online music economy 1307947

INNOVATION IN THE ONLINE

MUSIC INDUSTRY: PAST,

PRESENT AND FUTUREM U S I C A L C O N T E N T

History of Musical content:

- Since the late 19th Century Musical content has traditionally always

been distributed physically, starting when Thomas Edison invented the

Phonograph, which allowed music to be recorded on to a physical

cylinder and played back through a large horn (Albright, 2015).

(Phonograph, n.d.)

- Following this development an early interpretation of the flat “record”

that we all recognise now was introduced and this stuck throughout the

20th century. It has been claimed that the development of this way to

consume music is what started the mass music market, and until the late

1940’s when the original Shellac 78RPM records were starting to be

replaced by long playing 33 rpm vinyl records, it was the predominant

way for people to listen to music in their own home (Haven, 2006).


- After records started to be manufactured from Vinyl little

changes occur in how musical content was distributed and

consumed.

- This is until Compact Cassettes were introduced in the

1960’s, consumers for their small and portable nature

adopted them and they became popular through to the

1980’s (Rogers, 2013).

(Deviantart.com, n.d.)

- Next in the musical content pipeline came the Compact Disc, this was

introduced originally in 1979 but took off in popularity from 1982 when

production CD players were introduced by Philips (News.bbc.co.uk, 2007).

It then became the predominant form of musical content consumption for

consumers.


(Kratochvil, n.d.)

The Innovation of File-Sharing:

- This is where the Online Music Economy begins, in the same scenario as

the physical distribution the online distribution of music starts with a

technological development. Through the late 1980’s and early 1990’s there

was a new innovation called mp3 technology, mp3 was a new easily

transferable format for audio files conceived by Karlheinz Brandenburg

(Ganz, 2011).

- From the development of this technology came new problems for the

music industry. The creation of an audio file that was easily transferrable

alongside the rapid advancement of the Internet meant that the industry

was trying to catch up on how this new format could be monetised.


- In light of this in the spring of 1999 new web software was launched from

America; it was called Napster (Lamont, 2013).

- Napster was a web programme that allowed the distribution of audio files

through a process called file sharing. This involved users of the site

allowing access to their collection of musical content and allowing it to be

shared among the network of Napster users.

- By late 1999 over 4 million tracks were available on Napster and by 2000

over 20 million users were online using the site to acquire the musical

content (Lamont, 2013) without any charge or fee being passed on to the

copyright holders.

(Napster Logo, n.d.)

- This was an important issue for the major labels at the time; if files

could be shared between consumers in this new digital format for free

then the copyright holders wouldn’t earn any royalty income from selling

their records.


- The realisation of the seriousness surrounding this issue forced the

labels to meet in Washington at the Record Industry Association of

America (RIAA) to discuss what Napster was and what could be done

about it. After the labels met they decided that they would take legal

action against Napster for breach of Copyright (Lamont, 2013). The

case went to court with the RIAA and Major Labels at the time claiming

copyright infringement had taken place within the operations of the

Napster community (The Guardian, 2000).


- As a result of the legal action taken against them Napster closed down

its original peer-to-peer file sharing service in 2001.

- In addition to Napster there were other file sharing services that

became available around the same time as Napster. LimeWire and

Gnutella were released in 2000, again they were both peer-to-peer file-

sharing services that involved users sharing content with each other.

- Gnutella was owned by a sub-company of AOL so was quickly shut

down however LimeWire continued its reign right up until 2010 when

along with another popular file sharing site The Pirate Bay it was closed

down with a court injunction (Gearlog, 2010).

Arrival of ITunes Music Store:

- Following the trouble that easy access digital music files had caused

the music industry, a change occurred which showed a way in which it

could be monetised.

- Steve Jobs was the CEO of apple and after the explosion of file

sharing was developing an idea which he hoped would change the way

people thought about digital music files. After developing his idea Jobs

pitched it to the major labels at the time, they agreed to it on the basis

that it operated within certain restrictions (Chen, 2010).

(Anon, 2015)

- Therefore in April 2003 Apple Launched the ITunes Music Store, a

programme released as an add-on to the already existing ITunes 4 a

self-titled “Digital Music Jukebox”. The innovation of the ITunes store

was the way it changed how musical content was purchased. It allowed

the track-by-track purchasing of music for as little as 99 cents per track

(Apple.com, n.d.).


- This was such a new development for the industry as traditionally in the

physical content realm it had be known that if consumers wanted to

purchase a track of an album that wasn’t a single they would have to

commit to a full album. A great example of this is Pink Floyd’s A Great

Gig In The Sky off of the album Dark Side Of The Moon (Songfacts.com,

n.d.).

(Anon, 2015)


- When developing ITunes Music Store Jobs stated that being easy to

use, having a complete library and being easy to use would attract

consumers from the free marketplace of file sharing to the monetised

alternative (Chen, 2010).

