Ever since the introduction of high-speed Internet and the development of ultra-compressed mp3 files, illegal downloading of music, movies, and games has increased exponentially. The pirating of music truly began with the photocopier that could make copies of sheet music so that commercial buyers did not need to purchase their own set of sheet music—they could merely copy it from a friend. The process further accelerated when CD burners became commercially available and people took to copying CDs for friends and family, but still, the piracy was limited to local areas. However, when the Internet grew in popularity, Napster quickly took root. Napster was a free, file-sharing service developed in 2000 that provided users with an almost unlimited selection of music to illegally download. It took several highly publicized lawsuits, filed by high profile musicians including Jay-Z and Metallica, to finally shut down Napster’s no-charge peer-to-peer file-sharing network. Today, Napster still exists as a subscription based music-streaming service, in which its users pay a monthly fee to access the music, similar to renting the music (Papies, Eggers, & Wlömert, 2010). Several alternatives to illegal downloading have emerged on the Internet, but the music sales have already taken a deep plunge that likely will not return to its previous levels. Despite this, the music industry has not given up on selling and has devised new plans to get around the loss of revenue in music sales, such as the relatively new 360 deals and the endorsement of new advertisement-based streaming services like Spotify. Without a doubt, even though the music industry is on its knees and struggling to recoup losses, there is hope for the industry to yet survive the blow that illegal downloading delivered upon album sales.
Undoubtedly, record sales have fallen in the past decade at an unprecedented rate, but the blame cannot be placed solely on music piracy. Though there is no question that the illegal downloading of music has affected the amount of sales of albums, the idea of converting one’s collection from tape or vinyl to the smaller, more convenient CD takes some of the blame. Until now, the sales of albums on CD have been inflated due to the older crowd re-purchasing the albums they already own on tape or vinyl on CD in a re-mastered format. By the last decade, most people had already invested in replacing their music with a CD format that supposedly sounded better and was, no doubt, far more convenient than lugging around a record player or tape machine. While there is no way to truly pinpoint the cause of falling record sales, the early inflation of CD sales surely contributes to the initial plunging of sales. Today, however, it is unlikely that this is causing the continued decrease in sales. However, the record labels were slow to react when the CD began to fall out of favor when the digital music market became the primary preference of consumers due to the cushion of people replacing their vinyl and cassette tapes with the CD.
The record labels took far too long to react to the change in popular medium for the acquisition of music. The labels did not even begin to full heartedly work online distribution into their business plans until 2000 where, until then “the recording industry, while working hard at prohibition, was making only halfhearted efforts to assimilate songsharing into a legitimate business model” (Kernfeld, 2011, pg. 208). The labels merely tried to resist the transformation of music distribution until 2000, in which the labels attempted to put together several subscription services to try to fight back against Napster. The five major record companies fought over ownership of the catalog and how they could cooperate to create a combined online music source, which has not even happened today. The labels also spent the time between 2001, the time of Napster’s peak audience and notoriety, and 2003 fighting Steve Jobs’s proposal for iTunes and trying to futilely force the subscription services to effectively take root in the main music-consuming populace. According to Steve Jobs, “Corporate executives were…unwilling to sell downloads outright from their catalogues, and failing in a series of halfhearted efforts to put together subscription services” (Kernfeld, 2011, pg. 209). Historically, record labels have resisted change in the music market, and this may have been the largest factor in the falling of music revenue generated by audiences. Perhaps if it had not taken more than four years to introduce a legal form of music downloading, music piracy would not be the widespread problem it is today, and the music industry would possibly not be failing. The record labels are to blame, in part, because of their hesitance to embrace the new digital market that rapidly replaced CDs.
