Emerging Business Concepts

The music industry has not been completely resistant to the digital revolution, though to say it has welcomed it would be a drastic exaggeration. The Internet, the ideal technology for the delivery of digital media, can be leveraged to support music, once entrepreneurs figure out how to make a profit. One successful business model that has emerged is a la carte online music stores like the iTunes Store. Digital music downloads now make up a third of US recorded music sales. But there are still unmet needs in the market that will drive listeners to piracy.

Digital Music Sales

In February 2010, the iTunes Store sold its 10 billionth song.[1] This staggering figure shows that people are still willing to pay for music. But have digital music sales actually reduced music piracy? A study from the Wharton School of Economics, University of Pennsylvania shows that despite legal downloading services, students still obtain music through file-sharing (though it is usually music they would not have purchased in the first place), and that illegally-obtained music reduces the amount of music purchased. The rate of sales displacement is equivalent to the rate determined by a similar study conducted before the iTunes music store came into existence.[2]

Internet Radio

Internet radio stations like Pandora are another popular development in online music. But unlike their AM/FM counterparts, Internet radio stations pay royalties to not just the composers of the songs they play but also the record labels and recording artists. Every year the royalty rates per song determined by the Copyright Royalty Board have been steadily rising, prompting Pandora to begin charging its most frequent users.[3]

Streaming Music as Advertising

When Viacom's lawyers contacted (and subsequently sued) YouTube to take down copyright-infringing works, they did not realize that some of the music videos on YouTube had in fact been uploaded by their own artists' marketing teams.[4] Now it is commonplace to find popular music on YouTube, often with a link to purchase the song legally. Though music streaming is a great form of advertisement for digital music sales, it has also spawned a slew of web services that allow listeners download MP3s from YouTube videos.

References

1. Waldfogel, Joel. "Music File Sharing and Sales Displacement in the iTunes Era." The Wharton School. University of Pennsylvania, 15 June 2009. PDF
2. "iTunes Store Tops 10 Billion Songs Sold." Apple, 25 Feb. 2010.
3. Oxenford, David. "Copyright Royalty Board Releases Decision - Rates are Going Up Significantly." Broadcast Law Blog. Davis Wright Tremaine LLP. 2 Mar. 2007.
4. Kravets, David. "Accusations Fly in Viacom, YouTube Copyright Fight." Wired 18 Mar. 2010.