Impact of iTunes and Other Online Services on Music Industry - Research Paper Example

? Impact of iTunes and other online services on music industry iTunes was conceived in 2003 and ever since it`s impacts havebeen overwhelming. Though iTunes has contributed to the evolution of the social, economic and even political norms of the society to some extent, but the music industry saw the most apparent shift owing much to the development of this innovation. iTunes has affected the music industry in numerous ways. Holistically speaking, the revenues for the music industry for U.S alone dropped from about $12.8 billion to $5.5 billion indicating a negative impact of iTunes on the music industry. However, closely analyzing the impacts of this music sharing revolution, there are apparent positive impacts on the industry as well including the exponential rise in the profits of the labels and the individual artists. Furthermore, the study indicates that the drop in the number of revenues is a result of two main factors; an apparent increase in piracy related issues and the ability of the potential buyers to pick and choose particular songs rather than buying the entire albums instead. Though iTunes has proved to be a dynamic and a powerful medium having the potential to revolutionize the music industry, but the drop in revenues has turned out to be a huge drawback which overpowers the apparent advantages of the medium of the industry. Impact of iTunes and other online services on music industry Introduction iTunes is like a music jukebox which is used to manage, purchase and download the music online. It is an online music library with an added feature that allows the online purchase of music. However, in contrast to the tradition purchase of music albums iTunes allow the customers to cherry-pick the particular songs instead of buying the entire albums. This in turn has various implications which will be addressed further on in the paper. iTunes was launched in 2003 which was a product conceived by Macintosh replaced Napster; therefore it is important to analyze and track the impacts of Napster on the industry to contrast the results with iTunes for a more credible result. The decade after Napster was replaced saw a drastic decrease in the revenues of music industry in the U.S. In contrast when Napster was first introduced in the market, the U.S music industry saw a rapid increase in the profits. According to the statistics, the U.S shipments for recorded music were increase from $5.8 billion to $12.8 billion between 1975 to 1990`s. This is a positive indicator as the recorded shipments almost doubled. However, between 1990`s to 2007, the records again dropped back to $5.5 billion. (Waldfogel 2011). The same trend was observed worldwide indicating the strong impact of iTunes in the market. Though many researches indicated that iTunes have paved way for piracy and illegal copying of music, but iTunes was constituted in such a way that it minimizes the risks of piracy related issues. With iTunes, music can be shared in two ways, i.e. either by sharing an entire library or by sharing specific playlists. iTunes doesn`t support illegal copying of music over the internet as the music is only available to the host system where iTunes is located. Also, the music can only be retrieved by the person using the iTunes, he shuts down the system the music is no longer available for anyone to be listened. (Waldfogel 2011). iTunes protects the content by two ways, i.e. firstly by incorporating copyrights laws and secondly via contracts. However, different countries have now come up with different jailbreaks and unlocking software which allows copying of music online onto iTunes for free. Though the laws are considerably strict in U.S, but in Europe and other places the laws can be molded which results in music piracy via iTunes elsewhere. Thus, these two factors i.e. pick and choose which music to purchase, and unlocking software leading to music piracy leads towards the apparent decrease in revenues. However, according to a review by Berkeley University, the impact of peer-to peer music sharing online is unclear and if proper steps aren’t taken in time to protect the intellectual capital, it will lead towards serious long term consequences for the industry. (Goel, Miesing and Chandra 2010). iTunes allow music sharing on apple devices like apple iPod or apple iPhone etc, while other online music services can be utilized on any of the Mp3 players, laptops, computers or the like. Thus the loss in revenues is also a reflection of the impact of other online music services that makes sharing and piracy easier. Moreover, despite the apparent decrease in overall revenues, there is an apparent benefit being sought by the individual artists and labels. Literature Review The scholarship has been talking about various aspects of iTunes and its impacts on the music industry; however the literature is dominated by the negative impacts inflicted through reduction in sales and piracy laws. Some literature is also focusing on social aspects of the innovation bringing people closer which have an indirect impact on the market. At the same time, a small proportion of the scholarship is also talking about the positive impacts of this digital jukebox on the music industry. Brett Danaher (2009) for instance has pointed out that due to the digital media transformation owing to the online music sale and purchase in contrast to the physical sales of CDs; the revenues have fallen to a considerable level. The reason behind the decline in sales in that the pace with which the purchase of CDs is decreased is unparalleled with the increase in the purchase of online music, thus the gap has been left unfilled. New York Times (2008) indicates that in 2007 alone the drop in the sales of CDs was up to $15.9 billion while the increase in digital music purchase was only up to 2.9%. The main reason behind the drop is that software like iTunes now allows the purchase of only the handpicked songs rather than purchasing the entire albums. However, Joel Waldfogel (2011) has argued that the production of music records, i.e. the quantity of music records haven`t been effected by the iTunes. This suggests that individual artists and labels are still being benefitted; otherwise music production would also be decreased. Similarly, a study by Berkeley University in 2004 has indicated that the labels have had potential benefits in the aftermath of iTunes development due to a variety of reason including; a lower price, irrelevance of distributer`s needs, handpicking songs, special features like information on concerts or new music launch, updated information on new music launch etc. This has enhanced interest of consumers in music which has led to the increase in profits for these labels. The same study proves that for individual artists, the new ones are at a disadvantage but iTunes has definitely benefitted the well established artists. Digital music report launched in 2012 indicates that advertising is the major source of piracy as advertising generates revenues for the