The Emerging Music Business Model: Back to the Future?

Abstract

For many years, the music industry has consisted of two main components: the concert industry and the recording music industry. Throughout the 80s and 90s, thanks mostly to CD sales, the recording music industry was dominant in terms of revenue and visibility. It reached record US sales in 1999 and 2000 (over $14.3 billion in 2000, $13.2 billion of which for CD albums), and between the years 2000 and 2007, the industry has seen a decline of 44% in its sales of physical records. Reluctantly, the recording industry has joined the digital world by signing agreements with a variety of organizations providing music downloading, in particular with Apple and its iTunes downloading service. It earned 1.4 billion dollars from music downloading in 2007 (with another billion from other digital sales such a cellular phone ringtones). Obviously, digital sales have fallen short of compensating the industry for its losses of physical record sales. The concert industry is re-emerging as the potential dominant component of the music industry. In contrast to the recording industry, its revenues have not been affected by illegal Internet downloading. On the contrary, it is making use of the Internet to increase them. Recording artists are taking advantage of the weakening of the recording labels and of the opportunities offered by the Internet to loosen their dependence on the labels. Finally, the once well-defined separation between the concert industry and the recording industry may be disappearing: concert organizers are getting into the recording business and majors are getting into the concert business.