A tool for planning for change is the PEST analysis (political, environmental, social, technological).

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EBM Assignment 2: Trends, PEST Analysis
Casjmia Ellis
05/13/2022
EBM Assignment 2: Trends, PEST Analysis
The Music Industry
John Multhauf, Instructor – Entertainment Business Models

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EBM Assignment 2: Trends, PEST Analysis
The Music Industry
Why I Chose the Music Industry
Music has the power that people cannot deny. Markedly, it adds vibrancy to societies by
bringing people together, speaks to all when the words cannot, and is understood wherever a
person goes in the world. As a singer, music has always been my passion. Growing up, I have
always been a fan, from riding around listening to Oldies with my Grandpa to forming my own
interest in music in different genres that ranged from Soft Rock to Hip Hop. Music opened up a
way for me to express myself, although my main focus is not music at the moment, I can see
music finding its way back to me in my career in the Entertainment Industry.
Background of the Music Industry:
In 1999, the music industry started to pick up the pace and encountered growth. In the
same year, the sector claimed $ 39 billion in global revenue (Hochberg, 2019). The music
industry’s business model in 1999 was based on sales of hard copies in stores. During the first
half of 1999, distributing music through CDs, vinyl, and Cassette was prominent. Record
companies distributed more than 392 million albums on CDs to stores during that period.
However, in June 1999, Napster peer-to-peer application was initiated. This method focused on
distributing MP3 music files and permitting subscribers to look for and download songs with
ease. The application was the first broadly used music downloading service, with more than 80
million subscribers at its boom. Particularly, it was prominent for distributing recordings,

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including demos, live sets, and unreleased mixes, among others, that were so hard to find.
Significantly, the industry used ads in print publications, such as magazines and posters, to
promote music. The sector also used radio and word-of-mouth.
Two Companies:
1. BMG Entertainment. BMG entertainment was one of the dominant companies in 1999.
BMG was a recording company, with its first steps to music from the success of
Lessering, a book club formed in the 1950s (“BMG Entertainment, n.d). It also
established Ariola Records, combined with Arista Records and RCA as core labels to
ship a selection of light music and operetta. Besides, BMG was a division of a German
media company before it completed its asset sales to Sony Corporation of America in
2008, creating a jointly owned Sony BMG. It ceased its operations as an independent
company in 2009.
2. Sony Entertainment Music (SEM). SEM also dominated in the pre-digital era of 1999. It
is an American music company founded in 1929 (Sony Music Entertainment, 2020).
Notably, the company counts brands such as Columbia Records, Epic Records, and RCA
as its core labels. Its products include entertainment and music. SME is a separate entity
of Sony Entertainment Music Japan (SEMJ). The company also became a part of Sony
Music Group in 2019, which also accommodates the globe’s giant publishing company,
Sony/ATV. Until today SEM is still operating and reports directly to Sony Corporation in
Tokyo.
PEST ANALYSIS
Political

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 New Copyright Laws: The copyright regulation has positively impacted the music
industry. This law has helped many musicians protect their projects. Through the
copyright Act, companies and musicians have protected their work from being used by
third parties without their permission. In 2018, the updated copyright law was initiated to
help independent music artists to obtain better compensation (U.S Copyright Office, n.d).
Significantly, the music modernization act makes statutory licensing more just and
efficient for art creators and digital music providers.
 Lawsuits: Lawsuits have also affected the music industry since 2000. Musicians such as
Thicke, Williams, Katy Perry, and Ed Sheeran have been sued and asked to pay millions
due to claims of copyright infringement. With multiple lawsuits affecting dozens of
artists, most musicians are confused and question whether they will be sued for the music
they will release. Some are afraid to produce their works, adversely affecting their music
career.
Economic
 Online Self-service (Automation). During the digital era, streamlining services has been
on the rise. This factor has negatively impacted the traditional artists who made profits
through selling physical albums (Lillywhite, 2020). Consequently, they have been
struggling to break even with their music career.
 Recession: During the recession in 2008, the music industry was profoundly affected
(LillianWhite, 2020). Markedly, at this time, there was high unemployment and reduced
consumer spending, which turned out to be the worst-case scenario. It led to declining
recorded music sales, translating to decreased revenue.
Social

