iTunes Inspires Changes in Music Industry
Imagine a world where musicians keep the copyright to their music and make $5 or $6 per album sold instead the current $1 or $2. This is a model being proposed by Terry McBride, CEO of Nettwerk Music Group. With sales of CDs continuing a downward spiral, he realizes that the music industry needs to make some changes.
According to an article in Wired.com, CD sales have dropped over 20% in the United States since 2000. The drop isn’t because of lack of interest in music, though. Since 1999 concert ticket sales have increased 100%, peer-to-peer filesharing has proliferated, and iTMS has sold over one billion downloads. While all this has been happening, artists have seen their payment for each song decrease from an average of 30 cents per song to 10 cents per song.
McBride thinks there’s a better way. He recognizes that there are more venues for selling music than ever before. The goal of the major labels has been to sell CDs. It’s time for the music industry to focus on selling music in all possible forms.
McBride’s model calls for artists to record under their own labels. They retain ownership of their music. Companies like Nettwerk take the place of all of the different players who are typically involved in selling CDs. This means any profit has a much smaller split, with all involved able to take more home. In addition, keeping the copyright in one place makes it easier to sell songs to advertising agencies, to approve free downloads for promotion, or to do whatever it takes to market the music. Every move doesn’t require multiple approvals.
This is not the only proposal to change the face of the music industry. Ingenious Media founded Ingenious Music in 2005. This United Kingdom firm makes money in the music industry by investing in bands and small labels as well as managers. In July, EMI announced the creation of a new music company called The Firm. This company plans to replace the traditional royalty schedule for artists with profit sharing. Other proposed changes include the elimination of DRM.
Does iTunes have a role in the rethinking of the music business model? Epoch Times and others believe that the success of iTunes has forced the music industry to think differently. A model that allows artists to keep their copyright, particularly if the same model helps new artists to be heard, is something we can all hope for.
Still, while giving iTMS credit for demonstrating that music lovers are willing to pay for what they can get elsewhere for free, I would take one step back and give Napster and other early music download sites credit for leading the way. Without them, it is unlikely that iTMS would even be in the picture.
Others would argue that iTMS is more of an enemy to the industry than a friend. Wharton marketing professor Peter Fader thinks that the dominance of iTunes means that there will be only one model that really means anything. Analyst Phil Leigh suggests that if the music industry feels threatened by iTunes, a good strategy might be to back Microsoft’s Zune.
What are your predictions or suggestions for change in the music industry? Are changes something Apple should proudly take credit for, or has the ability to download music done more harm than good to the industry and to consumers?
Labels need to change with the times. This could be to the advantage of artists and consumers. I’m looking forward to seeing what other innovations occur in the industry.