A presentation on the the historical and current developments within the online music industry, with a view of the future.

1. By Tara-sapphire Broe
U1252732

2. *
This presentation will look at the historical developments
within the online music industry as well as touching on the
current situation and what the future might hold.

3. *
The music industry has been constantly evolving over time,
all be it slowly. The industry’s growth has always been
pivotal on the expansion of culture and innovation as well
as societal perceptions.
In its current climate the music industry has seen a seismic
shift in the elements that guide the industry’s expansion.

4. *
During the initial twenty years of the internet, the
music industry along with others struggled to adapt. It
spent most of the first ten years, 1993 – 2003, with its
head buried, trying to dismiss what was going on
around it and heading to court to try and sue its way
out of the change.
In the latter of the twenty years, the music industry
attached itself on to Apple and its iTunes store so
tightly that iTunes eventually became the default
outlet for digital sales within the Western world
(Silver, 2013)

5. *
The rise of the Internet was rapid and it brought about many
developments that effected the every single industry. It mae
things more accessible and direct. Naturally after such a rapid
rise, websites such as file sharing site ‘Napster’ emerged onto the
scene. This brought about a new challenge for the music industry,
which, as Jeremy Silver pointed out in his ‘Digital Medieval’ book,
the industry tried to sue their way through this challenge.
It was at the end of the 90’s that student, Shawn Fanning, created
the widely known file sharing site ‘Napster’ this site enabled users
to upload, download and share music files without any monies
being paid to the recognised rights holders. Napster, of course,
was swiftly sued by the music industry and forced to shut down
but this started a string of of increasingly sophisticated file
sharing sites. Despite the aggressive attempts to stop this by the
music industry, sites such as ‘Piratebay’ and ‘Megashare’ have
snowballed into the world of online piracy, dragging digital music
sales down.
(Wikstrom, 2014)

6. *
• The explosion of online piracy, in the late 90s saw record sales drop to an all time low.
• The industry panicked at the emergence of online piracy due to the lack of resources in
place to help tackle the problem.
• Social acceptance of online piracy has now become the norm, making the issue even
harder to tackle.
• This has led to perceptions that the Internet is ‘killing’ the music industry.
• Despite this, the innovation of online streaming services has started to reduce the
amount of online piracy.
Online Piracy

7. 96.7m
43.3m
33.2m
24m
19.7m
19.2m
10.3m
9m
8.4m
8.4m
0 20 40 60 80 100 120
United States
UK
Italy
Canada
Brazil
Australia
Spain
India
France
Philippines
Downloads of music releases via BitTorrent in the
first half of 2012
Millions

8. *

9. *
During the shift in the music industry with the rise of
online services, music distribution was also affected.
Apple, amongst other major companies, rightly decided
to quickly perfect their business model and successfully
implemented different variations of ‘prisms’ this meant
that consumers could easily consume within these
prisms but not outside of them. i.e. the innovation of
the iPod ensured that consumers could only consume
music using iTunes and nothing else. (Silver, 2013)
Apples iPod came crashing into the music scene in 2001
and was the first device to offer you up to 1000 songs in
your pocket. Over the years Apple progressively
developed the iPod and introduced different models
such as the iPod shuffle and Nano. Apple also managed
to refine their business model by introducing iTunes
Music Store in 2003, this changed the way in which
people would consume. The store managed to sell one
million songs in its first week!
In 2007 Apple then introduced the iPhone bringing music
files to your phone and by 2010 iTunes had sold more
than 10 billion songs!
(Apple, 2016)

10. *
Apple has managed to
completely overhaul the way
we consume music in less than
10 years. iTunes has become so
rooted in our lives that, as
stated previously, it has become
the center of digital commerce.
It has also helped to implement
certain business practices as
the standard for digital
companies. This includes
getting 70% of each sale,
sending consumers a detailed
invoice with a breakdown of
each item bought as well as
being able to sell music on
almost any digital device.
(Pham, 2013)
• iTunes created the first
legitimate digital music
store that competed with
piracy.
• iTunes & iPod turned digital
music into a fashion
statement.
• Digital music has risen to
become global through iPods
and iTunes.
• iTunes is to have level the
playing field for independent
labels and artists.
• Apple made the 99p
download a standard
practice across the board.
• iTunes helped to make the
economics of the single rise
in importance.
• Thanks to Apple labels got
paid much faster.

