UK Recorded Music Industry - Essay Example

Six years have passed since new millennium and new century begun. Many industries are trying to adjust themselves to new era of online technological developments, its advantages and disadvantages, benefits and threats, and music industry of the United Kingdom is not an exception. In 2001, four largest music companies in the world (British EMI among them) tried to combat the piracy by developing new software program that made impossible for online users to copy CD to internet. In spite of the fact that many analysts claimed that this step would reduce the quality of recording, the companies nevertheless implemented this program as they were resolved to fight online piracy by new technological means1. Online sharing of music and video files had been one of the huge problems for music industry since the end of the 20th century, as such companies as Napster that distributed music files for free, gained popularity. Despite the fact that Napster’s activities were curbed, online files sharing was still widespread at the beginning of 2001. 2 New files-sharing systems, such as MusicCity and Kazaa were used by online users instead of Napster. Many specialists and analysts insisted that online sharing could be effectively combated by selling music files through online legal subscriptions of major recording companies, yet such services of recording companies had many drawbacks as it was still impossible to copy digital files to CDs as well as portable devices. Neither it was clear whether file sharing, would be as cheap as the services provided by Nepster and other file sharing system3 Many fans of Michael Jackson had already made acquaintance with this new technology as his single” You Rock My World” was so encrypted that it could not be copied. Sony was so much concerned with the piracy that it not only did not send in advance the album for the review, but allowed to hear it only at the party at one Sushi restaurant, where it took additional security measures to prevent illegal recording of the album. Advantages of the new technology for the music industry were obvious, however some technological experts claimed that this technology might shorten the duration of life of discs. BBC engineers also stated that new discs could be played on the broadcast computers of the company. Moreover, activists of the Campaign for Digital Rights tried to stage some protests in an attempt to stop distribution of the encrypted discs. New online technologies coupled with new technological development of personal computers (especially new CD burners) represented a huge threat to the businesses of many recording companies and even were blamed for the downfall of the sales in the music industry. As global level of sales of CDs reduced by 5 percent in the first six months of 2001, it was clear that at least major part of this downfall was due to the implementation of new technology that allowed CD to be copied on the computers. According to some analysts it cost recording industry millions of pounds in revenues, so one could understand the actions taken by recording companies.4 Despite the fact that global downfall in the level of sales of Compact discs was evident in global music industry (it was viewed as the worst downfall in two decades) music industry of Britain showed remarkable results in 2001 with increased level of sales (by more than 10 percent, comparing with global downfall of 11 percent). Some analysts stated that the growth of sales in the United Kingdom was largely due to “strong release schedule” as many new British groups got international acclaim and eminence; three singles were sold by million copies. Moreover, there were fewer instances of piracy in the UK, than in other countries, strong consumer confidence and successful marketing campaign of major record shops. Some specialists predicted that music industry would exhibit slow growth in the first three years of the new century. 5 Though British record industry exhibited some growth, one of the largest record companies in the world- British EMI lived through lean times in 2001 as it suffered from several marketing failures. The most notable failure of that year was 50 m contract with American singer Mariah Carey, as she was unable to fulfill her part of the contract due to physical and psychological breakdown, the company also failed in its expansion policy in American market. Combination of many negative factors led to the reduction of value of EMI (from 10 billion pounds in the year 2000, to 1.19 billions at the end of the year 2001).6 At the beginning of the year 2002, some analysts expressed concerns that British music industry had lost lucrative American market, as none of the British artists appeared in American hot 100 singles chart (it was the first time since 1963, when US charts had become UK free)7, yet many experts saw few reasons for pessimism in this fact. According to them European market had become as much important as American one, and some British bands focused on continental market rather than