Chapter 2

The Digital MillenniumChapter Two

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

Start Thinking . . .

1. How has digital technology affected the music industry?

2. Would you say this change has been for the better or for the worse?

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

Chapter Goals

• Learn of the technological paradigm shift into the digital world and the way it has altered how music is created, distributed, and consumed.

• Understand the legal battleground issues in the age of digital music.

• Gain awareness of how the business has changed for record companies and the implications of this new environment for recording artists.

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Double-Edged Sword

• Benefits of digital recording and distribution to musicians to producers to record labels

• Disadvantages infinite copying

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

Internet Synergy

• CD piracy only one problem

• Internet offered unregulated and accessible distribution channel

• MPEG and P2P protocols

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

Labels Sow Seeds of Self-Destruction

• Legislation Audio Home Recording Act of 1992 Digital Millennium Copyright Act of 1998

• Litigation by RIAA Consumers Internet Service Providers

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

Smaller, Cheaper, Faster, Better (?)

• Heart of digital revolution = process of making music

• Implications: reduced need for conventional recording studios reduced need for large corporation funding reduced need for large corporation infrastructure

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Economics of Digital Distribution

• Previously: record labels = banks artists = sharecroppers investment in successful recordings = profit

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The New Economic Order

• Digital technology + Internet = independent artists earning money investment in personal recording equipment and software promotion through

Internet-based services

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The New Economic Order

• Disadvantages loss of industry gatekeepers loss of well-trained “ears” decline of radio as tastemaker

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The New Economic Order iTunes Arrives

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The New Economic Order iTunes Arrives

• Computer company brings new business model for music industry

• Give and take: labels get royalties Apple removes DRM code

• Single songs become primary product (not albums)

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The New Economic Order Mobile: On the Go

• Proliferation of mobile phone distribution strategies

• Streaming music sees rising share

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Digital Future

• How will the music industry evolve: will it disappear? will it reapply itself?

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Digital FutureConsolidation

• Mergers and acquisitions

• Old school companies = exploiters of catalogs

• Digital companies = engine for new creative directions

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Digital FuturePrice Versus Value

• Digitization means more music more accessible more affordable

• But popularity still adds premium value

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

The Digital FutureStreaming Versus Downloads

• “Cloud” computing may overtake downloads

• New attitude: music must be freely accessible music must be free of cost

• Entrepreneurial spirit revived

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners

For Further Thought . . .

1. What other potential implications can you see digital technology bringing to the music industry?

2. What is your view on civil litigation? Whose responsibility is it to ensure legal downloading and file-sharing: record labels, ISPs, or the consumer?

3. How has social networking affected the distribution of music?

Music Business Handbook and Career Guide, 10th Ed. © 2013 Sherwood Publishing Partners