Monday, November 2, 2009

Contemporize, Man: The Future Of The Music Industry

An essay by Andy Scott [041399967]

In all probability the 20th century will be remembered specifically as the century when the world became less mysterious due largely to the globalizing effects of revolutionary technology. However it may be our ability to exploit these technologies to discover all possible applications and utilizations that is the real marvel. Never has this been more evident than with the Internet which has caused the largest social shift perhaps since the resurgence of Democracy during the late 18th century. Specifically the Internet has been able to achieve what most ideologies can only theorize, that being the successful creation of a global culture containing traditions, customs, communications, entertainment and business opportunities on a grand scale. But the most impressive trait of the Internet is its ability to reshape certain social practices, in a way it conjures images of the darkest sci-fi themes, particularly that our resistance is futile.

It’s also unnecessary to resist, it’s counterproductive and unprofitable to not adapt your business to the realities of the free market. This is apparently not a belief held by certain industries that are reluctant in changing their business model to better suit a market that will eventually be predominantly online. This is particularly apparent in industries that produce physical media that can also be easily distributed digitally i.e. newspapers, magazines, films, television shows, video games and music. This essay will examine the music industry in particular and why it is an industry that has become central in the digital revolution. Are there any viable methods of making a profit online? Is the album as we know it dead? Are major record companies necessary in an era where self-distribution is faster and easier?

To better understand how the Internet is disrupting the record company’s business process a clearer understanding of that process is needed. The role of recording companies is to discover, fund, produce, promote and market musicians. Artists that want their music to reach the broadest possible audience have had to rely on these record companies for the funds to achieve their goals, in return they usually grant these companies ownership of whatever music they make and limited creative control over the artists. The contract they enter into begins a work cycle that involves two principal stages, recording an album and then touring in support of that album.

Most attention has been on copyright laws and trying to enforce these laws on consumers that download music illegally, a seemingly misguided action by an industry struggling to maintain authority. "The threat to the music industry is not MP3s, but the arrival of a consumer distribution channel that is not controlled by the music industry." (Jeremy Silver, vice president of New Media, EMI. 1999). Consumers no longer need to rely on big companies, radio stations or entertainment institutes such as MTV in order to decide what music they like. The Internet has even made it possible to interact with the musicians directly, cutting out all the middle people.

“Given the Net's low entry barriers, new entrants in the music industry are outpacing traditional record labels, which have limited experience with new technologies… As more and more consumers go online to shop for music, key players in the music industry must reexamine their value proposition to remain relevant.” (Calvin K. M. Lam, Bernard C. Y. Tan. 2001)

However it is impossible to ignore the effect illegal downloading is having on the industry. Canadian Record Industry Association president Graham Henderson noted in 2007, "There's mass confusion in the (Canadian) marketplace about whether downloading is even illegal… Musicians themselves, who are working for less than ever, are in a state of denial over the rights and wrongs of downloading and music property rights. And law agencies don't have the money, manpower or political backing to take action."

This has been an important issue since the early 2000s with p2p programs such as Napster. A p2p (peer-to-peer) program connects users to a network where they able to search for files and download them directly from other users. The advantage of such a network is that if more than one user has the same file you’re able to download at a faster speed, certainly an important feature in a pre-broadband world. These programs filled a gaping void left by the music industry whose only online activity was the sale of CDs in an attempt to mimic the success of

Numerous lawsuits against these file sharing networks have caused most of them to either become legitimate organizations that fight copyright infringement or to disappear from the market altogether. All of this clearly caught the industry by surprise as they’ve spent the majority of the years since trying to create new methods of eliminating copyright infringement. Yet again other groups and individuals note this obvious gap in the market and begin to exploit it. On the legal end of the spectrum Apple releases the iPod in 2001, the first Mp3 player to capture the market’s attention much in the same way Sony had two decades earlier with the Walkman.

In 2003 Apple again had success with its launch of iTunes, the first online digital music store to gain widespread attention, since then iTunes has sold over 6 billion songs worldwide. iTunes made downloading MP3s less taboo and has started a trend that is gradually making digital downloads more popular than CDs. “According to a report on The iPod Observer, quoting data from NPD, "some twenty-nine million consumers ‘acquired' digital music legally during 2007, specifying the legal online download services such as iTunes. That represents a 5% increase compared to 2006, and that growth was largely driven by consumers age 36 to 50. NPD said that demographic ‘aggressively acquired digital music-players in 2007.’”(McIlroy, T. 2009) In terms of a worldwide market digital music revenues have risen from $2.9 billion in 2006 to $10.7 billion in 2009. (eMarketer, 2007) Hardly the type of statistics you’d expect from an industry in peril.