The major problem with the music industry’s goal of prohibiting online downloading is that a technology that has already been discovered cannot be un-discovered. One cannot simply erase the existence of a technology or function of an object in people’s memories, and the record labels seemed to be trying to do just that. When the RIAA, the Recording Industry Association of America, stepped in, things merely got worse for the music industry, especially in terms of public relations. Even though the RIAA eventually was able to add one success to its track record, the bankruptcy of Napster after a massive lawsuit, its disaster of a program named “MediaSentry” sent public opinion of the record industry plummeting. MediaSentry searched for illegal downloading information and identified individuals taking place in the pirating of music online. After it successfully identified an individual, the RIAA proceeded to take one of two courses of action: it would either file suits against the offender for massive amounts of money under the charge of copyright infringement or it was forced to drop the claim due to an error on account of MediaSentry. Several cases gained high profile popularity, including:
“A suit in September 2003 against Sarah Ward, a sixty-six-year-old…Massachussetts resident, whom the RIAA threatened with a liability of $150,000 per song for more than two thousand songs that she had allegedly downloaded through KaZaA. The charge was moot, as it turned out, not only because she had not done it, but because she had a Macintosh computer, and KaZaA only ran on Windows systems” (Kernfeld, 2011, pg. 213).
In addition to the Sarah Ward case, the RIAA sued one Gertrude Walton who had died two years prior to the filing of the lawsuit. Though the lawsuits no doubt gained millions of dollars from the resulting settlements, the means were outrageous and overly aggressive despite the mass copyright infringements occurring. After many years of mistaken lawsuits against non-offenders and retaliatory lawsuits by the individuals wrongfully accused of pirating music, the RIAA realized that its legal strategy was not working and ended its long relationship with MediaSentry. As of now, the Recording Industry Association of America does not file new suits against individual offenders except in the event of major instances of copyright infringement, such as the downloading of thousands of songs per month. This, incidentally, seems to be the most effective way of dealing with music downloaders without incurring needless legal fees found as of yet.
Due to the extravagance of the fines the RIAA imposed upon the found infringers, public opinion of the music industry as a whole fell. This low public opinion continues on even today with the idea that major record label executives are greedy and out to take money from the artists and buyers. Though this may not be completely true, this can greatly affect the amount of money a consumer is willing to spend on music, which, in turn, further increases the amount of illegal downloading done. This causes the RIAA to file more lawsuits, which angers the public, and it becomes an endless cycle. The RIAA has done a good job of raising public opinion in recent years by decreasing the amount of high profile and lavish lawsuits, but the damage has already been done, and it will take much longer to effectively rebuild the record labels’ reputations.
Recently, there have been sentiments insinuating that the music industry, namely the major record labels, will fail in the future due to the lack of revenue from the purchasing of records. However, “the recording industry has surrendered record sales as a revenue stream” and has instituted what is called “360-deals” in which “they gain the right to share in every area where an artist may receive income” (Hollis, 2011). This allows the record labels to receive revenue from merchandise sales, sponsorships, income from touring and concerts, publishing deals, performance fees, and more. This gives the labels the ability to recoup the money that they invest in the making of their artist’s album and overcome the loss of album sales as a money-maker.
Though the 360-deal is regarded as controversial at best, due to the supposed loss of money that the artists experience. Though this may seem true, the labels cannot provide the money for the artists to embark on their tours or record their albums when the label experiences loss after loss due to the damage music piracy has done to overall record sales. Even though the artists ultimately lose some of the revenue to the labels that they would originally have been able to pocket, the fact remains that the artists, often low on money, would not be able to pay the exorbitant studio, production, manufacturing, and distribution fees without the label’s help. The label is ultimately a business, and if money cannot be made on record sales in-store and online through the use of iTunes and ad-based and subscription-based streaming services, then the money needs to come from somewhere else, and the only available avenue for recouping the advance given the artist is the other sectors in which the artists receive paychecks that, until now, was untouched by the record labels.
Apple’s iTunes and Napster also placed the emphasis on digital format music. Previously, to gain music in a digital format, one had to rip the music off of a purchased album. However, iTunes was, and is, available to provide music in digital format straight to the consumer’s computer in no time. Napster gave the consumers the ability to retrieve music for free, because without the digital format, stealing music was merely a risky business of shoplifting for the local WalMart or BestBuy. Napster set the precedent for online music downloading and purchasing services, including Amazon and iTunes, and it did not take long for many illegal file-sharing networks, like KaZaa and the Pirate Bay, to follow suit. With the ease of finding and downloading a desired song, the free music on peer-to-peer services is a tempting deal—fast, free, and easy music is nearly the embodiment of the instant-gratification-obsessed modern society.
