Soundscan, a system that measures precise sales figures, reports that album sales are down by 5. 4% starting the first months of 2001 (Todd, 2005). Pali and Nielsen Research conducted a similar study on the sales of CDs. According to their study, the current yearly total CD sales are 7. 7% below that in 2005 last year. About 496 million annual volumes were recorded last year. This is higher compared to the present volume which is approximately 458 million (CD Sales Keep Dipping; Yearly Totals Remain Problematic, 2006).
While the sales of physical forms of music are in its downward trend, it seems that the sales of digital music are running the opposite end. According to the Nielsen Research, there is about 73% rise in sales of digital music from last year’s 437,000 to the present’s 785,000 (CD Sales Keep Dipping; Yearly Totals Remain Problematic, 2006). The sales in digital music are then further increased as distribution of digital innovations that stimulate the distribution of digital music also increases. One of these is the portable music device, most popular among which is Apple’s iPod.
According to Jupiter Research, the increase in consumption of Ipods is currently driving the growth digital music industry (Menta, 2006). David Card, Jupiter’s Senior Analyst noted that more than 60% of the owners of portable music devices rip their music and among these people, 58% of the Ipod users and 44% of the users of other music devices are known to use playlists (Menta, 2006). Ipods stimulate online purchasing of music. According to a study done by Jupiter Research, only 18% of adult users of portable music device have more than a thousand music files in their computers (Menta, 2006).
Among the users of portable music devices, a third is interested in music subscription services: most of which were teenagers from 13-17 and young adults. According to Josh Green, a Senior Analyst of JupiterResearch, subscription services will soon take the place of single downloads. In addition, he forecasts that physical devices like CDs won’t be replaced by digital media in the next five years (JupiterResearch Reports Almost One-Third of Young Adults Interested in Music Subscription Services, 2004).
Meanwhile, Soundscan reports that the rise in sales of digital tracks is currently led by the Universal Music Group with 31. 6% share of the overall album sales; Sony BMG is second with 23. 6% (Digital Music Sales on the Rise, 2006); Warner Music Group is third with 19. 2%; the independent sector comes fourth with 12. 7%, while EMI is fifth with 10% (Morris, 2006). It seems that music companies see peer-to-peer downloading and internet music distribution as acts of theft that causes music sales to continue to drop from 1999 to present (Music’s Brighter Future, 2004).
The number of lawsuits filed against digital music distributors and sharing networks like Napster and Mp3. com shows that the growing popularity of digital tracks as well as that of internet piracy are currently considered by the music companies as the major threats against the future of the music industry. The purpose of lawsuits is to deter illegal downloading and propagating of copyrighted music through the internet. Lawsuits has been done and redone and yet, after years of struggle against internet piracy, digital music downloading has continued to escalate and album sales continue to fall.
According to Todd (2005) such lawsuits have not done anything significant in alleviating the problem with piracy and with album sales continuing its downward trend, it might be wise to look at the current situation in another angle. The question on the correlation between internet piracy and the loss of album sales now arises. A study done by one of the major companies show that the decreasing trend in music sales in the US had nothing to do with internet piracy (Music’s Brighter Future, 2004).
Similarly, some authors believe that there is no significant correlation between internet music piracy and the music industry’s downward trend in sales (Todd, 2005). Oppositely, The real issue on the downward trend in album sales has become vague as other factors that might be affecting are now being considered. Other factors that could be considered include, aside from the increase in internet music piracy, are reduced distribution in supermarkets, greater competition against other entertainment forms and reduced quality of music (Music’s Brighter Future, 2004).
The big firms are now struggling to maintain their marketing status in the physical world as outlets become more focused in distributing alternative forms of entertainment like game consoles and DVDs. In this case, the competition is expanded to a wider scope, not only to other medium of music distribution such as the internet but also to other forms of entertainment which are targeted to the youth (Music’s Brighter Future, 2004). Such reduced distribution by the outlets themselves is an indicator of the reduced income that could be generated from the sales of albums.
But again, if there are other reasons for the reduction of album sales aside from internet piracy, the question, “what” is still left unanswered. It is said that at this time, very few artists live long-lasting acts, being reduced to one-hit wonders and that music companies are now focusing on developing short-term hits that could generate revenues at the minimum amount of time. This is according to EMI Music Chief Executive and Chairman Alain Levy in an interview done by Billboard Magazine (Music’s Brighter Future, 2004).
This means that music companies are concentrating their efforts in producing “sure-hits,” or formulaic music, which suffice it to say, would sacrifice their products’ quality. In the same way, formulaic music offers the consumers a standard style with less variation and individuality. The music companies’ offers of less music variation and quality could be a possible alternative explanation to the industry’s declining revenues and store shelf-space, which would then produce a reciprocal effect of further revenue decrease.