- As the programme showed more than a million song purchases in its

first week, Apple convinced the labels to lift one of the restrictions, which

was allowing ITunes to be downloaded onto windows Software in

addition to Mac’s own software (Chen, 2010).

(Anon, 2015)


- Apple’s, in particular, Steve Job’s quick reaction to the file sharing

epidemic shows that they mastered the online music marketplace with

one move. Giving consumers an easy none troublesome alternative to

the file-sharing community worked for Jobs and it was assisted by the

fact that he had the brand and technological products to push the idea in

the right direction.

(Anon, 2015)

Innovation From Streaming Services of Musical Content:

- In addition to the new innovations mentioned that the Online Music

Industry was facing, there were also other innovations taking place that

would have lasting effect

- Streaming musical content is the process of listening to music in real

time via data being streamed to a device constantly, as opposed to

downloading the content first and then listening back to it after

(Bbc.co.uk, n.d.).


- This way of consuming music started out in amongst the file sharing

movement at the turn of the century, it was first adopted and presented

to the public on a successful level in the form of Rhapsody. Rhapsody

was one of the first companies that used the streaming format to

distribute music to a vast number of people (Evangelista, 2002).

- It was launched in December 2001 by its parent company Listen.com

and without any major labels licensing their music to the site it received

criticism from the off (Evangelista, 2001).

- Come 2002 the site had become the first streaming service to have

licensing agreements from all five major labels of the time and also

around 50 independents (Evangelista, 2002). This cemented Rhapsody

as the leading innovator in the Music streaming world at the time.


- However Rhapsody is not the leading music streaming service that it

once was, throughout its first years the lack of CD burning options, offline

availability and ownership of content meant that Rhapsody struggled to

ensure it was the major music consumption tool.

- This shows along with a report from Fortune magazine that the

consumers at the time were not ready for the music-streaming model,

and that Rhapsody came before its time (Nieva, 2011).


- As the file-sharing community became smaller and smaller with sites

such as Rhapsody passed over and over through different parent

companies (Nieva, 2011), there was a gap for a streaming model for

consuming musical content.

- Spotify was launched in 2008 by a team from Sweden (Pullen, 2015), it

is a Music Streaming Service that had a business model not dissimilar to

Rhapsody’s.


(Spotify's progress so far, n.d.)

- However as can be seen in the

figure graph to the left, within its

first year it was pushing towards

3 million users on its free ad-

supported service.

- Again in reference to the graph

it can be seen that this continued

to grow year on year to a

combined user total of 75 million

people, with 2010 showing the

first signs of consumers paying

for the premium service at $9.99.

(Statista, 2014)

- The Data in the graph on the previous slide shows that in addition to

Spotify, there are various active Music Streaming Services in the more

contemporary period: Last FM, Blink Box Music, Vevo, Deezer, Google

Play Music, YouTube and also very recently Apple Music who aren’t

featured in the Graph.


- The most interesting point to be taken from the data is that as of 2014

YouTube held the largest market share in the UK by over 11%, this is in

light of the deal that YouTube arranged with the biggest Music Publishers

and Labels in the business (Robertson, 2012).


- However six months after its launch in 2015 Apple Music gained the

same amount of paid subscription users that Spotify did in its first six

years of operations (Garrahan and Bradshaw, 2016).

- This suggests that Apple Music is in a position to take over Spotify and

YouTube as the leading Music Streaming Service. In the same

circumstance as it did in the File-sharing period, Apple’s innovation and

ease of use to the consumer has shown that it can be a dominant figure

in the Online Music Industry in regards to the delivery Musical Content to

consumers.

- The Streaming Model has shown the Music Industry a new innovation

in the digital age, it has shown that we are now moving from an

ownership to a rental society when it comes to the music we consume.

What does the Future hold?

- In the future the Online Music Economy will only grow as more and

more services and companies move online to conduct their business.

- With the rapid rate of growth shown by Apple Music it can only be

expected that it will overtake Spotify as the predominant Steaming

Service.

- However because as a society we have changed from an ownership

society to a rental society, there is the possibility that we will go back to

the old mind-set and require a physical attachment to the musical

content we consume.

References:

Albright, D. (2015). The Evolution of Music Consumption: How We Got

Here. [online] MakeUseOf. Available at: http://www.makeuseof.com/tag/the-

evolution-of-music-consumption-how-we-got-here/ [Accessed 12 Apr.

2016].

Anon, (2015). [image] Available at:

http://iadvise.blogspot.co.uk/2015/10/apple-logo.html [Accessed 14 Apr.

2016].

Apple.com. (n.d.). Apple - Press Info - Apple Launches the iTunes Music

Store. [online] Available at:

https://www.apple.com/pr/library/2003/04/28Apple-Launches-the-iTunes-

Music-Store.html [Accessed 13 Apr. 2016].

