For The Music Industry, Buffeted by Declining sales of Albums and Slowing Digital Downloads, The Writing on the wall is clear. Embrace Innovative Business models or go under.
If you watched Beyonce Knowles perform during the Grammy Awards last month, you could be forgiven for thinking that the music industry is on a roll. Award nights, like the Grammy’s, never fail to throw up new music sensations and once in a while their newly-recorded albums soar to the top of charts, hauling in record sales in a matter of weeks. As for the established stars à la Britney Spears or Rihana, it’s no conceit on their part to think of the world as their oyster, with legions of music aficionados waiting eagerly to lap up their muscial offerings. The current pop sensation, Lady Gaga’s debut album The Fame has sold over 3 million copies worldwide and has spawned several hot tracks, which have become international chartbusters. But it would be naïve to think that the music industry is wallowing in the moolah. The truth, alas, is more sombre.
At the end of last year, the music business was worth half of what it was ten years ago and the decline doesn’t look like it is going to be arrested any time soon. According to the latest data given out by the International Federation of the Phonographic Industry (IFPI), global revenue from digital music sales, inspite of increasing 6% to $4.6 billion in 2010, was down from a 12% increase in 2009. The overall recorded music market decreased approximately 9% in trade value, according to IFPI’s “Digital Music Report 2011.” While digital revenue accounted for 29% of the global music industry’s total revenue in 2010, the report estimates approximately 95% of all global downloads were via illegal services. Not too long ago the music industry was in much better shape when global recorded music sales stood at a staggering $26.9 billion in 1999.
The phenomenal decline since then can be traced back to the June 1999 debut of Napster, a peer-to-peer file-sharing service that gave users access to free music. Not only did Napster help change the way most people got music, it also lowered the price point from $14 for a CD to free. Although Napster was forced to shutter its service in 2001, under overwhelming industry pressure, other Napster-like clones moved in quickly to fill the void. In the time between Napster’s shuttering and iTunes’ debut in 2003, many of Napster’s 60 million users found other online file sharing techniques to get music for free.
In hindsight, Napster only acted as a catalyst for forces that were soon to alter the dynamics of the music business. It set the trend for the way music content is distributed, sold and marketed over interactive channels. Today, music can be accessed for free and legally downloaded. Internet radio services such as Pandora and Grooveshark, and music services such as Spotify have started giving users access to free but legally downloaded music. Result: there is now a generation that believes music is available to download for free on the internet. The sheer size in terms of number of tracks obtained through internet downloads as well as via illegal file sharing on mobile phones is growing and is much larger than legal purchases of music.
At the end of last year, the music business was worth half of what it was ten years ago and the decline doesn’t look like it is going to be arrested any time soon. According to the latest data given out by the International Federation of the Phonographic Industry (IFPI), global revenue from digital music sales, inspite of increasing 6% to $4.6 billion in 2010, was down from a 12% increase in 2009. The overall recorded music market decreased approximately 9% in trade value, according to IFPI’s “Digital Music Report 2011.” While digital revenue accounted for 29% of the global music industry’s total revenue in 2010, the report estimates approximately 95% of all global downloads were via illegal services. Not too long ago the music industry was in much better shape when global recorded music sales stood at a staggering $26.9 billion in 1999.
The phenomenal decline since then can be traced back to the June 1999 debut of Napster, a peer-to-peer file-sharing service that gave users access to free music. Not only did Napster help change the way most people got music, it also lowered the price point from $14 for a CD to free. Although Napster was forced to shutter its service in 2001, under overwhelming industry pressure, other Napster-like clones moved in quickly to fill the void. In the time between Napster’s shuttering and iTunes’ debut in 2003, many of Napster’s 60 million users found other online file sharing techniques to get music for free.
In hindsight, Napster only acted as a catalyst for forces that were soon to alter the dynamics of the music business. It set the trend for the way music content is distributed, sold and marketed over interactive channels. Today, music can be accessed for free and legally downloaded. Internet radio services such as Pandora and Grooveshark, and music services such as Spotify have started giving users access to free but legally downloaded music. Result: there is now a generation that believes music is available to download for free on the internet. The sheer size in terms of number of tracks obtained through internet downloads as well as via illegal file sharing on mobile phones is growing and is much larger than legal purchases of music.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
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IIPM's Management Consulting Arm-Planman Consulting
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
