How did the introduction of downloads affect the music industry?

Since downloads were introduced in the late 1990s, the music industry has seen a huge number of changes. CD sales are steadily declining, whilst every day more and more people download music onto their computers, digital music players or mobile phones. However, as a large number of these downloads take place illegally, the music industry has not welcomed all the changes. Add to this is the fact that it is now apparently easier for unsigned bands to reach the music charts and cut out the ‘middle men’ of the record industry, it seems that the music industry is in danger of being ‘the loser’ when it comes to music downloads.
There are a number of issues to consider when examining the effect of downloads upon the music industry. The main aspects to consider are music piracy, the effect on sales and music charts, and the effects on the artists, record companies and consumers. I will deal with each of these issues separately, but a number of the areas do overlap.
One of the major ‘scares’ since downloadable music first became available was the threat of piracy. Suddenly it seemed that everyone with a computer and an internet connection had the chance to become a ‘music pirate.’ One of the first websites to capitalise on the ready availability of music downloads was Napster. Launched in 1999, Napster was one of the first ‘peer to peer’ (P2P) websites, and it allowed users to download MP3 tracks for free. Artists quickly began filing lawsuits against Napster when they released that their, sometimes unreleased, tracks were appearing on the website. The Recording Industry Association of America (RIAA) filed a law suit against Napster in 1999 for copyright infringement. In July 2001 Napster was ordered to go offline until it was able to protect the copyright of songs on the site. The site offered a $26 million settlement to copyright owners for previous infringements. The site now offers a paid-for subscription service.
Napster was not the only P2P site to be sued, and others such as MP3.com and Kazaa also came under fire. In 2003, the RIAA then decided to take on the downloaders themselves. One of its tactics was to target university campuses, where file sharing is common amongst students. 18,000 people so far have faced legal action. In the UK, the British Phonographic Society (BPI) has been less strict with down loaders, with less than 200 file sharers targeted. However, all this legal action does not appear to have stemmed the tide of illegal downloads. An article posted on the Media Guardian website in March this year claimed that billions of tracks are downloaded illegally every year.
“In Europe there have been hundreds of [legal] actions, but the numbers of filesharers are in the tens of millions,” says Mark Mulligan of Jupiter Research. “If you’re a file sharer, you know that the likelihood of you being caught is very similar to that of being hit by an asteroid.”
However, it seems that the BPI never intended to stop file sharing altogether. The BPI’s chief executive Geoff Taylor told the Media Guardian that the lawsuits were instead aimed at raising awareness.
“We never expected these actions to wipe out illegal file sharing on their own, but they’ve done much to raise awareness about the illegality of distributing music over the internet using P2P networks, and have been effective in changing many consumers’ behaviour.”
It is important to remember that whilst file sharing and downloading may be technologies of the 21st century, music piracy has been going on for much longer. The same issues were raised with the invention of recordable cassette tapes, CDs and mini discs, but the music industry still makes millions of pounds every year. Some artists and record companies also believe that the internet and the ready availability of download have been good for artist, the industry and consumers alike.
The Arctic Monkeys burst onto the music scene in October 2005 when their debut single I Bet You Look Good On The Dance floor went straight to number one. The networking website MySpace was widely credited in the press for helping the unknown band to break into the top of the charts. MySpace allows artists to upload music and videos as well as text, and is hugely popular with young people. However, the very technology that can help new, unsigned bands break into the music scene is much less popular once the same bands begin making money from their music. The Arctic Monkeys are carefully planning the release of their second album Favourite Worst Nightmare, and are so afraid of fans getting illegal copies, the only way music journalists are able to review it is by going to their record company’s office in London. When a copy of Bloc Party’s second album A Weekend in the City was leaked three months before its release, their record company V2 hired Web Sheriff, an internet detection agency, to track down the culprits. It seems that when bands have no money to lose and only publicity to gain then internet downloads are an excellent way of breaking into the music scene. However, once they are established they can then become a threat to the artist’s earning power and control over their own work. Research does seem to show that, if music is available illegally, for free, it is too tempting an offer for most music fans. A survey undertaken by Q Research found that almost half of people aged 11 to 25 did not pay for music downloads. This kind of statistic is one that record companies feared when music downloads first became available.
It is also debatable whether artists really can do away with the traditional guiding hand of the record company. The Arctic Monkeys had already been signed up by their record company Domino, who also included chart successes Franz Ferdinand on their books, when they reached number one. Lily Allen is another recording artist who is regarded as a MySpace phenomenon. However, she had also already signed a deal with EMI offshoot Regal. Regal A&R executive Jamie Nelson told the Media Guardian:
“Something like MySpace has just become another vehicle for people to hear music. It only has resonance if the music itself is exciting, which I think Lily’s music is.”
If this is the case then a website like MySpace could almost be said to be like an online radio station, pre-selecting music due to its popularity.
