The New Music Industry

Music has been a part of humans’ lives for all of time. Cavemen would bang on walls and their chests to make sounds. That was the first form of music. The earliest known mechanical musical instrument, the “Banu Musa,” which was a hydraulic powered organ, dates back to around 875 A.D (Fowler). We have come a long way since then in the way that we create, record, and distribute music. But in the last 12 years, the way music has been created and shared with the world has changed in a way so drastic no one could have seen coming.

The older generations of today remember the days when they had to go down to their local record store and purchase a vinyl record and bring it back home to listen on their record players to hear their favorite artists. I still remember my early childhood when music was available on cassette tapes that had to be flipped over halfway through. The ‘90s brought the compact disc (CD) to the forefront of manufacturing where it remained for over a decade. In 2009, however, CDs only made up 65% of all music sold (Graham). The remaining 35% was through a new technology; digital downloads.

The availability of digital music on the Internet has changed the way we listen to music. It has also changed the way the record companies make money off of the music we listen to. The major record companies or the “big five” are Sony Music, Universal, EMI, Warner Brothers, and BMG (Alderman). Since online digital file sharing emerged in 1999, U.S. music sales have dropped from $14.6 billion to $7.7 billion, a 47 percent decrease (RIAA). Digital music has produced some revenue, but nowhere near enough to cover the losses of physical music’s decline. The big five have been losing money faster than they could have managed from the mp3 and its power. It wasn’t a completely new concept, but all it need was “some kids to find it and shake things up” (Alderman).

This online music revolution started in 18 year old Shawn Fanning’s dorm room at Northeastern University in 1999 (Goldsworthy). Fanning wanted a program that combined a search engine solely for finding mp3 files, the ability to trade mp3 files directly (file-sharing), and a way to find and communicate with other mp3 users (Tyson). What he eventually created became known as Napster. This peer-to-peer (P2P) program allowed users to download a song from another user’s computer without using a centralized server. Napster was simply the platform that connected everyone that wanted to share music files. These users were now able to get music for free instead of having to buy CDs. However, when major record companies and high profile artists realized consumers had their music, but had not legally purchased it, they took action. In July 2001, Napster was temporarily shut down for violating copyright laws. It was relaunched as a legal retail music distributor in 2003 after being purchased by Roxio (Goldsworthy). However, the cat was out of the bag. Consumers now knew of the new world available to them for acquiring music files without having to spend a single cent.

Since Napster, new illegal programs such as LimeWire and legal programs like iTunes have become available on the Internet. The Recording Industry Association of America (RIAA) was formed in response to “protect the intellectual property and First Amendment rights of artists and music labels; conduct consumer, industry and technical research; and monitor and review state and federal laws, regulations and policies” (RIAA).  The RIAA has had a difficult job in doing their job when 30 billion songs have been illegally downloaded from 2004 to 2009 (RIAA). An even more astonishing statistic is that today only 1 in 20 downloads are legal (Wardrop). These statistics are horrifying to the major record companies. They are losing out on billions of dollars. But to consumers, the ease of acquiring music without having to pay a fee is ideal.

The Internet hasn’t been all bad to those in the music industry. Artists are now able to release music to the public and here their feedback. Even artists who are still small can get recognized through the Internet and hopefully sign a major record deal. Danny Goldberg said in 2004 that he doesn’t “think the music business was ever available to everyone who dreamed of being in it” (Kirk). In 2011, that statement may no longer be true. The Internet has allowed unsigned artists to post their music online and has also allowed record companies to hear hundreds of thousands of more artists. More and more artists are being discovered because of their songs on the Internet.

The recent teen pop sensation Justin Bieber was found by a talent agent who stumbled upon his YouTube videos and eventually got him to meet with Usher who helped him get a record deal with Island Records and RMBG (Herrera). Similarly, artist Sam Adams, who performed at the University of Richmond last fall, released “I Hate College (Remix)” on YouTube, a remix of Asher Roth’s I Love College. The vast attention from teenagers in high school and college got him a record deal with 1^st Round Records (1^st Round). Websites such as YouTube have allowed artists to post their amateur recordings in hopes that someone notices them. The Internet now gives everyone the opportunity to be noticed. The perception of having to be that “one in a million” has become more realistic.

Facebook has become the second most trafficked website on the Internet behind Google (Most Popular). Almost every major musician/band, as well as thousands of amateur and less mainstream artists, has a Facebook page. With more than 500 million users, Facebook is an ideal platform for artists to showcase their music (Statistics). The Facebook Music page describes its uses as sending updates about tours and concerts, showcasing new releases, selling tickets and merchandise, engaging fans, importing photos, and allowing content to spread virally and become discovered (Music on Facebook). The Internet has vastly expanded artists’ reach to fans and the interaction between them.

