A bum note for the music industry


The music business is under a serious threat from illegal downloads, however Theresa Cummins argues that the industry must keep in tune with changing trends.

Over the last past decade, there has been a steady decline in the value of the music industry worldwide. With profits tanking and CD sales falling, the record industry is facing a worryingly uncertain future. Illegal downloading and prohibited peer-to-peer file sharing services have been detrimental to the industry, with many of the major record labels struggling to keep afloat.

As record labels like EMI cut their staff figures, and re-assess their revenue estimates, it is clear that a major transformation is required in the record industry to curb declining profits and limit any further damage in a vastly deteriorating sector. In an article published in Rolling Stones magazine, music attorney Peter Paterno, who represents Metallica and Dr. Dre, bluntly stated “The record business is over, the labels have wonderful assets – they just can’t make any money off them anymore.”

The IFPI, an organisation politicsthat represents recording industries worldwide, has repeatedly stated that the biggest problem facing the industry has been extensive piracy, both from online illegal downloading and CD copying. The industry estimates that 20 billion music files were downloaded illegally in 2006, and for every legal download, there have been at least 20 illegal ones.

The Irish music industry has also witnessed a dramatic fall in profits, reportedly due to widespread piracy and increased competition. Early this year, in an unprecedented move by record companies, EMI records (Ireland) Ltd, Sony BMG Music Entertainment (Ireland) Ltd and Warner Music (Ireland) Ltd, took Internet provider, Eircom, to court.

The record companies are contesting Eircom’s refusal to use filtering technology that would assist in blocking music from being downloaded that was in violation of copyright agreements. This proceeding was the first in its kind, targeting the service provider rather than the person downloading music illegally.

File sharing resources first came to light with the introduction of a service called Napster in 1999. Napster was an online music file sharing service, created by a college drop-out, which allowed people to easily copy and distribute MP3 format song files to each other. In the early part of this decade, a string of lawsuits were filed against Napster, with record companies claiming copyright infringement. Although the service was shut down, it revolutionised the music industry, paving the path for future file sharing services.

Among the biggest mistakes the record industries have made is reported to have been their refusal to properly acknowledge the online piracy from the outset. “They left billions and billions of dollars on the table by suing Napster – that was the moment that the labels killed themselves”, conceded Jeff Kwatinetz, CEO of management company, the Firm. “The record business had an unbelievable opportunity there.” He went on to say when Napster was shut down, “those 30 or 40 million people went to other (file-sharing services).”

Instead of shutting the service down, many analysts have reckoned the industry should have cut a deal with Napster. One idea was to let Napster’s users keep availing of the service, but on a subscription basis. The service fee would then be split between the company and the record industry.

Despite the problems of the record industry, people are listening to as much music as ever. Demand for iPods and Mp3 players has been ever increasing in recent years. Over a 100 million iPods have been sold since their launch in 2001. “How is it that the people that make the product of music are going bankrupt, while the use of the product is skyrocketing?”, questioned Kwatinetz.

After the demise of Napster, an abundance of P-to-P networks surfaced online. The Recording Industry Association of America, an organisation set up to protect the interests of the recording labels, which was responsible for the downfall of Napster, was unable to cope with the increased volume of file sharing services. So the association turned its attention to individuals that download illegally instead. Extensive media coverage has been given to this uncompromising tactic over the last few years, in particular the filing of a lawsuit against a 12-year-old girl, and a wrongly accused deceased grandmother.

The message from the RIAA was crystal clear; they were not going to tolerate illegal downloading whatsoever, regardless of whom the culprit was, and the consequences for those found guilty would be severe.

Efforts by the record industry to lessen the downfall in the sector have been considerable. As well as the substantial lawsuits brought against individuals who violated copyrights by downloading music illegally, record labels have tried to introduce a platform for digital music subscription services, two years after the death of Napster, such as Pressplay, MusicNet and Rhapsody. Pressplay and MusicNet both earned their ninth place in ‘The Worst Tech Products of All Time’, according to PC World, which slated the two platforms, highlighting “the services’ stunningly brain-dead features.”

The services were expensive, allowed limited CD burning and were not compatible with most MP3 players at the time. The introduction of iTunes onto the market was undoubtedly a successful venture for Apple, with its unparalleled 99 cent per song pricing on its iTunes music store. However, both the lawsuits and the subscription services have done nothing to dent the current stream of illegal downloads.

Music companies have to acknowledge that illegal downloading is an unavoidable reality in today’s world. Research was carried out on the downloading activities of Radiohead’s In Rainbows, which was available for free through the official website last year. Results showed that the majority of fans still pirated the music.

This bizarre behaviour has undoubtedly been a major concern and source of utter incomprehension for music executives; even when the price goes to zero, people are still engaging in illegal activity, refusing to change their patterns of behaviour. On the strength of such findings, the need for change in this industry has never been more apparent.

A complete transformation of the industry may be on the horizon with companies such as Qtraz emerging, with a view to providing a legitimate peer-to-peer service, funding its costs through advertising. The industry hopes that providing legal and easily accessible services such as Qtraz will curb the popularity of other illegal sites. “We hope this service will draw from illegal P-to-P sites”, affirmed George White, Senior Vice-President, Strategy and Product and Development for Warner Music Group.

An old adage is highly relevant here; within the problem lies the solution. The problems of the record industry have been noted consistently throughout the last decade to be rooted in the availability of free (illegal) downloads. It would be highly ironic if those free downloads, plus some advertising thrown in, turn out to be the very salvation of the record industry.