American one. Moreover, there was some difference in the popularity of music styles in the USA and the United Kingdom. Whereas hip hop was quite popular in the USA, it had only limited market in the United Kingdom; neither had it had sufficient number of fans to gain popularity in England. Moreover American radio stations were reluctant to air music of British artists as they were very protective in their policy as well as American recording companies were more inclined to record national rather than British musicians. In spite of lamentable results shown by British music industry in the American market, British musicians were managed to get approximately 9 percent share of Billboard’s 100 album over the year 2002, which was a significant improvement comparing with 1.7 percent in 2000 and 0.2 percent in 1999. Some prominent persons of British music industry such as Chris Wright, chairman of Chrysalis music group, criticized pop culture in the United Kingdom for creating strong demand on so called “disposable music” He asserted that many recording companies were too much preoccupied with short-term market prospects rather than long term ones. He also claimed that such companies as EMI might face some serious problems in the future if they continued their policy of preference to one-day hit artists.8 Neither the industry was enamored with the levels of sales exhibited by the industry in the year 2002. According to British Phonographic Industry, the level of sales of Compact Discs decreased by 15.4 percent during the period of spring-summer 2002 compared with the same period in the year 2001. Apart from online file sharing that was still widespread; some analysts blamed several other factors such as World Football Cup-2002 that distracted the attention of music fans, (many releases were even delayed due to the factor mentioned). British Phonographic Industry also claimed that long term prospects were unfavorable as the sales decreased in almost every format. The problems of online piracy were less severe( though they remained quite serious) in the United Kingdom, than in the USA, due to the fact that broadband technologies were less developed in the UK, than in the USA that allowed American users to download their favorite tracks within the seconds9 Some music recording companies such as EMI were fighting to maintain its share in music market industry as it had implemented new restructuring program aimed to improve overall performance of the company.10 Apart from that EMI started providing its customers with downloading options that allowed them to download tracks permanently and provided limited capacity to burn CDs on the computers of its customers11. This step undertaken by the company was in right direction as many specialists claimed that recording industry was not innovative enough to combat online piracy. One of the negative consequences of online piracy was elimination by EMI of 1900 jobs and reduction of its profit. Moreover the company started to seek possibilities of merger with other recording companies in an attempt to maintain its position in the market. On the one hand it was evident that music industry suffered from illegal online distribution of the songs, on the other many critics put the blame on the inability of music industry to produce original and innovative products, and asserted it had became dependant on the hits albums and various cover versions. One of the music analysts-Anthony de Larrinaga of SG Securities claimed that music industry lacked originality and thus it was faced with long term structural problems12 Moreover consumers were spending their money on some other products such as DVD and computer games. Those who were skeptical about alleged online piracy worries of music industry pointed out that such small company as Sanctuary group managed to perform well even in such lean times. Despite the fact that this company was much smaller than other companies in the industry it managed to increase its profits by 26 percent in the year 2003, as the company had introduced new management concept by acting as merchandiser, producer, manager and promoter for its artists. Larger companies such as Sony, Bertelsmann and others tried to adjust to lamentable market conditions by merging their operations; most of the representatives of the recoding industry described such actions as synergy. Time Warner was trying to combine its operations with EMI, however it faced some hurdles as European Commission thought that this step would violate continental antitrust law. According to the view expressed by many experts at that time, mergers would reduce the costs of the companies, yet they almost universally agreed that mergers would not be able to solve inveterate problem of British music industry, that it had been facing since the beginning of 21st century-online piracy.13 In 2004, music industry in the United Kingdom won important court decision by which those people who were sharing music files via file sharing internet systems were required to pay 50000 GBP to settle legal dispute brought against them by representatives of recording companies. Moreover, representatives of these companies were resolved to bring litigations against other persons who were involved in file-sharing; they also acknowledged that they brought these actions to deter rather than punish potential or steadfast violators14 These actions with combination of inclusion of downloads of the songs in the weekly singles charts as well as possibilities of downloading songs to the ring tones of mobile phones led to the increase in the level of sales of CDs in the United Kingdom by the end of 2004. Moreover the industry started implementing new digital policies that allowed internet users to download music from special online services. 