One very obvious effect of downloads on the music industry is the change in the way the British charts are compiled. Charts used to be based on the number of units of singles or albums sold in a one-week period. In April 2006 chart rules were changed to allow downloaded tracks to count as official sales for the first time. Gnarls Barkley’s single Crazy was the first to reach the number one position by downloads alone. The change in the way the charts is compiled means that singles and albums now also re-enter the charts, sometimes months or even years after their first release. This has even led bookmaker William Hill to offer odds that, at some point this year, the Beatles will have all the top ten places in the chart. BBC radio is now even beginning to alter its playlists to keep up with the new-style charts. The Media Guardian reported in January that Radio 2 said in a note to record companies:
“We will be adding tracks three weeks prior to the download release date. We will no longer defer to physical release dates which may mean a track which also has a physical release date some weeks after its download date may be taken off the playlist before the physical release date.”
Some of the biggest news in the music industry this month is the fact that the Beatles have finally agreed to make their back catalogue available online. After resolving a loyalties dispute with EMI, the remaining band members have agreed that in the future their music will be available on sites such as iTunes. It seems that the music industry is now increasingly looking to the download market to act as a new revenue source. The Doors also recently released their back catalogue online, with re-mastered versions of old favourites as well as previously unreleased tracks. According to an article in the Media Guardian, the music is now available on download both to tempt old fans to buy the new version of songs they already own and also to introduce a new generation to the band’s work. The Doors guitarist Robby Krieger told the Guardian:
“Even though you get bootlegged to death, there’s something good to be said for the internet. If groups can sell their own records, that’s great. I use iTunes and stuff.”
However, the band’s keyboard player Ray Manzarek sounded a word of caution in the same interview:
“The delivery system is what it is. If everyone is on their computers, that’s fabulous. But although you gain the ease of access, you do lose the sense of an artefact.”
As with any new technology, music downloads still have a number of teething problems. One such problem resolved only this month is the fact that tracks purchased at certain MP3 music stores do not necessarily play on all MP3 players. This puts music downloads at a disadvantage to CDs, which are universal. However, after Apple boss Steve Jobs called on the five big record labels to do away with DRM (digital rights management copyright protection) EMI announced this week that it is to do just that. Apple’s iTunes will be the first online store to offer tracks without DRM, which will cost 20p more than tracks with DRM. Though it is too early to tell the effect of this move, presumably it is good news for both consumers who will have a greater choice of online music store and for artists and record labels, as fans will be able to purchase from a wider range of stores.
The most noticeable impact of music downloads on the audience is the way music is bought, or indeed downloaded illegally. It is no longer necessary to physically travel to a music store, and this has seen an impact on the high street. Discount music chain Music Zone went into administration last year. Interestingly, however, the company’s bosses did not finger downloads as the culprit. Finance director Steve Oliver believed that it was actually the chain’s inability to compete with supermarket discount CDs that saw it go under. He said in May last year:
“The physical sales of CDs are increasing year on year, and those close to the industry are clear that digital music is complementary to physical products rather than a substitution. Ask yourself how many downloads were gift wrapped this Christmas and indeed how many downloads is proudly displayed on the nation’s lounge shelves before questioning the future of CDs?”
This argument has been used by a number of figures in the music industry. Many believe that consumers will continue to purchase the physical product alongside their downloaded music. Whilst on the one hand it seems that the music industry is racing to keep up with downloads, it does seem as though traditional CDs are not dead yet. In 2006 single downloads only accounted for three per cent of the total market, up one per cent on the previous year.
Music downloads are still a relatively new technology, and in some respects it is too early to say for sure if they will ever replace hard copies of music in the future. However, what is certain is their big impact upon the current single and album charts and radio play lists.
Radio stations no longer take into account a record’s release date, and instead start to play it as soon as it becomes available online. Similarly, the music charts are no longer the preserve of new releases. Older, well-established bands are now tentatively beginning to release their back catalogues online, and it will be interesting to note if the older generation of music fans are tempted off the high street and into online stores. The fact that DRM-free tracks are now slowly being made available could also tempt some MP3-refuseniks to convert from CDs to download.
Whilst music piracy is clearly an issue, the industry has already proved that it is more than capable of fighting back, after it clawed back millions of dollars from Napster and persuaded it to change its business model. It is also important to remember that piracy is not a new problem, and that the music industry has thrived despite the black market in copied tapes and CDs for decades. Some commentators even believe that piracy is a good thing, and in the case of new acts such as the Arctic Monkeys, it can provide bands with much-needed publicity. With most new mobile phones now coming complete with MP3 players, this is likely to be a big area of expansion for music downloads in the future. One future development to watch is Apple’s new iPhone, set to be released sometime this year. Once it becomes commonplace to download music tracks straight to your mobile phone, the music business will have become a truly virtual, mobile industry.