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Music Remains Viable in a Digital World

May 27, 2009 07:00 PM
by Anne Szustek
The music industry continues to struggle with creating a viable business model for online music. But recent sales figures suggest digital music holds promise for major labels and up-and-coming acts alike.

Today’s Major Labels: Differently Versed

The New York Times reports that Warner Music Group’s price-per-share has gone up some 100 percent since the start of the year, with a 23 percent jump last week, when investors rushed to snap up $1.1 billion in bonds.

While certificates of deposit are a low-risk investment vehicle, another type of CD has fallen on hard times. Compact disc sales have halved since the start of the decade, although they remain the most popular format for purchase. The plunge in sales is largely a recent development; last year, 361 million CDs were sold, a 20 percent drop from 2007. Market research firm Gartner issued a report late last year suggesting record companies shift their focus toward digital downloads and other online content, including garnering revenue from streaming video. “We look at the total consolidated revenue … behind a given artist or project, which include digital sales, the physical business, mobile sales and licensing income,” Rio Careff, the executive vice president of the digital division at Universal Music Group, told The New York Times.

Apple iTunes’ new pricing policy is expected to meet some of the gap left by CDs; some tracks now sell for $1.29 rather than 99 cents. Much of that increase is expected to go to record companies. The price increase was met with derision by many consumers; however, even after accounting for an extra 30 cents, purchasing individual music tracks remains a budget-friendly way for music fans to expand their collections.

Internet Expands Fan Base

The advent of mp3s and illegal downloads roughly a decade ago ultimately helped burgeoning artists, in much the same way as did a prior bugbear for the music industry, home taping, Chicago Tribune music columnist Greg Kot told Time magazine. “The biggest problem a band has is getting its music heard,” Kot said, noting that digital downloading has exponentially increased the number of fora in which new musicians can hope to gain exposure. “If they’re intrigued enough, they’re going to start following an artist or band,” even though listeners might not pay for that first track.

For example, Death Cab for Cutie, a one-time indie band playing small clubs for beer money, gained the attention of concertgoers and the producers of television show “The O.C.” via its Internet downloads. Today, the band records with major label Atlantic and is a household name.

Nowadays, free music clips from musicians have become the norm. Nine Inch Nails and Radiohead both recently released full albums available for download on a sliding pay scale, allowing fans to decide how much the music was worth to them.

For bands with little likelihood of getting major radio play, the Internet is all-important for broadcasting their material. Jeremy Maciak, the head of marketing at Vagrant Records, the label of Canadian musician City and Colour, also known as Dallas Green, told NPR, “As media is more and more fractionalized, you can’t afford to not be any place.” Plus, fans see another upside to the “do-it-yourself” format of the Web: in order to connect with fans, bands must do more concerts and thus, can’t hide behind studio overproduction.

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