illegal music providers online. Thus, one can`t fully blame the iTunes or other music providers when advertising is the direct variable effecting piracy and causing the drop in the sales. Discussion Analyzing the literature from various sources, the initial observation is that since iTunes has been launched, there is a potential drop in the number of sales owing to the decrease in the sales of physical CD records. This indicates that iTunes has only posed effected the music industry negatively and is a huge challenge for the industry. Going into the reasoning, there seems to be two reasons for the drop in the sales, the first being the feature that allows cherry picking of particular songs rather than the purchase of entire albums, and the second being illegal copying of music online. This leaves us to the conclusion that iTunes has no positive impacts on the music industry. Further analysis on individual labels and artists, also the pace of music production indicates quite the opposite. The music production has only been increased since Napster which means that the music production is not being effected, which is a positive indicator. Also, most of the individual labels and artists are also mainly being benefitted since the launch of iTunes. The main reasons behind this are that iTunes allow a better price, new and improve features for infotainment and there is now no need for distributors. Thus, the artists and labels are generating more profits than they previously were making. Also, analyzing the drop in revenues in more detail, advertising seems to be a major determinant causing this decrease. Thus, conclusively iTunes is only contributing positively for the music industry. Conclusion iTunes is only contributing positively to the music industry in many aspects. Though the piracy and issues with illegal copying of content had been major issues since iTunes has been launched, but there are other variables like advertising causing this behavior. Moreover, iTunes allows us to pick and choose the songs we wish to hear, and apparently this has created a gap between the pace of CDs being purchase and the virtual music being purchased, which is very difficult to be filled. However, as for individual labels and well established artists, iTunes is only proving to be a blessing in disguise. Since there is no need for distributors now, the labels can keep more profits in their own pockets, and added features of iTunes are only benefitting the labels and the artists. Thus, iTunes has made access to music easier owing much to the rise in quality music in the music industry. ? References Bhattacharjee, S., Gopal, R. D., Lertwachara, K., Marsden, J. R., & Telang, R. (January 01, 2007). The Effect of Digital Sharing Technologies on Music Markets: A Survival Analysis of Albums on ranking Charts. Management Science, 53, 9, 1359-1374 Danaher, B. (2009). Is itunes killing the music industry? WISE. Goel, S., Miesing, P., & Chandra, U. (May 01, 2010). The Impact of Illegal Peer-to-Peer File Sharing on the Media Industry. California Management Review, 52, 3, 6-33 Urs Gasser, D. B. (2004). iTunes: How Copyright, Contract, and Technology Shapethe Business of Digital Media – A Case Study. Greenpaper v.10. Waldfogel, J. (2009). Music Files Sharing and Sales Replacement in the iTunes era. University of Pennsylvania. ? Reflective Essay The piece came into its original shape after going through many steps that were taken to organize the paper. Firstly, an outline was created to go through a step y step procure to go about the research process. However, once different literatures were reviewed for the purpose, the rough draft had to be altered accordingly. Thus, the entire outline had to be altered as the literature turned out to be the opposite of what was initially expected. As the research propelled, changes had to be made time and again to the initial draft. Once the paper was completed, it had to go through the rigorous process of editing and re-editing. The research focused on the text analysis. The method that was followed included the specification of concepts, categorization of concepts into general and specific categories, so that cause and effect relationship can be established between variables. The content analysis provided rich data in the form of facts and figures, statistics, market demand and supply analysis and the identification of causes of different phenomenon. Research reports and annual music reports were analyzed to collect credible data for the prevalent impacts of iTunes on the market. Once the data was collected, comparative analysis was drawn between the conditions of the market analysis before the launch of iTunes and after. Once the comparison resulted in the identification of apparent impacts, the reasons behind impacts were analyzed to confirm if iTunes has directly impacted the results or are these byproducts of some other factors. The research saw various strong points while writing the research. For instance, tracking down the topic historically, it was fascinating to find out many interesting facts about the music industry. But in the process of redrafting, many of these facts had to be eliminated as they lost their significance. However, as new data culminated, the research started taking a new phase. In the process of finding new variables and the drawing of relationship between the variables, new facts started deriving which were very interesting to quote. Further refining my research and quoting these new variables added value to my research, and once the final piece was written it was quiet coherent with the already present literature and I could locate my work into the larger context which is one of the strong points of my paper. However, one part that I had to struggle the most with was when I couldn`t determine the reason of apparent drop of revenues as iTunes market was proving to be beneficial in a lot of ways. In order to overcome the contradiction, I had to go through a lot of irrelevant literature after which I was finally relaxed to point out advertising as one of the potent causes in enhancing piracy and decreasing revenues. This way I could argue in the favor of my thesis statement that iTunes has proved to be very beneficial for the market and the innovation will only reap positive effects in the future. Thus, this paper was a rich experience which brought me to the conclusion that research is all about finding new aspects to a topic and exploring new data unless saturation point is reached. Initially when I gathered literature based on the relevance, I hadn`t realized that I was missing out on very important points, however, once I gave an opportunity to myself to open up to new data irrespective of the relevance point of view, I was able to find new data. One thing I learned was to explore more and more data unless the resources become depleted. Until that point researchers should avoid drawing conclusions. Thus, this research refined my skills and opened new doors to explore new and unexplored aspects of the study, allowing me to take risks and think out of the box. Read More