In 2001 arrived the biggest thing to the online music world; Apple’s iTunes (Cassidy). However, it was not the first program to join the music player world. A media player is a computer software used to play multimedia files; audio and video. In April 1995, RealAudio Player, the first version of RealPlayer, was released (RealPlayer History). It was one of the first media players capable of streaming media over the Internet. RealPlayer was the most popular software when it was first released, but today it has been surpassed by Windows Media Player and iTunes. Microsoft Windows has had a media player since 1991 (Windows Version History), but it wasn’t until the release of Windows 98 that it had been given the name it is known by today; Windows Media Player (Chandler). These two programs were the fundamental programs for online streaming of digital music, but today it is iTunes that is the standard.

The iTunes we think of today is far from the one that first appeared in 2001. In 1999 SoundJam MP was released by Casady & Greene (Kincaid). It was purchased by Apple in 2000 where it became the basis for their music player. Apple took the program, touched it up, and released it in January 2001 as iTunes (Sasser). But it was the release of iTunes 2.0 in late 2001 that it really started to become popular (Apple Announces iTunes 2). At the same time, Apple released its first version of the iPod (2001 to Present). The two programs took off together and haven’t looked back. They have become the standard for portable mp3 players and media players.

The release of iTunes 4 brought with it the biggest change to the music industry; the support of an online music store (iTunes – Rebranding History). Users could now log on to the iTunes Music Store and purchase songs and albums that would automatically download to their music library. Consumers no longer needed to drive to the mall to purchase CDs so they could then import them into their libraries. They could easily be purchased and downloaded in a matter of minutes. But the feature that consumers loved most was that they no long had to purchase an entire album for that one song they wanted. You can now easily buy only the songs you want to hear. This business strategy created by Apple has worked out better than anyone could have ever imagined.

iTunes has over 13 million songs available on the music store that can be purchased a song at a time or an entire album (iTunes A to Z). No physical store anywhere has a collection of music even close to that size. The online world is infinitely large, allowing iTunes to carry as much music as they can get digital rights for. And that is exactly what they have done too. The iTunes Music Store accounts for 70% of all legal downloads of singles and albums (Albanesius). On February 24, 2010 iTunes sold its 10 billionth song. (iTunes Store Tops 10 Billion Songs Sold). The vast grasp that iTunes has on the legal online digital music world has allowed its continuing success.

When iTunes users open their music library, they will find their iTunes Sidebar. Based on the music you already listen to and have downloaded, “Genius” recommends what you might like. Similarly, the iTunes Store features a recommendations section. Based on previous purchases, iTunes will create a list of music you’ll enjoy. Another feature of the iTunes Store, iTunes Essentials, allows you to discover new music, new artists, or even rediscover old artists. Delve into an artist’s biggest hits or their hidden gems to find something new.

Now iTunes isn’t only beneficial to consumers. Artists have been very receptive to what the program offers as well. From a business perspective, online music stores allow artists to receive revenue for their work constantly. Stores are not going to carry CDs years after they have been released, but iTunes will. Whenever customers want to purchase an old song from their past, they can log on to iTunes and purchase what they want. Musicians that have stopped recording new music and performing live can still make money from online sales. The revenue stream is endless.

For those artists that are not mainstream, online music stores allow them to become recognized. Each year 30,000 albums are released and of those only about 100 become hits (Kirk). However, with online media stores such as iTunes, the number of failed records has decreased. Artists are more easily available to consumers and are becoming recognized and noticed a lot more readily. All it takes is that one hit single for artists to become known. Unfortunately, this mentality has begun to ruin the music industry. The idea of the “one hit single” has become more accepted amongst artists and takes away from the musical beauty of creating entire albums. This is why the record companies are losing money. Consumers no longer have to buy an entire CD for the one song they want. The Internet allows them to get what they want when they want it.

The impact the Internet has had on the music industry is hard to fathom. It will be interesting to see what type of impact the Internet has on other aspects of the entertainment industry such as film and television. It seems that it may still be too soon to determine the impact. The Internet is still a relatively new technology and has yet to get its full grip on the film and television industries, but the seeds have been planted. Many films and television shows are available online for illegal download as well as on programs such as iTunes, but I cannot see the effects being as severe as they have been on the music industry. However, time will tell if I am wrong.

I sit here writing this research paper while listening to music that was illegally downloaded and then transferred to my iTunes library. It seems clear to me that the Internet has had a monumental effect on the music industry. From 2008 to 2009, digital music sales increased by $319 million, but physical sales have decreased by $1.12 billion (2009 Year-End Shipment Statistics). The record companies are losing millions of dollars in revenue, but new companies like Apple and Napster are snatching up that lost money. The standard form for music distribution from artist to record company to consumer has been shattered (Fink). The Internet and its various forums have been that element causing drastic changes. The new music industry is more proof of the Internet as a disruptive technology to some, but an opportunity for others. 

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