Korea in reducing illegal music downloads, implementing this on a wider scale presents problems as there should be some interest on the part of lawmakers in different jurisdictions. And even an application of South Korea’s methods to counter file sharing, this might not be feasible to implement in say the US where the internet providers might be reluctant to sabotage their business so as to uphold the music business. Therefore a better solution might be to follow the Europeans who dealt with Mininova and Pirate Bay. Find ways to restrict the sites that encourage this file sharing hoping that it could steadily reduce file sharing. In the next 10 years it would be hard to perceive the music industry tackling this challenge so there might as well get as much as they can from whatever channels available to counter this challenge.

  8. Samantha

    If the companies aren’t willing to change their ways to want the customer wants, then there is no room for them in the music industry. The use of the Internet has allowed the customer to get the music they want when they want it, it is all about the convenience rather than the music.

    The industry is not the only one to blame when it comes to the downloading of the music; the downloaders need to remember that the musicians are now no longer getting paid for the music the downloaders are getting. If they do not get paid they wont be willing to make that music we love. If you ask the downloaders if they would steal something from a store most would say no, however they are still stealing, just not from a physical location that they can see. The fact that the Internet does not have a face allows the downloaders not to feel guilty when they are downloading. Downloading and file sharing should be considered an ethical issue just as much as a criminal issue.

  9. Ashley Halliday

    The music industry will continue to grow despite downloading songs from the internet. There will always be people who are willing to pay the $20 for a cd rather than getting it online. This downloading phase is not new but it doesn’t seem that big artists are struggling in any way.
    Watch mtv cribs, it will help justify downloading songs for free…

    I think the future of the music industry will be similar to where it’s at today. There will be websites shut down for providing free music and more of these websites created. But either way, the industry is not going anywhere any time soon. Shutting down Limewire seems like a minuscule attempt to control the issue of downloading online. If Limewire is gone people can use other programs like Vuze- at least that program you can download whole albums instead of single songs. Shutting down programs one at a time will not solve the issue.

  10. Kevin Beauchamp

    I believe at the current pace that the music industry is going to top out very soon. Within the past decade, consumers have been accustomed to downloading music for free at their own will. Considering the younger demographics are downloading the most, they are to group who is least likely to change and most likely to seek out alternative downloading sources. The digital industry is also at a disadvantage because the demand for music is focused on single songs that cost a dollar, rather than cds that cost fifteen dollars. Record companies will hate to admit it, but they will have to make a drastic change in the very near future. Like others said, a Netflix-type system may be ideal where users pay a flat rate and are free to download x amount of songs. Record companies may be reluctant, but right now they are not in a position to be.

  11. N.P

    I personally think that the music industry was at its prime years ago when my generation found it cool to go out and buy the actual cd of their favourite artist. Now its all about finding it online and loading it onto your ipod. The article stated that music sales could top out at less than 5 billion dollars this year, and I feel that it could either get much better or much worst from here on out. If they think shutting down the internet of all users who decide to illegaly download music will help raise sales than I think they are way to ahead of themselves. Regardless of these attempts, people can easily turn on a radio or watch MTV and record all of the music in the world and still not go out and buy an actual cd. The latest generation of young teens- adults are no longer interested in having physical copies of discs. If these music industries can broaden the use of paid music downloads through phone companies and itunes than they should work harder at creating desireable plans such as these. They can’t just assume that they can regularily shut down someone’s internet forever, or expect that websites like limewire won’t continue to arise. This is an internet era that won’t slow down or shut down for that matter.

  12. Warren S.

    Until the music industry is able to make big gains on the fight against piracy I really do not see any growth at least in CD sales. In a digital anything and everything can literally be accessed. The way digital music is set up at the moment really has no way of controlling this missed opportunity of revenue. Perhaps a new digital device or technology will be invented to correct the misuse of pirating music. However, once the genie is out of the bottle so to speak it seems a great challenge to instil accountability. It is a double edged sword. When all iTunes songs were ninety-nine cents a song people were more enticed to get a high quality track for that price. Now because most are downloading their music for free, such companies have raised their prices to keep up. In doing so a $1.29 a piece for a song depending on your personal opinion seems expensive when it all adds up and so they continue to download freely. In the next ten years I assume a lot of the same problems and who knows maybe we will see songs on iTunes for $3 a song or more.

