iTunes Inspires Changes in Music Industry

by Janet Meyer Aug 29, 2006

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, 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.


  • iTMS has proven a billion times over that there is $$$ to be made over internet distribution of music.

    With that said, the labels must not greedily move their CD business model to the internet because it will not work. You can’t continue selling albums only for $14 and only has one or two hit tracks.

    No wonder iTMS model of selling tracks or albums a big hit with fans. Perhaps, artists should abide to creating their own labels and outsource their “studio” gear. I’m sure with that freedom comes more creativity and more imagination x10^2 (squared) in their music!

    Robomac had this to say on Aug 29, 2006 Posts: 846
  • Zune is emulating iTunes, so it’s no alternative for artists or consumers.  It would stand to alter the flow of profits into Microsoft’s fat pockets though.

    Who should get the credit?  I think young people.  They couldn’t afford to buy music at the industries prices, so they innovated new ways of disseminating their cultural values.  I think they’ll continue doing this.

    iTunes showed the industry a way to adapt that was acceptable to a large enough segment of consumers.  Is it the ultimate solution?  I don’t think any DRM enforced solution is, whether it’s Zune or PlayForSure.  Ideally artists should sell directly to consumers.  Music should be sold unprotected, returning fair use rights to customers.  In such a scenario, artists would defray the loss of money due to piracy on the sales of concert tickets and merchandize.

    HG had this to say on Aug 29, 2006 Posts: 7
  • Fact: Apple doesn’t make (much) money on selling songs through iTunes.

    Seriously, Apple’s cut is so small it only just covers their costs (bandwidth, marketing etc.). They see iTMS as support for their iPod players, and they make their money selling those.

    Certain people ( say that artists make very little money on songs sold on iTMS, and blame Apple for screwing the artists, but it is the record companies that are doing this.

    Apple are the fighting the greedy record labels to keep prices on iTMS from going up, because Apple is looking out for it’s consumers. But the artist will have to fight their own battle which is against the labels, not Apple.

    j-s-h had this to say on Aug 30, 2006 Posts: 2
  • Fact: Apple doesn’t make (much) money on selling songs through iTunes.

    See here if you don’t believe it…

    “Even though Apple’s iTunes Music Store made only a slight profit, the combination of the iPods and iTunes now represents about 38 percent of Apple’s revenue, said Chief Financial Officer Peter Oppenheimer.”

    j-s-h had this to say on Aug 30, 2006 Posts: 2
  • I dislike the labels and publishers, but it would be so easy for them to cut out MS and Apple.


    Hire IBM to create the front and backend store.

    Labels and publishers are so stupid. I guess the main reason is maybe they couldn’t hide al of the money from the artists to rip off if they sell directly.

    mozart11 had this to say on Aug 30, 2006 Posts: 35
  • * Nobody I know is stopping a musician from selling their music directly to a customer, unless they have voluntarily signed a contract.

    * Musicians sign with labels because labels do things that musicians neither want to do or know how to do. Artists are notoriously bad at marketing themselves. The few that are good are hated by the rest.

    * Labels front the $$$ to do recording and promotion of music.  Albums have multiple songs because no one knows what song will be a hit. Every song takes $$$ to record. If you were smart enough to know which song would be a hit, you could get VERY rich, very quickly. You’re not, they’re not. Same goes for musicians in general.  The labels ki$$ lots of frogs to find a prince.

    * What we’re discussing here are business models, not religions. If you don’t like a musician’s or a label’s business model, shop elsewhere or elsehow.  Why is this so hard???  Its not as though there were a shortage of musicians.  If enough buyers change their buying habits, business models will change. Get your courage up and quit whining.

    golfzilla had this to say on Aug 30, 2006 Posts: 1
  • Golfzilla, the music labels own 80% of copyrighted music and control the distribution model, including iTM$.  Because of their stranglehold, it is very difficult for independents to break through because retailers simply won’t carry content that’s not from the labels.  It’s the same reason independent films still need to sign with a major distributor to get films into cinemas.

    While indepenent outlets for distribution are springing up, the music cartel has attempted to thwart these outlets at every turn.  They have done everything from trying to sue CD-recorders out of existence (and even now, a percentage of the money YOU pay for a CD burner goes to the recording industry, whether you use it to burn music or not) to literally rewriting the copyright laws to their own benefit (copyright of recorded material now defaults to the publisher, not the artist).

    But thankfully, the giant recording industry has shills like you to defend their practicies from all the “whining” customers and artists who have little choice but to deal with their oligopoly or simply go without.

    And btw, they package songs in albums because they KNOW those songs wouldn’t sell otherwise.  It’s why they charge so much money for a CD single.  It’s a way to make you pay for songs you don’t want to get the ones you do. 

    It’s one of their big objections to the iTM$ model and why they want to charge more for popular singles - not only to make money but to discourage customers from buying singles-only.  I applaud iTM$ for distributing indie albums, but the process could be easier.  It’s a step in the right direction, however.  But iTM$ is going to have to get a lot more popular to become a real alternative to the music industry cartel.

    Beeblebrox had this to say on Aug 30, 2006 Posts: 2220
  • iTMS, as far as I know, still doesn’t directly do business with independent artists as we would love them to. iTMS still has to deal with the freakin’ RIAA oligopoly (as stated nicely by Bbx above) at every turn.

    Apple would love to lower the price of one track or album but the RIAA would take Apple to court faster than you can download the latest Chili Peppers’ single.

    Until Apple sets iTMS to cater and promote artists directly (a la MP3.COM - remember them?) and indy labels without the RIAA’s manipulative fingers, we just have to deal with the greedy f&*kers for much longer.

    Otherwise, Golfzilla, read Bbx post because he’s right and I agree completely. Some of your points make sense but does shoving the very artists a 10% cut (or lower) per song FAIR? Who exactly is providing the talent here to fetch that $$$??? It’s the artists and lets admit here. They deserve a better treatment than a measly 10% OK? How about 50/50 cut? Now, that is fair enough.

    Robomac had this to say on Aug 30, 2006 Posts: 846
  • In every era of civilization, evolution happening in a particular field had inspired an entire range of changes in all the other fields of life. That`s a natural thing to happen. That is how synergy between domains is created in order to give birth to whole new further domains. In this case, we have music and technology. We can name so many other examples: science and society, science and politics, society and fashion and the list can go on and on. We can notice the evolution by pointing at interdisciplinary fields: like security software to draw a connection between iTunes and music or, on the other hand, ethics that connects science with politics.

    Sandy had this to say on Sep 30, 2011 Posts: 7
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