Piracy is driven by the market’s shift towards a single-based market with the focus on the purchasing of full albums decreasing. Apple’s iTunes largely contributed to this change, when “between 2004 and 2008 the number of single tracks sold in the U.S. increased by 669 percent while the number of album sales dropped 42 percent,” which caused the extreme drop in revenue from music sales since singles are far less profitable than albums are (Ernesto, 2010). This shift towards a legal singles-based market would likely not have occurred had it not been for the creation of iTunes, which allow consumers to purchase a single song off of an album rather than the previous CD-based market in which a buyer must purchase an entire album to obtain one song. Granted, this kind of market already existed within Napster, never had this kind of service been offered legally, since the record labels largely opted for subscription-based music streaming services. With the advent of this new, legal, and lawsuit-free service, consumers had an outlet to purchase songs for a low price without having to worry about expensive monthly fees or the overdramatic court cases filed by the RIAA. This, however, contributed to the amount of songs being uploaded to file-sharing networks. Though iTunes tried to combat this process by installing encryption codes similar to the ones on the subscription-based models on the songs that were downloaded to combat copying of the singles, hackers quickly found ways around the anti-piracy codes and placed the songs on a file-sharing service relatively hassle-free. It was almost a game for the hackers, to see who could break the new encryption code first.
iTunes was revolutionary; after the then five big record labels, Universal Music Group, Warner Music Group, EMI, Sony, and BMG (Sony and BMG later merged in 2004) fully beat the subscription model they all sponsored to death, Steve Jobs put together a proposal for a pay-per-download after saying, “’The subscription model of buying music is bankrupt. I think you could make available the Second Coming in a subscription model, and it might not be successful’” (Kernfeld, 2011, p. 210). This proved true when the many subscription services offered by the major record labels combined had only approximately fifty thousand subscribers when millions of music consumers were in the market of online downloading, legal and illegal. iTunes also plays upon the fact that the music it offers is legal, and, “a consumer is also more likely to opt for a given legitimate product if its price makes it affordable, and the product can be easily accessed,” likely due to the high risk of legal action, such as in the infamous RIAA lawsuits (Stryszowsky & Scorpecci, 2009, p. 38). This gave iTunes a competitive edge over the peer-to-peer networks like KaZaa and the Pirate Bay in addition to the pathos, the appeal to emotion, aspect of supporting the musical artist. It took several years for the record labels to authorize iTunes to sell their catalogs with somewhat lenient restrictions for copying, but through the perseverance of Steve Jobs, iTunes has become the number one market for online music purchasing.
Recently, with the premiere of iOS 5, Apple’s operating system, iTunes has introduced a new service through revamped program, iCloud, called iTunes Match. Essentially, for $25 a year, iTunes will match the user’s entire library with its records, and with its full service at $256 a year, it will allow the user to download an iTunes quality copy of the song. In the event that a song in the library is not in its system, it will be added to the catalog and found by iTunes separately. Through the analysis of the songs the users own library, including albums illegally downloaded, iTunes will distribute portions of the $25 or $256 fee to record labels and artists in an attempt to restore the revenue lost from illegal downloading. Thought it is yet to be seen how effective iTunes Match will be at boosting the music industry’s profits, it is a promising service being offered by Apple at essentially no profit for the company. A selfless act, it seems, in the midst of a capitalist economy.
All hope is not lost for the music industry, despite what the falling music sale revenues indicate. A new service called Spotify has emerged as a major competitor that has the potential to lower music piracy rates, and has even done so in foreign markets. Developed in 2008, Spotify was originally available only in European markets. Only recently has it been able to reach agreements with the record labels in America, and it is already taking the United States by storm. Spotify provides streaming of music for free with interspersed advertisements that provide the revenue that Spotify owes the record labels and artists. For a monthly fee, similar to subscription services, a user can listen to an unlimited amount of music with a vast selection of songs and albums from many different artists. The advertisements are about thirty-seconds long each, and they play in between songs occasionally, but apparently not frequently enough to deter its audience.
