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June 30, 2005

New Trends In The Music Industry

kensei-news: Here's an interesting report about the decline of record sales revenues that many would like to blame on P2P. Are the RIAA's lawsuits really working to discourage file sharing? The truth is that only a very small percentage of the total number of copyright violators can be sued, because there are simply too many users (over 8 million simultaneous) and the process is too costly. So the small probability of being sued inhibits the effectiveness of lawsuits against file sharers. On the whole, the report makes a lot of sense so I've taken the liberty of quoting and paraphrasing a few of the key points below...

"A complete protection of the property rights of music is only possible at prohibitive costs. Hence, it is unlikely, that the worldwide record sales volumes of 1995 and 1996 can be fully recovered just by legal efforts, technological copy protection, moral appeals and licit supply of downloadable music."

--The development of different strategies appears warranted and alternate strategies should be pursued such as diversification. For example, expansion into the merchandise and concert business will help turn the music labels turned into music marketing companies... Lately, many labels have added merchandise production, concert promotion and artist management to their business, i.e. their buyers' scope has expanded.

--As the recorded music market has shrunk the merchandise and the concert segments have actually grown. The worldwide concert audience of US artists has grown US$ 32 Million to US$ 39 Million between the years 2001 and 2003 in spite of rising ticket prices. According to industry analysts, this growth is part of a positive trend in the concert industry.

--Unauthorized copies do not seem to be significantly correlated with licensing revenues...Intuition would suggest that the increased distribution and consumption of recorded music of a specific musician, no matter if authorized or unauthorized, augments the popularity of that specific artist. Increased popularity leads to increased sales of the artist's licensed goods.

--Concert revenues do not seem to be negatively, but rather positively correlated to unauthorized copying of recorded music.

--The concert and merchandise industry is not significantly threatened by any kind of unauthorized copies.

--Interdependencies between the marketing activities of record companies, concert promoters and licensing agencies are a reason to organize all of them in the same company, since the necessary conveyance of knowledge between them causes transaction costs.

"With the transformation of record companies into music marketing companies and sometimes their integration into media corporations (i.e., Bertelsmann Group), unauthorized copies and the subsequent loss of record sales revenues is not a major issue anymore, since a major part of the revenues generated by one artist often comes from different sources and growing markets, unaffected by unauthorized copies."

Posted by Todd in General | Permalink


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This industry if alot of fun for independants..it is rough though from the money perspective. I would like to see technologies for protecting these rights..they are not rights if they are not protected.I gladly pay for the music I listen to. I don't know why people have not filed lawsuits against every tech company and producer of goods which enable this kind of theft.Stealing your music is equilivant to someone stealing or squating your property..Its time to get serious and hold some people,corps etc accountable and do I hear the word class action? How about a media sniffer on the net for one..sniff sniff I smell a rat!

Posted by: Edward | May 15, 2006 7:18:16 PM

File sharing is a crime but it is also a way of promoting new music to the industry. Downloading large amounts of music is wrong and should be discoraged among friends if it is too costly for government to do anything about. File sharing through the use of web pages such as "My Space" or other similar is very helpful to the music industry. Bands can choose which songs the public have access to and it gives these bands a sort of cheap advertising to a large group of people. After people decide if they like the band then they should choose to go BUY the album from a music store and not online. Buying music online will crash the music industry and bankrupt records stores because people won't get off their ass and go to a store. Sure the internet is convenient but if bands are not making money off of their records sales they won't be able to afford the cost of recording new albums and there will be no more music.

Posted by: Jon | Apr 10, 2007 11:43:50 AM

Record companies can sue file sharers all they want to try to curve record sales but is that really a good investment? Is it practical? The fact of the matter is that it is so easy to share music files that those who can probably will and there are millions already doing it! Why buy when you can get it for free? Sure, some may care about the bands and want to support them but this is money. People are a little reluctant to pay when they don't have to. Besides, there are still other reasons to buy recordings; it's not like they have stopped selling altogether. Maybe it's time for the industry to capitalize on other things such as live concerts, merchandise, marketing, sound engineering, equipment, and licensing. Now, maybe some can use the money not spent on recordings to go to their favorite band's show, buy a T-shirt, or purchase tickets to a movie featuring a popular song. People still like music and still spend money on entertainment and merchandise. If those who buy an mp3 player could have unlimited free downloads then people may download songs by bands they don't know and now they have heard a sample. It's a win-win situation. The band gets heard and somebody gets a free song to add to his or her playlist. Sounds like marketing, but better, people may actually try to get a hold of it and keep it. Even if record companies could protect all of their Copyrights, there are plenty of bands producing their own recordings who may only need a company to market them. Much of what record companies do can be done by any band but cheaper and less risky. It's not the same but the music is already out there, via free downloads, and they will need further promotion and resources on a large scale. Copyright protection technologies don't seem to be the answer either as there are likely going to be ways around them.
Music business is tough but there are still ways to make money and you are always subject to the current business [and legal] atmosphere. Who knows, maybe the Music Industry really should be more about the music and less about the mailbox money.

Posted by: Braden | Jul 7, 2007 10:22:36 PM

Sorry Jon, but you're in denial. Record stores and physical albums are a thing of the past. The internet is the future of music, and CDs have no more place in this world than VHS tapes. The technology is outdated; it's time to let it die.

Piracy is the new advertising. Labels are increasingly signing 360 Deals with new artists that encompass every aspect of revenue: concerts, merchandise, mechanical rights, tv/film rights, you name it. As the article says, increased illegal downloading of a song simply increases the popularity of the artist. Music isn't the product any more, *the artist is the product*. Piracy is free publicity. Smart labels will capitalize on it.

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