The proposition that illegal downloading is destroying the music industry can be critically assessed by exploring how the music industry's revenue is progressing in the age of digitalisation. This will include the discussion of supply side and demand side risks. Furthermore, illegal downloading and its effects on the music industry in will be assessed in terms of whether it is aiding the overall growth of the music industry, or impeding it.
To start, there can be a drop in monetary income to the music industry brought on by customers who purchase pirated copies of music. To put this differently, those customers who attain the illegal download for free are denying these companies amounts of 20-25 pounds per album. The rise of illegal file sharing made record labels take serious legal action against those parties involved in this activity. For example, Napster was taken down in 2001 due to its peer to peer file sharing internet service that shared music files encoded in MP3s. This however did not affect the decline in revenue for music industries. In 2003, legal digital downloading became available with the debut of the iTunes Store. This will be further discussed in the supply side risks of the age of digitalization.
One of the supply side risks of the age of digitalization is commodity distribution which added to the decline in revenue. Where once the artist would willingly sign over rights to their work for shares in sales and copyright dues, they no longer need to do this. With the advent of music sharing applications and music hosting sites, the record company is no longer needed to allow for the sale and distribution of an artists work. A key example of this is Radiohead’s ‘In Rainbows’ (2007). It was a self released album, hosted online and downloadable as a zip file for the price agreed on by the consumer. 3 months after the download was made available a disc set was released with bonus content and enhanced packaging. It ended up making them more money than their final album with EMI, ‘Hail to the thief’ (2003). Furthermore, in 2005, the BPI (British Phonographic Industry) reported that digital downloads exceeded sales of vinyls and CDs for the first time. Although this seems to indicate that downloading is the main method of acquiring music, we must look at the quality being offered on sale, with many music files being downloaded in mp3 format, often lacking in sound quality to high bit rate CDs. In addition to this is the lack of a tangible album, something that consumers could see as lacking in wholeness of the item purchased. However, even given this, with the growth in download speeds, better recording programs, and overall ease, downloading music has become a much more convenient and affordable option. An example to illustrate this is the creation of iTunes, Apple’s flagship digital download site and application. Initially one would have to purchase a whole album for the want of a select few songs, however with the launch of such online music stores, one can simply pay for what one wants. It it then logical to assume that with the advent of legal digital downloading sites, that the record companies would salvage losses from lowered record sales. However, The Economist reports, "paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDs."
Hence, the music industry needed to find other sources of income. Edgar Bronfman, CEO of Warner Music, described the state of the music industry best, “The music industry is growing, but the record industry is not.”. For example, live performances and tours have increased while concert ticket sales have been increasing at a consistent rate. This increase in concert sales has become the main resource of income for the music industry. Artists have been receiving two-thirds of their annual income from concerts tours while the remaining…