The Swedish music industry recently conducted a survey of thousands of citizens of a large range of ages to ascertain the exact music consumption habits of these people. The results were shocking, to say the least, indicating that “since 2009 the numbers of people who download music illegally has decreased by more than 25 percent, and over the last year alone it dropped by 9 percent.” This serves as the largest recorded drop in music piracy, and the “data further suggests that this downward trend is caused by the availability of improved legal services such as Spotify” (Ernesto, 2011). This Swedish poll indicates that in recent years, the prevalence of music piracy has dwindled, and this certainly provides hope to the ailing music industry in America. Now that Spotify has firmly made it overseas to America, it has the chance to grow. The Swedish survey continues on to say that “more than 40 percent of the participants in the survey now use a music streaming service, compared to less than 10 percent who say they download music legally…[and only] about 23 percent continue to pirate music” (Ernesto, 2011). While the Swedish music industry is undoubtedly different than the American music industry, the potential for a significant dent to be made in music piracy is great.
Spotify is largely successful due to the fact that it makes it easy to consume music freely and legally. Though there are still many people who are adamant about not having any advertisements and not paying for music at the same time, Spotify has not yet reached its full potential. Spotify has similar characteristics to cable TV; there are multiple tiers of subscription level with varying access to content and varying prices. If Spotify were to add more features and content such as radio and even video, possibly concert videos or interviews with artists, they can add more tiers at different charges. Cable TV has hundreds of millions of users, which allows it to charge for more content, and once Spotify gains a larger audience, it can do the same. It will have more influence in the industry and make more money, which will allow it to sign more licensing agreements. As a comparison, ESPN makes approximately $2 per subscriber per day, whether or not the subscriber actually ever watches ESPN. If the consumer has access, ESPN makes money, and they can thereafter pay their content providers. Replace ESPN with Spotify and content providers with labels and artists, and it becomes a viable music distribution and consumption idea. Both label and artist receive massive performance royalties, and everyone is happy.
Even though music piracy has caused a significant drop in music sales and total revenue made by record labels and artists, this does not mean the music industry will fail. New strategies have emerged to combat the rampant piracy such as Apple’s iTunes Match, the new 360-deals that artists sign, and the ad-based music streaming service, Spotify. Despite the record labels’ slow reaction to the new digital market, in the past several years, their distribution and marketing tactics have quickly adapted to the new mindset of the populace that consists of obtaining fast and free music. Though Spotify has not yet reached a significant portion of the American music market, its potential to greatly decrease the urge to download illegal music is great due to the concept of its ad-based, streaming service. The record industry spent much of the last decade on its knees, but in the new decade, it will likely make many, great advancements.
Undoubtedly, record sales have fallen in the past decade at an unprecedented rate, but the blame cannot be placed solely on music piracy. Though there is no question that the illegal downloading of music has affected the amount of sales of albums, the idea of converting one’s collection from tape or vinyl to the smaller, more convenient CD takes some of the blame. Until now, the sales of albums on CD have been inflated due to the older crowd re-purchasing the albums they already own on tape or vinyl on CD in a re-mastered format. By the last decade, most people had already invested in replacing their music with a CD format that supposedly sounded better and was, no doubt, far more convenient than lugging around a record player or tape machine. While there is no way to truly pinpoint the cause of falling record sales, the early inflation of CD sales surely contributes to the initial plunging of sales. Today, however, it is unlikely that this is causing the continued decrease in sales. However, the record labels were slow to react when the CD began to fall out of favor when the digital music market became the primary preference of consumers due to the cushion of people replacing their vinyl and cassette tapes with the CD.