  13. Teigen C.

    Whether or not the music industry invents a new way to distribute music for a profit, people are always going to find a way around it. Personally, I love the idea of having an iTunes option, where you can buy only the songs you want and not have to pay for the entire album. I can honestly say that I do not mind paying the price for individually downloaded songs. However, with that being said, it does not mean that I will not download it for free if I can find it on the internet. I think this is the true issue of the music industry. If you can find it for free, you are going to get it for free. If people really want to get rid of the problem, they need to shut down the free downloading sites. Shutting down LimeWire was one of the biggest advancements yet. Unfortunately for the music industry there are many other free downloading programs that have already taken LimeWire’s place.

    Basically, get rid of the programs and I think people will begin to use programs like iTunes instead. One dollar only seems like a lot when you can find it for free somewhere else!

  14. A.S.

    The future of this industry will face the same issue as it is now if not worsened by its current state. Since technology is continually advancing, we have seen a shift from cassette tapes and VHS movies to compact discs and DVDs, and now digital music/movie downloads onto our advanced electronic devices such as Ipods, MP3’s, PC’s, MACS, etc. Although there are attempts to stop pirating, it will be an everlasting trend in this era. Yes there are those that prefer to go out and physically shop for an album to support their favorite artists or simply abide by the rules, but there are also those who prefer to save a buck and download for free. An industry of this magnitude also suggests that this issue may be never be solved in its entirety since there are millions if not billions of music lovers out there and not everyone downloading illegally can be accounted for. These companies may be losing some big bucks, but it won’t drive them out of business since record labels are still making deals with large media companies such as MTV, or Much Music in Canada to air and advertise artists’ new albums and music videos.

  15. Jolan Naismith

    The current and projected future financial issues in the music industry can be viewed as a double edged sword. Major CD producing companies claim they are at a serious disadvantage as a result of free internet downloading of songs by tech savvy consumers. How do you feel sympathy for companies who have spent years over valuing the cost of their products? Artists likely have mixed reviews, as internet posting and downloading has allowed countless artists with significantly less financial backing break onto the ever competitive music scene and compete with better marketed artists and products. Is there a desire to thin out the competition for fear an unknown will share or steal “their” spotlight?
    I agree with previous posts indicating the development of technology and the industries that surround music. Instead of trying to stop people from downloading, maybe it’s in the music industry’s best interest to jump on the bandwagon and find an innovative way to provide consumers with more choices and avenues in which to obtain their product. Society is changing you have to keep up or you become obsolete.

  16. AS

    Although there are attempts to stop piracy in regards to downloading music I dont think there will be a way to completely abolish this problem. Facts from this article proves that piracy is taking away business from the music industry, in a sense it helps the discovery of new artists. Tech savy music lovers will spend hours trying to find new music from searching the web. Without this new artists may not have been discovered and brought to new popularity. I do agree that “stealing” music is hurting the music industry but it will not ultimately slow it down. I also find that cutting off someones interent from pirating music is not the right wayt to go about it. You cant cut off some ones interent forever and once they get back on to the interent more than likely they will pirate music again. Cutting out the programs like Limewire and Frostwire seems to be the better solution.