11. *
With the rise of digital music many music entrepreneurs saw a gap
in the market. This was the emergence of online streaming, which
has led to even more of a shift in the music business, digital sales
which were once believed to be the ‘savior’ of the music industry,
declined for the first time since the innovation of iTunes in 2003.
In 2014, track sales decreased by 6% whereas streaming services
such as Spotify and YouTube increased by 32%, this translates to
more than 118 billion streams.
(Knopper, 2014)
Streaming has become a way for people to discover new music.
People who use streaming services have indicated that the
freemium options and the ability to listen to album or a piece of
music without having to purchase the single track offered by
streaming services is very appealing and convenient.
(IFPI, 2013)

12. *
Source: http://www.ifpi.org/downloads/Digital-Music-Report-2015.pdf
Permenant
Downloads
46%
of $3.6bn
revenues
Mobile
Personalisati
on
3%
Physical
Product 46%
of $6.9bn
revenues
Ad-
supported
streams
income 9%
of $614m
revenues
Other
12%
Subscription
streams
income 23%
of $1.57bn
revenues
Percentage
39% Subscription
Growth
41m People using
subscription
services

13. *
• Despite the popularity of ‘free’ music with online piracy, according to the IFPI 2015 report,
subscription services such as Spotify and Pandora have seen a growth in paying users, an
estimated 41million people worldwide now pay for a music subscription service.
• Despite this growth it is clear from the stats that streaming services cannot make up or
compensate for the slump in physical and digital sales, which is leading to the decline in
the overall music industry’s revenue.
• The implementation of ad-supported streaming has been hugely popular with a growth of
38.6% in 2014.
• Streaming revenues have now overtaken download revenues.
• YouTube alone has over 1 billion users.
• A global survey conducted by Ipsos Mori revealed that 57% of Internet users had accessed
music via YouTube.
• Chart compilers and record labels are now using streaming data to reflect how well an
artist’s music is doing, including when calculating data for the Gold and Platinum awards.
• 16 countries have integrated on-demand audio streaming into their singles charts.
(IFPI, 2015)

14. *
0
10
20
30
40
50
60
70
80
90
100
Permanent downloads & subscription streams as
a % of total digital revenues 2014
Permanent Downloads
Subscription Streams
Income
Source: http://www.ifpi.org/downloads/Digital-Music-Report-2015.pdf

15. *
Simon Cowell once said that social media was a major plus for the
music industry. He pointed out that instead of having to spend
millions on marketing, you now have the power to access consumers
directly, for free.
Social media has become a part of our everyday lives. It has changed
the way in which we consume not just music, but everything. It is
now easier than ever for companies to access their target market, in
such a cost effective way.
Social media has also given some power back to the consumer. By
putting it down to the consumer to share and generate a buzz around
whatever has been uploaded online, it leaves it in the consumer’s
hands to decide if they want to make something go ‘viral’ or be a
successful campaign, it has also given the consumer a way of
communicating directly to a company or their artist.

16. *
The innovation of social media and music sharing websites such as Soundcloud, has
given everyone a shared feeling of a quick and unstable change. This then brings about
questions of the general world-view of the past. It forces us to depart from our old
principles and take on new ones. It has created corporate tension that creates rash
decisions to acquire companies that are not correctly valued, such as Jay-z’s
acquisition of Tidal, which has now been found to be excessively valued.
(Silver, 2013)
The online market place is ever evolving and continuously changing. Major services are
constantly expanding into much larger platforms, which enable licensed or legal access
to music via ‘widgets’ across broad range of websites and social media pages.
Companies like YouTube and 7digital are offering and creating such services, this in
turn is greatly widening the access to legal music without any hassle.
Alongside tech companies, music companies have been driving forward with digital
innovation for over ten years. Within this time music rights holders have managed to
license to an extensive range of online services, platforms and applications. This has
helped to create new and licit ways to captivate consumers through music.
(UK Music, 2013)

17. *
A recent study revealed that more than a half
of teens had created online media content
and a third of teens had shared the content
they produced online. This shows that the
innovation of social media and other
interactive platforms, has brought about the
participatory culture which affects all
industries, not just the music industry.
A participatory culture is one that has
comparatively lower barriers with artistic and
community engagement. It has a deep-rooted
support for creating and sharing as well as
having some form of mentorship, in that
experienced participants pass on their
knowledge to the rookies. The participatory
culture has developed through many industries
such as the music, gaming and film industries.
(Jenkins, 2009)

18. *
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
January 15 to
June 15 2010
November 15 to
December 15
2010
How we consume information
Blogs
News
Forums
0 50 100
Less than 10%
10 to 20%
21 to 30%
31 to 40%
41 to 50%
More than 50%
I don’t know
Social Media Advertising Spend as a
% of Marketing Budget
2015
Expected
Spend %
2014 Spend %

