Most aspiring artists and bands in the traditional music industry dreamed about being able to sign a contract with a record label. In the pre-Internet music industry, recorded music was the biggest of the three and the one that generated the most revenues. However, while these are important industry sectors they are traditionally not considered to be integral parts of the industry’s core. There are other companies that sometimes are recognized as members of the music industrial family, such as makers of music instruments, software, stage equipment, music merchandise, etc. This basic structure has given rise to three core music industries: the recorded music industry-focused on recording and distribution of music to consumers the music licensing industry-primarily licensing compositions and arrangements to businesses and live music-focused on producing and promoting live entertainment, such as concerts, tours, etc. Composers and songwriters create songs, lyrics, and arrangements that are performed live on stage recorded and distributed to consumers or licensed for some other kind of use, for instance sheet music or as background music for other media (advertising, television, etc.). The overall music industry is based on the creation and exploitation of music-based intellectual properties. In order to understand the dynamics of the music industry, it is first of all necessary to recognize that the music industry is not one, but a number of different industries that are all closely related but which at the same time are based on different logics and structures. This chapter will examine the impact of the Internet on the music industry and present the state of the music industry in an age of digital distribution. Internet makes physical music distribution increasingly irrelevant and the incumbent major music companies have been required to redefine themselves in order to survive. The power and influence of the pre-Internet music industry was largely based on the ability to control physical distribution. This rapid transformation of the music industry is a classic example of how an innovation is able to disrupt an entire industry and make existing industry competencies obsolete. By the end of 2013, the sales of physically distributed recorded music (e.g., cassettes, CD, vinyl) measured in unit sales, were back at the same relatively low levels of the early 1970s.ĭuring the 15 years that has passed since Napster was launched, the music industry has been completely transformed and the model that ruled the industry during most of the past century has been largely abandoned. As soon as one file sharing service was brought to justice and required to cease its operations, new services emerged and took its place. Even though the traditional music industry used very aggressive methods, both legal and technical, to stop the explosion of online-piracy services such as Napster, Kazaa, Limewire, Grokster, DC++, and The Pirate Bay, it was to no avail. However, a string of other, increasingly sophisticated services immediately followed suit. Napster was fairly quickly sued by the music industry establishment and was eventually forced to shut down the service. Shawn Fanning created and launched a file sharing service called Napster that allowed users to download and share music without compensating the recognized rights holders. At the end of the nineties, spirits among record label executives were high and few music industry executives at this time expected that a team of teenage Internet hackers, led by Shawn Fanning (at the time a student at Northeastern University in Boston) would ignite the turbulent process that eventually would undermine the foundations of the industry. Approximately one billion records were sold worldwide in 1974, and by the end of the century, the number of records sold was more than three times as high. In 1999 the global recorded music industry had experienced a period of growth that had lasted for almost a quarter of a century.
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