The internet has changed everything. It has changed our perceptions and methods of communication. It has changed the most profoundly fundamental aspects of our lives. And while it may not be exactly clear how our lives are changing, one thing is certain: media industries have undergone their most sudden change in history. Once-established and extremely profitable industries have been forced to adapt to the rapidly and constantly evolving digital world. Not only have industries been incapable of adapting in a timely manner, but have also been reluctant to. At many times this has lead to missed opportunities and tremendous losses.
One such example is the music industry. In the year 2000, at its peak, the recorded music revenue in the US was measured at $71 billion – in 2009, revenue was down to $26 billion, a decrease of over 60%. Pinpointing the exact demise of the industry is difficult as a number of new developments occurred simultaneously. Firstly, 1998 marked the emergence of illegal peer-to-peer (P2P) networks such as Kazaa and Napster. As digital music files could be copied and distributed freely over the internet, purchasing hard-copy CDs (the predominant – and highly lucrative – medium at the time) was not only no longer as appealing, but not necessary. While data supporting the complex relationships between file-sharing and its effects on legal purchases are conflicting, it is of no coincidence that the industry peaked and began its very rapid decline two years after the emergence of P2P networks. However, P2P networks were not the only changing factors for the industry: legal alternatives also played a role.
On April 28th 2003, the iTunes Music Store was launched by Apple, marking a groundbreaking step towards the appeal of legal music downloads. Within five years of its release, the iTunes Music Store became the number-one music vendor in the United States and in less than seven years, over ten billion songs had been purchased from it. Last year, I wrote a paper called “The iTunes Business Model and its Widespread Effects” in an attempt to detail the rapidly changing music industry. In short, as successful as iTunes has been, no one is really benefiting from it other than Apple, indirectly. Each song is sold at $1.29 (previously 99¢) and is then divided: 60¢ goes to the label, 40¢ to Apple, 20¢ to the artist and 9¢ to the songwriter. While Apple receives 40¢, most of this is used to pay the 25¢ credit card transaction fee. Apple has devised a system in which transactions are delayed by a few days to bundle payments together, therefore paying only one transaction fee for multiple songs. Despite this, users usually purchase only single songs and iTunes never sees relatively large profits. The downfall of the music industry is not only attributed to P2P networks, but also to an indirect consequence of the MP3s: the majority of purchases has shifted from albums to singles.
Even so, Apple is not interested in profiting from iTunes. Instead it uses iTunes as a marketing tool for physical Apple products which are highly profitable (there’s a reason iTunes integrates more seamlessly with iPods and iPhones). While no party directly benefits, or really profits, from iTunes, I felt that in my essay, there was a beneficial trade-off for both artists and consumers alike. The internet, and iTunes specifically, has given artists instant global distribution allowing them to reach niche markets like never before. It has given artists the freedom to bypass established markets and to reach fans directly. It also gave listeners the freedom to choose. I felt the internet was a democratizing force in music, a tool of empowerment. It offered a decentralized alternative model as opposed to the corporate monopoly so heavily enjoyed by large music labels; it removed the necessity of gatekeepers, that is large music labels, and gave responsibility back to those most important: artists and fans. Unfortunately, this was wishful thinking. Read more