  17. t.sedrovic

    Where do I see the future of the industry in ten years? Illegal downloading will always take place, but if the industry does a little cleaning house there may be some changes. I rarely buy music, my Ipod has over 3000 songs of which I listen to maybe 200 of them. When I want to listen at home, I throw on youtube and listen for free. Why? Because the “music”(if we can call it that anymore) industry is pumping out ridiculous song after ridiculous song of music that only appeals to the 16-year old girl in us. It’s getting hard to call it “music” when anyone can have their voice digitally altered to sound any way they want it. Hopefully, with all of this talk about where the industry is going and the piracy that goes with it, the music industry will take a big step back and stop throwing their money at the less-than-talented individuals who’s mommy or daddy was a rock star so now they have to be. So where do I see the music industry in ten years? Right next to Disney, pumping out a CD for every new pre-teen tv show. I’ll buy music from the artists that are talented, but that is getting pretty hard to find…

  18. Kim Berger

    If the music industry continues to implement and enforce anti-piracy laws, then no, the music industry at this point in time is not as big as it is going to get. Cracking down on pirating will add a big chunk of revenue to sales, because former pirates face the choice of either not getting their desired music, or actually paying for it like the rest of us honest people do. It makes sense that as long as something is done by the music companies to control the piracy that runs rampant within the music downloading world, that there is a possibility for further and future growth in the music downloading industry.

  19. J.E.

    Piracy will never be abolished. This is a way of making a living and a way of rebelling. You shut one website or program down after years of time in legal battle as well as a lot of money spent and 50 other sites have opened up. The music industry needs to focus on getting their music out there in more convenient ways such as apple has done with iTunes. I myself very rarely purchased music before iTunes, but thanks to the convenience of it they have scammed a few bucks out of me. This problem with piracy though extends far beyond just the music industry. Movies are massively pirated as well as computer programs. So instead of wasting money of enforcing piracy laws I think we all just need to realize it is a way of life and try to figure out some way to live with it or live around it.

  20. Dylan B

    The music industry is in a time of radical change. I appreciate the work thats being put forth to sell music online via such channels as iTunes, but the fact remains that the industry has been corrected. Gone are the days of waiting in line at the record store to but a newly released CD. Musicians are no longer able to go quintuple platinum in the first 3 days of their album coming out, thats just how it is. The world was given a shortcut to free music when peer-to-peer programs came along, and until they are all completely shut down, people will choose free over $0.99 every time.

  21. Chris

    The music industry might be as big as it gets but being used with technology that is where it will be changing. The use of the technology with the music industry can bring a larger industry. The use of technology though can make the music industry not make any money. Like now when you want to hear music you can go on your computer and download songs for free. The use of piracy on the computer is what causes the music business to not grow. Looking at what they have done in Korea with making the laws tighter to piracy allowed the digital music economy to have an increase with digital sales. In our music industry I think they need to be tighter on the piracy laws. In the article is says they are focusing on television as an opportunity. This will not stop the piracy of the business though. This however will make a broader market to make money not just focused on itunes. This looks like this how the industry will change in the next ten years and go along with the changing of new technology.

  22. Wendy.R

    I believe that the music world can become a successful digital market. However there are many steps needed in order to accomplish this strategic movement from CDs to digital. This advancement will not occur in a year, but over the next 5 to 10 years. Similar situations have occurred over the last few decades, for instance VHS to DVDs. Many individuals stayed with the VHS systems due to the great condition of the system or their previous collection of movies, until new movies were not available in that format. This tactic forced the public to grow with modern technology. When recording companies provide a no copy or share-free restriction to all songs, this will control the flow of unauthorized music; forcing the music lovers to purchase the songs or CDs from the appropriate providers.

  23. brittni.maurer

    I think that the music industry will keep growing slowly but it will. I think this because there are going to be the new young singers that are going to keep streaming into the industry. It is at a stand still right now because thy are caught in a trap of transferring from CD’s to the digital world, it is in a bit of a toss up on how to market the music through the digital world while still making a profit. The biggest impediment to this business growth is the young talent entering the market, I think that the business model that they are using is working to a point where its not going to hurt them.
    In ten years I can see the music industry staying the same as it is today but with different new young stars that everyone wants to see in concert. I cant see if changing dramatically because there is always a demand for music every where you go. Whether it is on a CD or its downloaded from the web, there is going to be a profit made. Selling their albums online will be a huge thing in ten years I believe.

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