Music Recording Industry - Essay Example

The distribution of music was once the exclusive domain of the major record companies, i.e. Warner AOL, EMI, Sony, Universal and BMG. However, a new business model is emerging that may fundamentally change the way music is distributed. Digital distribution of music on the Internet has altered the landscape of the music business. This has created both threats and opportunities to those in the music industry. Artists, labels, retailers, and consumers are all taking a closer look at the roles they will play. Although it is widely believed that consumers will be slow to adopt digital downloads over physical media such as compact discs, musicians, retailers, and independent record labels can position themselves to benefit from this emerging new business model. Music file sharing on the Internet via websites and networks such as the notorious Napster has become an extremely controversial topic in recent years. Since May 1999, when Napster began introducing millions of Internet users to the pleasures of trading music via a peer-to-peer network, music file-sharing has become ubiquitous online. 42% of the respondents in a June 2001 study of online behavior among American Internet users conducted by Jupiter Media Metrix indicated that they had downloaded music from the Internet. Jupiter Media Metrix is a company that helps other companies develop, extend and integrate business strategies across online and emerging channels. Backed by proprietary data, Jupiter Research's industry-specific analysis, competitive insight and strategic advice give businesses the tools they need to exploit new technologies and business processes. With the rise of Internet use amongst the growing population around the world it has been easier then ever for individuals of all ages to download their favorite songs from the Internet. Originally music sharing was something that had started in colleges, students would share their music amongst one another on the college server but now with the introduction of P-2-P technologies such as the famous Napster, Kazaa, and Gnutela coupled with the advancements of high speed internet services, downloading of music from the internet is extremely popular. There has been a great deal of public argument over the effects of this phenomenon. The recording industry views Napster-style file-sharing unambiguously as stealing and have tried to enforce its view by filing lawsuits against Napster and other similar online services. Napster itself has been effectively put out of business by legal action since July 2001, and a number of other lawsuits against most of the other major file-sharing services are currently pending. Among listeners, however, there is little agreement on whether or not file-sharing is the equivalent of theft, with many contending that they are actually led to purchase more music in physical form such as CDs because of their music downloading. Although the research taken in part by the record industry is very appealing, there are others who believe that the era of music file swapping across the Internet did not cause the acclaimed 5% drop in sales in recorded music. According to a research done in part by a company called Ipsos-Reid concluded that there exist a direct relation between downloading music from the Internet and the purchasing of recoding music. Those who download more music from the Internet are more likely to go out and buy recorded music from the stores. Another study conducted by Jupiter Media Metrix concluded similar results, as did the research done by Ipsos-Reid. The report which was released in May of 2002 surveyed 3,319 people contradicts the claims make by the record industry that file sharing and CD burning have been key contributors to the drop in record sales for the fiscal year of 2001. The report concluded that a considerable amount of people who download music frequently over the Internet are actually spending more on music than they did before they started downloading files. Only about 14% of heavy file traders have reported that they now spend less on music than they did initially. According to the study " the recording industry has continued to scapegoat file sharing even as record sales have fallen over the past year". The record industries of today are not willing to accept the reality that the sales have dropped to due to other factors that will be discussed later and as a result they are pointing the finger to those who pose the largest threat in their eyes. So if P2P programs and other forms of music sharing are not the cause of the drop in global sales for recorded music what can explain this phenomenon There are many reasons for sales to drop. Jupiter theorizes that the real reasons for the decrease in global music spending are multi faceted. Normal music market cycles combined with an overall drop in consumer spending, coupled with increased competition from other entertainment product categories, and increased reliance by the music industry on a small number of titles for the majority of sales me be large factors. In addition we have seen that throughout the 80's and 90's CD's were very popular and in very large demand. Most consumers already had the titles on LP or cassette but due the practicality that the CD offered the consumer many individuals went out and bought the same titles on CD. Unfortunately this boom has come to an end, which can also be affiliated to the 5% decline. In another study by Forrester research they too have found that the major record companies can restore their profits by making it more accessible to the population. Forrester predict that by 2007 digital music revenues will reach more that $2 billion which will result through digital music onto cell phones, portable player, or PCs. Perhaps a larger concern to the recorded music industry should be the amount of music that is stored in a person's computer rather then being concerned with trying to eliminate the sharing of music through the Internet. In a study conducted by Parks Associates that looked at 711 consumers in U.S households with Internet access. They came to find out that over 40% of the households have downloaded MP3 files onto their home computers and store them in their hard drives averaging about 305 MP3 files per house hold computer. The biggest threats are from those who are in the age cohort between 25-34 that on average store 721 MP3 files in their computer. As we can see from the evidence provided by the research done a final conclusion is difficult to be made. According to the reports conducted by the record industry they state that the fall in sales for 2001 are to be blamed on the sharing on music over the internet and other forms of music piracy. On the other hand the research done by Jupiter and Ipos-Reid conclude that the swapping music over the Internet is not to be blamed for the 5% drop and that if anything the downloading of music of the Internet has increased sales for the record industry. While more research should be conducted in this area it seems clear that the impact of music file sharing is not so unmistakably negative as the RIAA and the IFPA would like us to believe. According to the Forrester report it will not be till the year 2005 before digital music really takes it boom as finding the music consumers want will become easier and purchases become less complicated an even then it will take a lot of effort before the record industry is satisfied with their global turnover. From a personal perspective I strongly believe with the results that Jupiter have found. Although initially one might download music from the Internet it is hard to substitute the music that we download for a whole album by an artist. Even then if one could, and they can, gather all the songs on one Album of an artists the consumer usually geared to going out and purchasing the album itself. Therefore the downloading of music in a way creates an incentive by providing the consumer a taste for what is on the market creating a driving force that creates a want to acquire the album. Bibliography: Downloading and Upgrading http://www.riaa.com/music-rules-2-cfm www.jupitereasearch.com www.forrester.com Music sales dip; Net seen as culprit http://news.com.com/2100-1023-8883761.html Recorded Music http://www.emigroup.com/financial/annrep2000/execrecord.html Music Industry may sue people downloading music http://www.worldlawdirect.com/article/1383/ Music fans must rebel against greedy record industry http://www.foxnews.com/story/0,2933,46557,00.html www.forrester.com Read More