References:

Bbc.co.uk. (n.d.). BBC - WebWise - What is streaming?. [online] Available

at: http://www.bbc.co.uk/webwise/guides/about-streaming [Accessed 14

Apr. 2016].

Chen, B. (2010). April 28, 2003: Apple Opens iTunes Store. [online]

WIRED. Available at: http://www.wired.com/2010/04/0428itunes-music-

store-opens/ [Accessed 13 Apr. 2016].

Deviantart.com. (n.d.). Compact Cassette I. [online] Available at:

http://www.deviantart.com/art/Compact-Cassette-I-118738349 [Accessed

14 Apr. 2016].

References:

Evangelista, B. (2001). Music firms open online services, but will fans pay?.

[online] SFGate. Available at: http://www.sfgate.com/business/article/Music-

firms-open-online-services-but-will-fans-2845907.php [Accessed 14 Apr.

2016].

Evangelista, B. (2002). Industry starting to endorse Net music / Listen.com

to offer songs from all five major labels. [online] SFGate. Available at:

http://www.sfgate.com/business/article/Industry-starting-to-endorse-Net-

music-2801248.php [Accessed 14 Apr. 2016].

Ganz, J. (2011). The MP3: A History Of Innovation And Betrayal. [online]

NPR.org. Available at:

http://www.npr.org/sections/therecord/2011/03/23/134622940/the-mp3-a-

history-of-innovation-and-betrayal [Accessed 12 Apr. 2016].

References:

Garrahan, M. and Bradshaw, T. (2016). Apple’s music streaming

subscribers top 10m - FT.com. [online] Financial Times. Available at:

http://www.ft.com/cms/s/0%2F742955d2-b79b-11e5-bf7e-

8a339b6f2164.html#axzz46ZIvyJcB [Accessed 14 Apr. 2016].

Gearlog, (2010). LimeWire, Napster, The Pirate Bay: A Brief History of File

Sharing | Gadgets | Geek.com. [online] @geekdotcom. Available at:

http://www.geek.com/gadgets/limewire-napster-the-pirate-bay-a-brief-

history-of-file-sharing-1359473/ [Accessed 13 Apr. 2016].

Haven, K. (2006). 100 greatest science inventions of all time. Westport,

Conn.: Libraries Unlimited.

Kratochvil, P. (n.d.). [image] Available at:

http://www.publicdomainpictures.net/view-

image.php?image=557&picture=compact-discs [Accessed 14 Apr. 2016].

References:

Lamont, T. (2013). Napster: the day the music was set free. [online] the

Guardian. Available at:

http://www.theguardian.com/music/2013/feb/24/napster-music-free-file-

sharing [Accessed 13 Apr. 2016].

Napster Logo. (n.d.). [image] Available at:

http://www.samhanksdesign.com/napster/ [Accessed 14 Apr. 2016].

News.bbc.co.uk. (2007). BBC NEWS | Technology | How the CD was

developed. [online] Available at:

http://news.bbc.co.uk/1/hi/technology/6950933.stm [Accessed 13 Apr.

2016].

References:

Nieva, R. (2011). Rhapsody: Life in a Spotify world. [online] Fortune.

Available at: http://fortune.com/2011/09/28/rhapsody-life-in-a-spotify-world/

[Accessed 14 Apr. 2016].

Phonograph. (n.d.). [image] Available at: http://uwyoming.org/phonograph/


Pullen, J. (2015). Everything You Need to Know About Spotify. [online]

TIME.com. Available at: http://time.com/3906839/spotify-tips/ [Accessed 14

Apr. 2016].

Robertson, A. (2012). YouTube signs music licensing deal with BMG and

eight other publishers. [online] The Verge. Available at:

http://www.theverge.com/2012/6/6/3067636/youtube-music-licensing-deal-

bmg [Accessed 14 Apr. 2016].

References:

Rogers, J. (2013). Total rewind: 10 key moments in the life of the cassette.

[online] the Guardian. Available at:

http://www.theguardian.com/music/2013/aug/30/cassette-store-day-music-

tapes [Accessed 12 Apr. 2016].

Songfacts.com. (n.d.). The Great Gig In The Sky by Pink Floyd Songfacts.

[online] Available at: http://www.songfacts.com/detail.php?id=2665


Spotify's progress so far. (n.d.). [image] Available at:

http://www.spotifyartists.com/spotify-explained/ [Accessed 14 Apr. 2016].

Statista, (2014). [image] Available at:

http://www.statista.com/statistics/325518/most-popular-streaming-services-

in-the-uk/ [Accessed 14 Apr. 2016].

References:

The Guardian. (2000). Napster loses net music copyright case. [online]

Available at:

https://www.theguardian.com/technology/2000/jul/27/copyright.news


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