The record labels took far too long to react to the change in popular medium for the acquisition of music. The labels did not even begin to full heartedly work online distribution into their business plans until 2000 where, until then “the recording industry, while working hard at prohibition, was making only halfhearted efforts to assimilate songsharing into a legitimate business model” (Kernfeld, 2011, pg. 208). The labels merely tried to resist the transformation of music distribution until 2000, in which the labels attempted to put together several subscription services to try to fight back against Napster. The five major record companies fought over ownership of the catalog and how they could cooperate to create a combined online music source, which has not even happened today. The labels also spent the time between 2001, the time of Napster’s peak audience and notoriety, and 2003 fighting Steve Jobs’s proposal for iTunes and trying to futilely force the subscription services to effectively take root in the main music-consuming populace. According to Steve Jobs, “Corporate executives were…unwilling to sell downloads outright from their catalogues, and failing in a series of halfhearted efforts to put together subscription services” (Kernfeld, 2011, pg. 209). Historically, record labels have resisted change in the music market, and this may have been the largest factor in the falling of music revenue generated by audiences. Perhaps if it had not taken more than four years to introduce a legal form of music downloading, music piracy would not be the widespread problem it is today, and the music industry would possibly not be failing. The record labels are to blame, in part, because of their hesitance to embrace the new digital market that rapidly replaced CDs.
The major problem with the music industry’s goal of prohibiting online downloading is that a technology that has already been discovered cannot be un-discovered. One cannot simply erase the existence of a technology or function of an object in people’s memories, and the record labels seemed to be trying to do just that. When the RIAA, the Recording Industry Association of America, stepped in, things merely got worse for the music industry, especially in terms of public relations. Even though the RIAA eventually was able to add one success to its track record, the bankruptcy of Napster after a massive lawsuit, its disaster of a program named “MediaSentry” sent public opinion of the record industry plummeting. MediaSentry searched for illegal downloading information and identified individuals taking place in the pirating of music online. After it successfully identified an individual, the RIAA proceeded to take one of two courses of action: it would either file suits against the offender for massive amounts of money under the charge of copyright infringement or it was forced to drop the claim due to an error on account of MediaSentry. Several cases gained high profile popularity, including:
“A suit in September 2003 against Sarah Ward, a sixty-six-year-old…Massachussetts resident, whom the RIAA threatened with a liability of $150,000 per song for more than two thousand songs that she had allegedly downloaded through KaZaA. The charge was moot, as it turned out, not only because she had not done it, but because she had a Macintosh computer, and KaZaA only ran on Windows systems” (Kernfeld, 2011, pg. 213).
In addition to the Sarah Ward case, the RIAA sued one Gertrude Walton who had died two years prior to the filing of the lawsuit. Though the lawsuits no doubt gained millions of dollars from the resulting settlements, the means were outrageous and overly aggressive despite the mass copyright infringements occurring. After many years of mistaken lawsuits against non-offenders and retaliatory lawsuits by the individuals wrongfully accused of pirating music, the RIAA realized that its legal strategy was not working and ended its long relationship with MediaSentry. As of now, the Recording Industry Association of America does not file new suits against individual offenders except in the event of major instances of copyright infringement, such as the downloading of thousands of songs per month. This, incidentally, seems to be the most effective way of dealing with music downloaders without incurring needless legal fees found as of yet.
Due to the extravagance of the fines the RIAA imposed upon the found infringers, public opinion of the music industry as a whole fell. This low public opinion continues on even today with the idea that major record label executives are greedy and out to take money from the artists and buyers. Though this may not be completely true, this can greatly affect the amount of money a consumer is willing to spend on music, which, in turn, further increases the amount of illegal downloading done. This causes the RIAA to file more lawsuits, which angers the public, and it becomes an endless cycle. The RIAA has done a good job of raising public opinion in recent years by decreasing the amount of high profile and lavish lawsuits, but the damage has already been done, and it will take much longer to effectively rebuild the record labels’ reputations.
Recently, there have been sentiments insinuating that the music industry, namely the major record labels, will fail in the future due to the lack of revenue from the purchasing of records. However, “the recording industry has surrendered record sales as a revenue stream” and has instituted what is called “360-deals” in which “they gain the right to share in every area where an artist may receive income” (Hollis, 2011). This allows the record labels to receive revenue from merchandise sales, sponsorships, income from touring and concerts, publishing deals, performance fees, and more. This gives the labels the ability to recoup the money that they invest in the making of their artist’s album and overcome the loss of album sales as a money-maker.