19. *
Due to the dramatic rise of social media and other interactive online
services/platforms building your brand has become the easiest it has
ever been. As stated previously, it has made marketing cost effect and
easy!
In the current online climate, unsigned artists are propelling
themselves to fame through pure social media efforts. You are now
seeing the key influencers that were once a list celebrities becoming
bloggers and vloggers. People now look to online personalities for
their opinions, rather than the traditional celebrities.
The ease of access to search and comparison through the internet has
changed the brandscape, posing a possible threat to undermine the
value of brands. Though this can be a positive is you are an
established brand, as customers tend to stick to the brands they know
when online, especially when purchasing online. According to the
Financial Times instead of weakening the major artists, as was
originally thought when the internet exploded into our lives, it has
actually boasted them, creating a monopoly effect that sees the
heavyweight artists, such as Rihannah and Kanye West, reaping the
main bulk of music revenues, with their share increasing.
(Cookson, 2014)

20. *
Despite that fact that the major
celebrities are sweeping in most of
the money from music, there has
still been a change in the dynamics
of brand building. The rise of
unknown artists, such as new
popular rapper; ‘Post Malone’ who
shot to fame earlier this year by his
song going viral on Soundcloud. The
internet gives content and business
owners control over their
interactions and enables brand
building to be a lot more consumer
focused.
(Cleland, 2000).

21. *
The music business model has definitely evolved, I even feel that it has effected
the publishing and live side of the business, with more bands and artists playing
live to try and help subsidise their income from music. It has become widely known
that the money comes from touring and ‘merch’ sales (Wiksrtom, 2014). The
internet has also changed the way in which publishers and labels work, the need
for a publishers and labels have diminished from what it was, with the ubiquitous
availability of works and music. On the otherhand the internet has also boosted
certain aspects of these business it has helped them, the content delivery
opportunities have enlarged hugely (Olsen, 2006).
For me the future of the music business is unpredictable at the moment, reliant on
technological and social innovation the music industry tends to follow the direction
of culture. Digital music is now the way of the world and the rise of DIY musicians
is happening. To me this is what happens when ever there is a siesmic social shift.
The birth of Punk and Rock were all born out of a shift in the business model, just
like life the music industry will continue to cycle.
The future of the music industry is not all doom and gloom as many believe. In
2014 the UK music industry generated £4.1billion for the British economy. Despite
the recent technology and copyright reforms I feel that the music industry will
settle and is heading in the right direction (Kirabo, 2016)

22. * Apple, 2016. Ipod history. [Online] Available at:
https://www.apple.com/pr/products/ipodhistory/ [Accessed 5 april 2016].
* Cleland, R.S., 2000. Media Source Centre. [Online] University of Cambridge Available at:
http://images.forbes.com/fdc/mediaresourcecenter/documents/uc.pdf [Accessed 10
April 2016].
* Cookson, R., 2014. Why the music industry’s “fat head” is eating its “long tail”. [Online]
Available at: http://blogs.ft.com/tech-blog/2014/03/why-the-music-industrys-fat-head-
is-eating-its-long-tail/ [Accessed 10 April 2016].
* IFPI, 2013. Digital Music Report 2013. IFPI.
* IFPI, 2015. IFPI Digital Music Report 2015. IFPI.
* Jenkins, H., 2009. Executive Summary. In Jenkins, H. Confronting the Challenges of
Participatory Culture. London: Mit Press. p.xi.
* Kirabo, T., 2016. Is the future of the Music Industry really that scary?. [Online] Available
at: https://www.musicgateway.net/blog/625/Is-the-future-of-the-Music-Industry-really-
that-scary [Accessed 20 April 2016].
* Knopper, S., 2014. Digital Music Takes a Dive as Record Sales Slip Again in 2013. [Online]
Available at: http://www.rollingstone.com/music/news/digital-music-takes-a-dive-as-
record-sales-slip-again-in-2013-20140108 [Accessed 10 April 2016].

23. * Olsen, D., 2006. How Technology has Changed Music Publishing. [Online]
Available at:
http://www.artistshousemusic.org/videos/how+technology+has+changed+music
+publishing [Accessed 20 April 2016].
* Pham, A., 2013. Seven Ways iTunes Changed the Music Industry. [Online]
Available at: http://www.billboard.com/biz/articles/news/1559622/seven-
ways-itunes-changed-the-music-industry [Accessed 5 April 2016].
* Silver, J.M., 2013. Digital Medieval. In Silver, J.M. Digital Medieval. London:
Xstorical Publishing Media. p.12.
* Silver, J.M., 2013. Introduction. In Silver, J.M. Digital Meideval. London:
Xstorical Publications Media. p.9.
* Silver, J.M., 2013. Introduction. In Silver, J.M. Digital Medieval. London:
Xstorical Publishers. p.10.
* UK Music, 2013. A Year of Innovation Licensing Works: A Report By The Music
Industry. london: UK Music.
* Wiksrtom, P., 2014. The Music Industry in an Age of Digital Distribution.
Queensland: Queensland University bbva open mind.
* Wikstrom, P., 2014. The Music Industry in an Age of Digital Distribution. Open
Mind.