15 As one can see British music industry tried to adjust itself to highly sophisticated online era. It has managed to devise new marketing strategy-legal download options that are widely used by many internet users today. In spite of the fact that it has been unable to eliminate online piracy completely, it nevertheless took active steps to reduce significantly the dimension of this problem. Right now music industry of the United Kingdom lives through one of the best periods in a decade with increasing levels of sales as well as new development processes that will make downloading of files more user friendly in the nearest future. 16 Government has taken more aggressive legislative measures to protect copyrights of recordings as well as implemented new program that will help to promote British music industry overseas, especially in the United States.17 This program has several important elements: the government will assist music industry in the researching of American market, promote British artists by developing new web sites that highlight achievements of British musicians as well as develop program of gigs that highlight British artists. Undoubtedly more active part on behalf of the Government should help British music industry to promote itself in the USA, though due to the reasons mentioned earlier the impact of such actions might be limited. It is clear that if British music industry manages to keep itself abreast of the latest changes in the technology and adjust itself to new development as it did in the past, than with new creativity and ingenuity it will manage to maintain its position as one of the most diversified and innovative music industries in the world. . Works cited. 1). Severin Carrel Music industry inserts digital `scratches on CDs to foil pirates The Independent. London (UK): Oct 21, 2001. pg. 17. 2). Charles Arthur, Huge increase in music swaps over the Net despite demise of Napster. The Independent. London (UK): Nov 8, 2001. pg. 15. 3). Things dont sound good in the pop world - but dont despair, Business: In a spin; Music industry, The Economist, London Oct 13, 2001, p.79. 4). Charles Arthur, Copying albums for free on `CD burners cuts worldwide music sales; The Independent (Foreign edition), London (UK), Oct 2, 2001. pg. 13 5). Chris Gray, British music sales rise as world suffers 11% slump; The Independent (Foreign edition). London (UK): Nov 14, 2001. p9. 6). Jane Robins, FOCUS EXTRA: MUSIC INDUSTRY - She enjoys the rocknroll lifestyle. The trouble is she works in rocknroll ; The departure from EMI of top executive Ken Berry has led to the demonising of his wife, Nancy. But what is she supposed to have done wrong? The Independent. London (UK): Oct 21, 2001. p25. 7). David Lister, Analysis: The Music Industry - Rejected by America - but our pop stars arent singing the blues; Many artists are building careers and fortunes on European sales rather than spending months on the road in an attempt to crack the US, The Independent. London (UK): Apr 26, 2002. p17. 8) Susie Mesure, Disposable music is killing our industry, The Independent( foreign edition). London (UK): May 10, 2002. pg. 23 9) Chris Gray, CD sales fall as industrys global woes hit Britain, The Independent (foreign edition). London (UK): Aug 14, 2002. p9 10) Susie Mesure, BUSINESS ANALYSIS: Music labels in a spin over falling sales of CDs ; Record industry blames everything from the World Cup to piracy for rough ride here and in the US, The Independent. London (UK): Aug 16, 2002. pg. 3 11) EMI music announced enhanced distribution program offered music in downloadable, burnable and portable formats < http://www.emigroup.com/Press/2002/press5.htm >. 12) Cahal Milmo, ANALYSIS POP MUSIC: Sales falling, tours cancelled. So why is our music industry in such dire straits? ; While record companies blame falling sales on internet piracy and competition from DVDs, others say the industry itself is at fault, The Independent. London (UK): Feb 20, 2003. pg. 15. 13) Business: Come together; Music mergers, The Economist. London: Nov 15, 2003. pg. 78. 14) Music industry nails UK pirates, 15) Nick Hopkins, Record firms enjoy record sales; The Times. London (UK): Nov 27, 2004. p69. 16). UK music industry enjoys boom, 17) Government boosts UK music in US < http://news.bbc.co.uk/2/hi/entertainment/4768308.stm> Read More