Though the 360-deal is regarded as controversial at best, due to the supposed loss of money that the artists experience. Though this may seem true, the labels cannot provide the money for the artists to embark on their tours or record their albums when the label experiences loss after loss due to the damage music piracy has done to overall record sales. Even though the artists ultimately lose some of the revenue to the labels that they would originally have been able to pocket, the fact remains that the artists, often low on money, would not be able to pay the exorbitant studio, production, manufacturing, and distribution fees without the label’s help. The label is ultimately a business, and if money cannot be made on record sales in-store and online through the use of iTunes and ad-based and subscription-based streaming services, then the money needs to come from somewhere else, and the only available avenue for recouping the advance given the artist is the other sectors in which the artists receive paychecks that, until now, was untouched by the record labels.
Apple’s iTunes and Napster also placed the emphasis on digital format music. Previously, to gain music in a digital format, one had to rip the music off of a purchased album. However, iTunes was, and is, available to provide music in digital format straight to the consumer’s computer in no time. Napster gave the consumers the ability to retrieve music for free, because without the digital format, stealing music was merely a risky business of shoplifting for the local WalMart or BestBuy. Napster set the precedent for online music downloading and purchasing services, including Amazon and iTunes, and it did not take long for many illegal file-sharing networks, like KaZaa and the Pirate Bay, to follow suit. With the ease of finding and downloading a desired song, the free music on peer-to-peer services is a tempting deal—fast, free, and easy music is nearly the embodiment of the instant-gratification-obsessed modern society.
Piracy is driven by the market’s shift towards a single-based market with the focus on the purchasing of full albums decreasing. Apple’s iTunes largely contributed to this change, when “between 2004 and 2008 the number of single tracks sold in the U.S. increased by 669 percent while the number of album sales dropped 42 percent,” which caused the extreme drop in revenue from music sales since singles are far less profitable than albums are (Ernesto, 2010). This shift towards a legal singles-based market would likely not have occurred had it not been for the creation of iTunes, which allow consumers to purchase a single song off of an album rather than the previous CD-based market in which a buyer must purchase an entire album to obtain one song. Granted, this kind of market already existed within Napster, never had this kind of service been offered legally, since the record labels largely opted for subscription-based music streaming services. With the advent of this new, legal, and lawsuit-free service, consumers had an outlet to purchase songs for a low price without having to worry about expensive monthly fees or the overdramatic court cases filed by the RIAA. This, however, contributed to the amount of songs being uploaded to file-sharing networks. Though iTunes tried to combat this process by installing encryption codes similar to the ones on the subscription-based models on the songs that were downloaded to combat copying of the singles, hackers quickly found ways around the anti-piracy codes and placed the songs on a file-sharing service relatively hassle-free. It was almost a game for the hackers, to see who could break the new encryption code first.
iTunes was revolutionary; after the then five big record labels, Universal Music Group, Warner Music Group, EMI, Sony, and BMG (Sony and BMG later merged in 2004) fully beat the subscription model they all sponsored to death, Steve Jobs put together a proposal for a pay-per-download after saying, “’The subscription model of buying music is bankrupt. I think you could make available the Second Coming in a subscription model, and it might not be successful’” (Kernfeld, 2011, p. 210). This proved true when the many subscription services offered by the major record labels combined had only approximately fifty thousand subscribers when millions of music consumers were in the market of online downloading, legal and illegal. iTunes also plays upon the fact that the music it offers is legal, and, “a consumer is also more likely to opt for a given legitimate product if its price makes it affordable, and the product can be easily accessed,” likely due to the high risk of legal action, such as in the infamous RIAA lawsuits (Stryszowsky & Scorpecci, 2009, p. 38). This gave iTunes a competitive edge over the peer-to-peer networks like KaZaa and the Pirate Bay in addition to the pathos, the appeal to emotion, aspect of supporting the musical artist. It took several years for the record labels to authorize iTunes to sell their catalogs with somewhat lenient restrictions for copying, but through the perseverance of Steve Jobs, iTunes has become the number one market for online music purchasing.
