A new report on the digital music industry examines the shift of value in the music industry during the last 10 years as it has migrated to the Internet, the current online alliances / initiatives
that are in motion and the business deals over the last three years that have helped shape the industry into its present state.
The following are some highlights from the report:
• Illegal downloads could be costing the global music industry $10 billion a year, the very amount by which the global industry has declined since 1999.
• Entrepreneurial artists have more
opportunities than ever to make it without the backing of a label.
• Transaction activity in the music industry has been robust from 2006-8, with over 150 deals valued at $11.2 billion.
• The
music industry is still searching for a business model as the Internet has cannibalized CD sales, yet the pace of innovation and sense the industry has come close to bottoming makes it seemingly safer
for investment.
• MySpace Music has a lot of competition based on our review of the major ventures in this arena.
So, to this former newspaper industry analyst's eyes, being asked to look at
the music industry felt like being asked to witness a train wreck, again. The music industry is facing the same trials and tribulations as most traditional media. The Internet has reduced the barriers
to entry and not surprisingly has put incredible pricing pressure on the industry, increased competition, and put a lot of the power into the hands of the artists and consumers.
CDs are now
unbundled and songs can be purchased individually; estimates suggest that illegal downloads could be costing the global music industry $10 billion a year, the very amount by which the global industry
has declined since 1999. Consolidation is rampant as witnessed by the proposed Ticketmaster/Live Nation merger and the very fact that there are now only four record labels representing 74% of global
music sales.
Yet, entrepreneurial artists have more opportunities than ever to make it without the backing of a label and so many more ways to make money than in the past. The advent of the
Internet has produced new sites and services that allow artists to get discovered, fund, produce, and market a CD, online and off; they can find their fans, set up a tour, sell merchandise and license
their work. Consumers can find all types of music online and compare their tastes with others. They can stream for free, sample indefinitely, and communicate with other fans and artists. The era of
D-I-Y is here.
Radiohead tried the ultimate experiment in 2007 releasing their CD online and allowing consumers to pay what they wanted. While some consumers took full advantage of the offer,
others paid; Radiohead generated tremendous revenues from hard copy boxed sets and went on to sell more tickets on tour than in the past. Aerosmith generated more revenues from a special edition of
Guitar Hero: Aerosmith both through licensing and downloads.
The music industry is still searching for a business model as the Internet has cannibalized CD sales, yet the pace of innovation and
sense the industry has come close to a bottoming makes it seemingly safer for investment. Transaction activity has been robust with over 150 deals valued at $11.2 billion over the last three years.