The music industry has struggled to come to terms with the Internet. The first signs of change were evident to the wider world almost a decade ago when Napster was launched. With the prospect of free music (albeit with no copyright control), the record companies sat up and took, not only notice, but also action which resulted in the site being closed, then relaunched in a denuded form.
The brilliant realisation by Apple that the key to the success of the new MP3 players was not contained in the machine itself but the supporting infrastructure led to the development of the iTunes store and a significant new route to market for legally downloaded music and video. The industry dominance that Apple achieved is remarkable, but despite their success, the record industry still appears to be wary – as evidenced by the continuing wrangles over royalties, digital rights management and the continuing absence of some significant elephants, or maybe dinosaurs, from the room.
The impact of iTunes has been so significant it is hard to remember that it didn’t exist in Europe in 2003, and was only introduced to Australia in 2005. After a century of distributing physical media with a licensed copy of some music or video, the industry agreed to allowing virtual copies of music, movies and TV shows to be sold. More recently we have seen the arrival of some competitors, including significant players such as Amazon (which itself was only launched in 1995).
October 2008 saw the launch of Spotify. If you have not encountered it yet, this is an internet music service that enables your computer to access a vast library of music for free. There are no downloads and, more significantly, no purchases of anything either physical or digital. The price you pay is to listen to advertising, or a modest daily or monthly fee to remain advertisement free. Many big name companies signed up to the service and, from the outside at least, it would appear that they did so with less protest than they did with iTunes.
So, the pace of change is quickening. Will Spotify replace iTunes or merely add another choice? The challenge for the music industry is the speed of this change. I know it is a cliché, but hopefully the diagram below illustrates that in this case it is a real business issue.
It isn’t enough for the record labels (how much longer will this be a valid term?) to decide how to respond to Spotify; they have to think about what will come next and anticipate the trend. At the current rate of development, the next significant advance could be here in less than 5 years, and with an increasing number of artists finding success through independence, the need to finally get ahead of the trend is imperative.
