CHAPTER THE Music INDUSTRY IN TRANSITION—THE FUTURE Is Now ery few businesses are static, and the music business is no excep- on. Increasingly, the business itself is aout change, because pop- Wg edge of culture ees at work aflecting the industry (in no ‘* The impact of technology on the way music is made, transmitted, perceived. bought. and sold f power within the music industry, most notably. = Changes in the cor + Emerging creative careers the chapter on touring} wusic business. le effects on today’s music industry, f the music business, can predict the future with certainty, we feel that strong trends are well underway and continue to be a factor for years to come. The trends do not exist in a vacu- tum; some of them are intimately related to each other. By discussing these ‘ongoing changes and tendencies, we hope to better prepare today’s musi- Gian for the true environment‘own performing rights society. Broadcast keeps moving forward, and law and bu: adapt or fall behind. In no event can the genie be per- suaded to go back in the bottle. Consumers want the convenience. speed. and flexibility of Internet transmission of di they are io played out (though the company’s original operations folded). This attempt to “beat “em and join ‘em” at the same time is just one example of the music indus- {ns inconsistent approach to the issues surrounding the on! MP3 files, Consumer Poputarity oF Digita Music AND FILE SHARING It's fair to say that five years is half of a generation, and in some cases more, in pop music. Trends rapidly come and go. To most listeners, vinyl records are an artifact c@ wood-burning stoves, has aluays been part oftheir worl, they dor't conser itto be theft—in this view, music is just out there on the Net for the taking, artists and record labels have been alarmed by the a successful lawsuit, but others have teken its place. in 2003 and 2004, the RIAA filed suits against individuals in the hopes that others would be encouraged to refrain from using free file-sharing for fear of legal reprisal. As noted earlier, these efforts may have succeeded to a degree, but unless the industry changes the way consumers thine, the problem of enforcement is, Just too large to inhibit large-scale downloading, Proponents of unfettered downloading argue that this practice actual- increases music sales (of CDs and pay downloads). They reason that the Internet vastly enhances the exposure, hence the market. They concede that yes, some people steal music they would othentise have to buy, but main- tain that sales lost this way are minute compared to the extra revenues gen- erated because so many more people willingly pay for music they would not have heard otherwise. Here's the mode! ‘vo of the Newbies without paying. Bob likes what he hears, so he supports the Newbies by purchasing the whole album. ‘Though this must be true sometimes, what if Bob likes just two tracks ‘and isn’t willing to buy the entire album to acquire them? The alleged net sales gain isn’t backed up by any sales figures. We don’t kaw whether Bob buys the album, or downloads the rest Interest in general seems to be moving away i problems with the “free music leads to teners too young to have developed the habit of buying CDs at “brick and mortar” stores probably don't possess the credit card necessary to purchase music at an online fee site, Tue Music InpustRY’s AVERSION TO FILE SHARING 8 person walked out of a CD store of COs and bypassed the cash register. this action would constitute theft. Why not when he downloads? “Internet freedom” advocates claim that major labels have been over- charging consumers for years, end that consumer prices for good music. These ic to: our ears, ‘Adults who download entire albums rather than buy them, do so because yone else does’ and because they don't expect to get caught—kind of cheating on one’s tax return, Youngsters whose sense of right and wrong developed. and who have grown up with the Internet as a fact of second thought, (child downloads free, the music industry sees @ problem. Though the labels concede the Internet is a great tool to widely and efficiently promote their product, they want to keep the same per-unit Pi le while growing the market, not trade off growth in total units in less music for fans. To us, this logic bresks down because making “pro- fessional sounding” master recordings in today’s world is no longer daunt- ingly high-priced. Not even distribution of recordings needs to remain the province of majors. That function, too, can be accomplished online at low cost, without the extensive, costly “brick-and-mortar” network required to distribute “hard” preduct (CDs, cassettes, and vin DECLINE OF THE LaBeL AND DEATH OF THE Record Store? At the height of MP3.com’s hubris, executives predicted their company ‘would drive the major labels out of business by “eliminating the middle- ring their music directly tothe public, thereby cutting i ofthe loop. Though MP3.com itself failed, the fear the company instilled in labels continues to haunt them. not of their product's being pirated, bootlegged, or stolen, but rather, rendered entirely irrelevant. Production and distributionTECHNOLOGY AND PIRACY Some years back. when the analog audiocassette became a viable inexpensive medium, the major labels and industry trade groups such as the RIAA were up in arms about the potential for pitacy—that is. the unau- thorized copying (and selling) cords, labels and the artists. Their dan cassettes are still with us, Now the perceived threat to the labels and artists is di technology. Digital technology cur ly is used by the industry to make records, ‘but that isn’t what annoys the RIAA. The reasons f ‘+ Flawless reproduction of an original source signal is al Modem “CD burners.” in essence, tun every commercial CD into a master recording. There is no gener ty loss in digi the or * The Internet ed transmission of recorded music and downloading by every person who has a hard drive and CD burner. Technology to send, receive, and download music cheaply, quickly, and easily isn’t perfect (MP3s offer not-quite-CD- quality sound)—but i's good enough for most consumers, ‘The combination of these two factors is seen as a threat to the revenue stream of the record companies, and to artists, whose royalties are paid out of thet revenue stream. Already in 3 panic about declining sales, the mi industry has maintained lawsuits against file-sharing services and individu- als who heavily use ther," THE INTERNET AND MP3 Downtoaps—. RECENT DEVELOPMENTS Almost everyone has heard of MP3s—compressed which are transferable via the Internet." At the time the first book was published @ company called MP3.com maintained a Web site (MP3.com), which contained recorded music to download—both free sam- ples and complete albums for sale. Acts posted their music for free, and the company boldly stated its intentions to “bypass the middleman” and put. major labels out of business. In 2000, we predicted that MP3.com would be acquired by a major label, and we were right. Ult ;, even with major label supr Pany never became profitable. It went out of business as a free site in December 2003. The record industry became far more upset over. ‘Napster, a ‘Web site and company) which essentially enabled u 2 down loading of copyrighted material. Napster was closed down after 3 lawsuit and now is @ pay download ened by major BMG. sharing sites have sprung up. but the 's against them. Undaunted, the RIAA I jual downloaders in hopes of having @ deter at money out of his harms fans also, Since the emergence of MP3s and wide-scale Internet file-sharing lincluding illegal file-shai ie music industry has been working to com- own technology, the Secure Digi THE INTERNET AND OTHER TRENDS IN THE TWENTY-FinsT CENTURY ¢ first edition, we identified four major trends: |. that online transmission of digital music wes not @ passing fed, and that major changes would take place technology: 2, that MP3 (and like format bought end sold: 3. that major record labels will survive and continue to be the major sellers of pop music, but the way they do business will change; and 4, that career path opportunities for artists will not change as dremet- ically as some artists and Internet proponents believe. would change the way popular music is ber four, and we have further comments to offer regarding career paths. ‘The outcome of the “MP3 wars" could not have happened any other way. The history of popular music is in large part technology-driven, and days of the h century. sheet music publishers sued piano roll makers for copy- right infringement." Later, when radio became a major force, ASCAP"' got in @ major fight ‘with broadcasters over performance royalties. This disegreement led the