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 Youth Market: The emergence of the millennial and Gen Z generation produced the
market for popular music in 2000 (YPulse, 2021). This group has consistently turned to
social media and YouTube to discover new songs and artists, leading to declining
traditional media use.
 Popular Culture: Music in popular culture is constantly transforming and evolving.
Markedly, the current use of popular cultures such as Spotify and TikTok has changed
how the music industry operates. Since the launch of Spotify in 2006, artists have been
creating their music to share directly with Spotify subscribers (“How pop culture is
shaping the music & tech industry,” 2021). As a result, it halted the use of CDs and
allowed Spotify users to listen to music from one platform.
Technological
 Improved Internet Speed: In the early 2000s, broadband began to replace dial-up, with
almost 50 percent of internet users having broadband connections in 2007 (” History of
internet,” n.d). The connection allowed consumers to download and streamline music at a
faster speed. It created a better online experience, enabling independent artists to find a
global audience through online platforms.
 Mobile Technology and Devices: Mobile devices have affected the music industry, where
people can easily download dozens of songs, keep them on their devices, and listen to
them whenever they want (“From disk to download, n.d). With the emergence and
dominance of smartphones, tablets, and iPads during the late 2000s, people do not need
to store music, as they can streamline through services such as Spotify and Apple Music.
Conclusion

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Music is a crucial part of human culture with its ability to change people’s mindsets,
connect them, and impact every facet of their lives and culture. Besides, music is a significant
worldwide business that impacts the economy. However, some external factors, including
political, economic, social, and technological (PEST), can affect the music industry’s success.
New copyright law is one political factor that has enabled independent artists to obtain better pay
for their streamlining services. Lawsuits have also adversely impacted musicians, failing to
produce their works with fears that they might infringe copyright laws. Additionally, economic
factors include the emergence of online self-service that has limited traditional artists from
making profits through physical albums. The 2008 great recession also declined music sales due
to the loss of unemployment and reduced consumer spending.
Moreover, social factors, including the emergence of millennials and Gen Z, have made
the music industry promote and sell its content using online platforms. Popular culture, such as
the use of Spotify in 2007, is also a social aspect that halted the use of CDs as artists shared their
content directly with consumers through this platform. Lastly, technological factors include
improved internet speed in the late 2000s that allowed faster download and streaming. Another
aspect is the emergence of mobile and smart devices, enabling easier music download, storage,
and streamlining.

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References
BMG Entertainment. (n.d.). Adbrands.net: leading global advertising agencies, marketers &
brands. https://www.adbrands.net/files/de/bmg_de_p.htm
From disk to download: How smartphones shifted the music scene. (n.d.). loveit
coverit. https://www.loveitcoverit.com/news/articles/how-smartphones-shifted-the-
music-scene/
History of the internet | How the internet was invented. (n.d.).
Plusnet. https://www.plus.net/broadband/discover/history-of-the-internet/
Hochberg, B. (2019, April 11). The record business is partying again, but not like it’s 1999.
Forbes. https://www.forbes.com/sites/williamhochberg/2019/04/11/the-record-business-
is-coming-back-but-its-not-1999-yet/?sh=3ae5d0b63257
How pop culture is shaping the music & tech industry. (2021, October 25). Music-
News. https://www.music-news.com/news/Underground/144261/How-pop-culture-is-
shaping-the-music-tech-industry
Lillywhite, M. (2020, September 22). How economic factors affect the music industry. Moon
Jelly Agency. https://moonjelly.agency/how-economic-factors-affect-the-music-industry/
Sony music entertainment. (2020, May 14). Music Business
Worldwide. https://www.musicbusinessworldwide.com/companies/sony/sony-music-
group/sony-music-entertainment/
U.S. Copyright Office. (n.d.). The music modernization act. U.S. Copyright
Office. https://www.copyright.gov/music-modernization/

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YPulse. (2021, December 14). How Gen Z & millennials’ music discovery has changed, in 2
charts. YPulse. https://www.ypulse.com/article/2021/12/08/how-gen-z-millennials-music-
discovery-has-changed-in-2-charts/