Recently, with the premiere of iOS 5, Apple’s operating system, iTunes has introduced a new service through revamped program, iCloud, called iTunes Match. Essentially, for $25 a year, iTunes will match the user’s entire library with its records, and with its full service at $256 a year, it will allow the user to download an iTunes quality copy of the song. In the event that a song in the library is not in its system, it will be added to the catalog and found by iTunes separately. Through the analysis of the songs the users own library, including albums illegally downloaded, iTunes will distribute portions of the $25 or $256 fee to record labels and artists in an attempt to restore the revenue lost from illegal downloading. Thought it is yet to be seen how effective iTunes Match will be at boosting the music industry’s profits, it is a promising service being offered by Apple at essentially no profit for the company. A selfless act, it seems, in the midst of a capitalist economy.
All hope is not lost for the music industry, despite what the falling music sale revenues indicate. A new service called Spotify has emerged as a major competitor that has the potential to lower music piracy rates, and has even done so in foreign markets. Developed in 2008, Spotify was originally available only in European markets. Only recently has it been able to reach agreements with the record labels in America, and it is already taking the United States by storm. Spotify provides streaming of music for free with interspersed advertisements that provide the revenue that Spotify owes the record labels and artists. For a monthly fee, similar to subscription services, a user can listen to an unlimited amount of music with a vast selection of songs and albums from many different artists. The advertisements are about thirty-seconds long each, and they play in between songs occasionally, but apparently not frequently enough to deter its audience.
The Swedish music industry recently conducted a survey of thousands of citizens of a large range of ages to ascertain the exact music consumption habits of these people. The results were shocking, to say the least, indicating that “since 2009 the numbers of people who download music illegally has decreased by more than 25 percent, and over the last year alone it dropped by 9 percent.” This serves as the largest recorded drop in music piracy, and the “data further suggests that this downward trend is caused by the availability of improved legal services such as Spotify” (Ernesto, 2011). This Swedish poll indicates that in recent years, the prevalence of music piracy has dwindled, and this certainly provides hope to the ailing music industry in America. Now that Spotify has firmly made it overseas to America, it has the chance to grow. The Swedish survey continues on to say that “more than 40 percent of the participants in the survey now use a music streaming service, compared to less than 10 percent who say they download music legally…[and only] about 23 percent continue to pirate music” (Ernesto, 2011). While the Swedish music industry is undoubtedly different than the American music industry, the potential for a significant dent to be made in music piracy is great.
Spotify is largely successful due to the fact that it makes it easy to consume music freely and legally. Though there are still many people who are adamant about not having any advertisements and not paying for music at the same time, Spotify has not yet reached its full potential. Spotify has similar characteristics to cable TV; there are multiple tiers of subscription level with varying access to content and varying prices. If Spotify were to add more features and content such as radio and even video, possibly concert videos or interviews with artists, they can add more tiers at different charges. Cable TV has hundreds of millions of users, which allows it to charge for more content, and once Spotify gains a larger audience, it can do the same. It will have more influence in the industry and make more money, which will allow it to sign more licensing agreements. As a comparison, ESPN makes approximately $2 per subscriber per day, whether or not the subscriber actually ever watches ESPN. If the consumer has access, ESPN makes money, and they can thereafter pay their content providers. Replace ESPN with Spotify and content providers with labels and artists, and it becomes a viable music distribution and consumption idea. Both label and artist receive massive performance royalties, and everyone is happy.
Even though music piracy has caused a significant drop in music sales and total revenue made by record labels and artists, this does not mean the music industry will fail. New strategies have emerged to combat the rampant piracy such as Apple’s iTunes Match, the new 360-deals that artists sign, and the ad-based music streaming service, Spotify. Despite the record labels’ slow reaction to the new digital market, in the past several years, their distribution and marketing tactics have quickly adapted to the new mindset of the populace that consists of obtaining fast and free music. Though Spotify has not yet reached a significant portion of the American music market, its potential to greatly decrease the urge to download illegal music is great due to the concept of its ad-based, streaming service. The record industry spent much of the last decade on its knees, but in the new decade, it will likely make many, great advancements.
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