But the problem with quality cannot all be blamed with the music companies. With the falling sales, the companies could not afford anymore to experiment on independent artists and must rely on acts that would surely sell despite the low probability of lasting (Music’s Brighter Future, 2004). However, this strategy by the industry creates a self-inflicting challenge as independent artists become more capable of distributing less safe and less formulaic acts that offer buyers an alternative to the mainstream media.
To add to this, it is said that more than half of the revenues incurred by music companies are brought about by catalogues of past quality music so relying so much on short-term pop music would become a future problem because there would be less catalogues to offer (Music’s Brighter Future, 2004). Still, it could not be denied that the current growth of the online music distribution could be a real threat to the music industry and if the music industry is to survive, there would be nowhere to go but harness the power of online distribution themselves.
In other words, the music companies must start seeing the benefits of online distribution instead of continuously prosecuting distributors. After all, consumers, young adults in particular, are willing to pay for the music being distributed online (JupiterResearch Reports Almost One-Third of Young Adults Interested in Music Subscription Services, 2004). In line with this, according to Todd (2005), online music distribution has no purpose but benefit artists in augmenting their popularity, thus increasing their revenues.
In addition, the distribution of unauthorized copies and decreased revenues from album sales are not a major issue anymore since revenues could still be gotten as other revenues taken from concerts and other forms of music advertisements increase. In other words, the decreased revenues are exaggerated because the increase in sales of digital music offsets the decrease in sales of physical carriers such as CDs and cassettes (Wallis, 2001). Music companies must start incorporating online music marketing in their strategic business plans.
According to IE music, spreading the music through peer to peer sharing programs is the future of the music industry. By sampling various artists’ music in the internet, more people would have access to the music and there would be greater probability of people buying the music (Music’s Brighter Future, 2004). Obviously, the current trend in the music industry now, involves the growth of digital channels in conveying music to consumers globally, removing national boundaries of distribution (Wallis, 2001).
And with this revolution is the redefinition of roles especially of music companies from producers to more focused marketers. This change in roles of music firms to marketing firms goes with the decreased limitation of music distribution. The distribution of music is not anymore limited to the imposition of major music companies but as the number of internet users, mobile phone users and digital music players increase, the control over music distribution is now taking a huge historical change.
Although promotion and marketing would still be difficult, artists can now work on distributing their music even without the need for record firms. With the rise of the internet sharing, the roles of music companies become more concentrated on promoting and marketing music so that it would be successful in reaching a wider audience. Despite the reduced limitations for artists, their success would still involve a significant hand by major music firms, although not necessarily. This is because the propagation of internet sharing still has limitations in terms of who holds promotion acts on the radio.
Launching of artists is still dominated by radio stations (Music’s Brighter Future, 2004). Conclusion With the advent of globalization, especially with the removal of national and cultural boundaries through the widespread use of global distribution channels such as satellites and the internet, the following of the music industry is inevitable. The problem of the declining music industry cannot be solely attributed to the increased online music distribution as there are other factors at play which could also be rooted to the music industry itself.
Continuous filing of copyright infringement lawsuits against online distributors would not solve the problem of declining music revenues. The music industry’s success with Napster and Mp3. com did not reduce the problem with internet piracy as these are only two of the thousands of online music distributors in the internet. Prosecuting lawsuits against all such distributors would not incur any gain but only additional legal expenses without any insurance of future success both in the cases and in the solution of their revenue problems.
If the main problem of the music industry is their declining sales, instead of filing continuous prosecution, they must instead realize the inevitability of the internet situation, see possible benefits of the current trend and exploit these possibilities in order to continue the survival of their industry. The increased capabilities of artists as imposed by the globalization of music must not be seen negatively by the music companies as this would merely involve changes in roles, which would benefit music firms by allowing them more focus.
The role of music companies would still be significant especially in the promotion of artists to which they’re still in major control. However, it must still be realized that such changes would impose significant benefits and adjustments especially in the part of the music companies. Through internet, music companies would be able to gain more access to independent artists of better quality, reducing their costs for research and development as well as giving them more chances for future successes.
Needless to say, adjustments involve the costs that would be incurred, although slowly, with the shifts in roles. As competition arises in the industry, more effort becomes necessary in the marketing of artists. Still, this may be done by the music companies by sheer manipulation of the industry. In addition, the music industry must target the internal root of the problem and focus in developing products with more quality and sustainability as this would give them more security in the future.