Music industry woes in digital age

The variety of music, video and pop culture content available on the Internet has left music companies and physical albums striving for survival.

The trend toward digital music, which engages its audience through audiovisual, has challenged the music industry to change.

“You could download the music and rip and burn to your heart’s content,” said music blogger Mark Mulligan of Music Industry Blog, who is also a seasoned media and technology analyst. "It puts the audience in control."

Santa Monica College music professor Keith Fiddmont conducted an informal poll with his students, asking them who had recently purchased a CD.

"Of 120 students, not one has bought a CD," he said. "Why, when they can make their own? It has killed the recording industry.”

According to Nielsen Broadcast Data Systems, a company that tracks music streams and radio airplay, the total unit number of audio and video music streamed in the United States was more than 50 billion between Dec. 31, 2012 and June 30, 2013, a 24 percent increase. This is not counting digital album sales, which make up 43 percent of all album sales, including CDs, cassettes, LPs and digital albums.

“One of the pros is that we get music that was restricted before, and now we’re free to go and get it ourselves,” said SMC music major Kacey Baughan. “We’re free to make music in our own homes rather than pay out a lot of money to a studio. There’s a lot of freedom in that.”

Napster began the shift away from the way music was distributed across the Internet. Rather than waiting for the release a CD, Mulligan said that the online file-sharing site may have changed the game by putting consumers in control. Napster and CD burning have made high-quality copies available to the public.

But that was not the only change for the music industry.

“The work has diminished because there are other methods, and a lot of it involves technology," said James Martin, chair of SMC's music department. “Digital is the future. [In] computer-driven music sent in digital form, the composer can digitize and sound like an orchestra that he doesn’t have to hire, and then he gets the whole paycheck. The composer and the employer never meet. It’s the future."

According to the Institute for Policy Innovation, part of the diminishing income of music companies has to do with piracy, which has caused a $12.5 billion economic loss every year in U.S. jobs, for a total of $2.7 billion in workers earnings, $422 million in tax revenues, $291 million in personal income tax, and $131 million in corporate income and production taxes.

According to NBDS, audience behavior is diverse and complex, and the use is very fragmented. The music companies are trying to understand how to market this new technology in order to receive their revenue.

Much industry attention has been given to audio-only streaming services, which allow users to listen to tracks or albums through computers or mobile devices without having to download and purchase the entire track beforehand. Services such as Spotify and Deezer have advertisement-funded, free-to-use platforms as well as monthly subscriptions without ads.

According to a Wall Street Journal article, music companies have now come into different partnerships. Apple, in addition to the iTunes store, has added iTunes radio, a different business model that will pay record companies 13 cents per listen, and about 19 percent of the advertising revenue.

Also, the three major record companies, Universal Music Group, Vivendi and Sony Music Entertainment are expected to get cash advances against future royalties from Apple, according to the article. The terms for independent companies are similar, but not identical to the big three.

Pandora, a popular Internet radio service that streams songs based on listener's genre preferences, pays labels slightly less than Apple, at 12 cents per listen, for their free site.

According to a Billboard article, the top six music retailers, Tower Records, Best Buy, Virgin Entertainment Group, Hastings Entertainment Inc.,Trans World Entertainment Corporation, and Wherehouse Music, formed a partnership called Echo. The group will aim to implement digital media online and loyalty deals to ensure survival in an industry where consumers now prefer digital content over physical albums.

In a future where conventional marketing is blurred, how the industry market should generate revenue effectively is still in question.

"In this new evolution of music, my one thing about the technology is that I feel like every musician using technology for music needs to know the basics,“ Baugham said. “It just makes you a more independent musician, and it makes you respected in all aspects of music wherever you go."