But not all musicians like the idea of having their albums for sale in an a la carte style system such as iTunes as they fear the disappearance of the traditional studio album, several notable acts are still holding out from joining iTunes including AC/DC, The Beatles, Def Leppard and Tool. AC/DC guitarist Angus Young stated in 2008 “Our real reason is that we honestly believe the songs on any of our albums belong together… If we were on iTunes, we know a certain percentage of people would only download two or three songs from the album - and we don't think that represents us musically."

Though there are some that seem to disagree with AC/DC’s stance on albums, “Music company EMI, keen to hear the views of some of its customers, invited a group of teenagers into its London headquarters to ask them about their music consumption habits. At the end they were thanked and asked to help themselves to a big pile of EMI CDs on the table…None of the teenagers took any. They didn't want them. "That's when we realised the game was up," says one of the EMI executives.” (Philipson, G. 2008) This is probably why some artists are exploring alternate routes of delivering their music and even reinventing the concept of albums.

Upon completing their contract with EMI after six albums Radiohead thought outside the box in terms of how they wanted to distribute their latest album, In Rainbows in late 2007. Vocalist Thom Yorke, "I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say 'Fuck you' to this decaying business model." (Tyrangiel, J. 2007) The band released the album themselves on their website for free or for a price if you wanted to. Whilst this business model requires the type of popularity as attained by Radiohead it’s not uncommon. Nine Inch Nails released their latest album in much the same way, except they didn’t even provide the option for payment.

The Smashing Pumpkins pioneered the free online album in the early 2000s with Machina II and have recently announced that they won’t be restrained by the restrictiveness of an album for their next offering. Billy Corgan, “My intention is to only put out music of the highest caliber, I will be only be recording about 4 songs at a time and then releasing them one by one shortly after their completion. 'Teargarden by Kaleidyscope' will be a new kind of album, an album you can hear as its being made. That process will unfold over the next few years.”

Other artists are exploring different methods of recording an album without having to rely on record companies to fund studio time and other expenses. In October 2009, Public Enemy became the first mainstream artist to join SellaBand, which is organization that allows fans to fund upcoming albums. Public Enemy “aim to raise an impressive $250,000. Parts will be priced at $25,00 each and will entitle Believers in this project to a unique, numbered digipak edition of the CD, as well as a pro ratio share of 33,3% of all net revenues generated with this album.” These and similar methods allow fans to take a more hands on approach in the actual development of an album and in this case lets them generate a profit for the opportunity.

Another benefit of these sorts of ventures is the promotion of previously unknown artists to a larger community in ways radio and television cannot even hope to achieve with their time limitations. Online consumers can find many communities dedicated to music in general or more specific tastes., one of these websites explains its purpose thusly, “thesixtyone democratizes music culture: artists submit their work, but rather than allowing a tuffy suit to decide what’s cool, the listeners do.” This anti-corporate listener centric attitude has been apparent amongst musical enthusiasts for many decades now, but it is only with the Internet that consumers have been allowed to explore alternatives.

If something is labeled ‘online’ there is often a tendency to think of it as amateur, of low quality and probably contains false information. This is much in line with society’s mistrust of the Internet over time. After all it was once thought unwise to purchase anything online, now you can even buy your groceries via online applications. If we can trust our stomachs and bank info to the Internet, isn’t it inevitable that we ease our tension towards online sources of media and entertainment?

There are three things for certain in regards to this argument, if persuaded to do so consumers will indeed pay for their music, the Internet is going nowhere and music can survive sans the record companies. Adopt, adapt and improve, as the saying goes. Musicians and record companies can try and fight the tide, but is it worth the effort? As Jeff Rabhan, an artist manager, told The Wall Street Journal, "[CD] sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream. It's the vehicle that drives the tour, the merchandise, building the brand, and that's it."

Almost gone are the times when there was a genuine need for an entity in the middle to introduce music to the masses. Artists as brands and consumers as bosses, it’s that simple. The Internet lets musicians and fans meet and form mutually beneficial relationships whether it be direct funding or promotion work, there are an army of dedicated out there who want to do what they can to ensure music is heard and many methods to do so. These are just a few ideas floating around particularly focused on the music industry, so you might imagine what is being considered for other industries. Where is the validity behind claims of ‘our industries are dying’, perhaps your world they are, in other realms they’re flourishing whilst simultaneously being reinvented to suit an ever growing global shift in society. ‘Adopt, adapt or cease to be’ might suit more as a warning, but the truth is there’s little to no reason or benefits from resisting change.


Calvin K. M. Lam, Bernard C. Y. Tan. 2001. The Internet Is Changing The Music Industry. Communications of the ACM. 44 (8). pp. 62-68.

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