The emergence of access-based music services
However, we must bear in mind that the borders that separate the three sectors are not as clear as they were before the Internet. Companies in the music industry, such as Live Nation, act as a general business partner for performers and composers and support their activity in live concerts, Here is one more indication of the change in power relations within the music industry. However, we must bear in mind that the borders that separate the three sectors are not as clear as they were before the Internet. Companies in the music industry, such as Live Nation, act as a general business partner for performers and composers and support their activity in live concerts, merchandising , licensing or distribution to the public and promotion of recorded music. This means that it is no longer easy to pigeonhole a company in the music industry into one of the three sectors mentioned. However, in the case of Live Nation, its revenue continues to come primarily from live concerts, so it still makes sense to say that it is primarily a live music company.
In this section I have explained how the advent of the internet
has affected all three sectors of the best lyrics website industry and how this has transformed the size, strength, routines and relationships between these sectors. The next section will focus specifically on recorded music and examine how new business models in music distribution can pave the way for the recovery of the recording industry.
At the beginning of the century, the music industry put all the means at its disposal to stop piracy, but it was not as ambitious and innovative when it came to developing new legal online distribution models.. There was certainly some feeble attempt on the part of the more powerful record labels, but the fundamental criteria for the development of these services was that they in no way jeopardize existing revenue streams and instead be limited to being a means of raising some extra income for record companies. The largest companies achieved at least one of their goals, namely that new services would not compete with sales of existing physical products. The truth is that, unfortunately, these services were not able to compete with anyone, much less online piracy .
The first company that managed to successfully create an online
service for the sale and distribution of music within the legality did not operate in the music industry. It was about Apple Computer (as it was called then). In 2003 Apple convinced major record labels that music consumers would buy music legally if they were offered an easy-to-use service that allowed them to buy and download music for less than a dollar a song. The service was called the iTunes Music Store.
In a sense, iTunes was a sea change in the music industry. It was the first online point of sale that could offer the music catalogs of the major labels, used a novel pricing model and allowed consumers to buy only the songs they really liked from each album.
On the other hand, iTunes can also be considered a very measured innovation, which was developed leaving the positions and power structures of the record labels largely intact. Rights owners continued to control their work, and royalty structures per song submitted were predictable and transparent. Apple was correct in its prediction of consumer response and all we can say about the iTunes Music Store is that it has been a huge success.
In 2013 it is the largest music trading site in the world
(Offline and online) and has sold more than 25 billion songs since its launch in 2003. This type of service has evolved substantially over the decade that it has been in existence, and a number of competitors have emerged in the digital music download market using More or less the same business model. Although competition has increased, iTunes remains in the lead, with a share of more than 50% of the global digital music market. In Figure 1 we see how the global record market has evolved since 1973 and we can see that, although the digital market has partially offset the drop in physical sales, the record market as a whole has lost more than 50% of its sales since its inception.
While digital download services like the iTunes Music
Store introduce a gradual change in the logic of the music industry, there are many other legal services that are much more radical and therefore considerably more controversial. These services do not allow individual songs to be purchased at a fixed price, but instead offer users free access to a huge music library. In these cases, users usually pay a monthly subscription that allows them to listen to the songs in the library that they want and as many times as they want.
Although at first glance it seems like a very attractive proposition, these legal access-based music services spend a lot of effort getting record companies to license their catalogs with them and, on the other hand, convincing users that it is possible to enjoy music no need to buy or own a copy of a song or an entire album.
There is considerable entrepreneurial activity in this segment of the music industry,
with new services being born and dying every week. Many providers are still desperately searching for a business model that can attract music consumers while also satisfying rights owners. The challenges are of course considerable, but the music service that has so far received the most attention from the international industry and the one that has perhaps found the right model is Spotify. Spotify is a very useful vehicle to explain the logic of the music industry in the age of digital distribution, and in the next section we will explain how it is driving its transformation. Even if Spotify ultimately fails to create a long-term sustainable business model, walkman , compact disc or iTunes.