Music Business Handbook and Career Guide Part 1: Setting the Stage

The Digital Millennium Chapter 2

Start Thinking. . . How has digital technology affected the music industry? Would you say this change has been for the better or for the worse? Music Business Handbook and Career Guide 10th Ed. (c) 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. (c) 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. (c) Sherwood Publishing Partners

Internet Synergy CD piracy only one problem Internet offered unregulated and accessible distribution channel P2P protocols Music Business Handbook and Career Guide 10th Ed. (c) 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 (Record Industry Assoc. of America) Consumers (could be fined for file sharing) Internet Service Providers Audio Home Recording Act of 1992: Basically: provided permission for use of digital recording devices (prior to late 1980’s, all digital formats were ‘read only’). The Digital Millennium Copyright Act of 1998 (DMCA) is a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization (WIPO). It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures (commonly known as digital rights management or DRM) that control access to copyrighted works. In addition, the DMCA heightens the penalties for copyright infringement on the Internet. Passed on October 12, 1998, by a unanimous vote in the United States Senate and signed into law by President Bill Clinton on October 28, 1998, the DMCA amended Title 17 of the United States Code to extend the reach of copyright, while limiting the liability of the providers of on-line services for copyright infringement by their users. Music Business Handbook and Career Guide 10th Ed. (c) 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. (c) Sherwood Publishing Partners

The Economics of Digital Distribution Previously: record labels = banks investment in successful recordings = profit Music Business Handbook and Career Guide 10th Ed. (c) 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. (c) Sherwood Publishing Partners

The New Economic Order Disadvantages loss of industry gatekeepers loss of well-trained “ears” (very important) decline of radio as tastemaker Industry gatekeepers (label heads, radio station managers, etc) had previously been the ‘tastemakers’. They decided what would dominate the airwaves. Today, the audience is the ‘tastemaker’ as they choose from a wider variety of music than ever before (due to technological advances). Music Business Handbook and Career Guide 10th Ed. (c) Sherwood Publishing Partners

The New Economic Order iTunes Arrives Music Business Handbook and Career Guide 10th Ed. (c) 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) Labels and Artists fought iTunes for years…knowing it meant the death of the album and serious declines in the profits of music sales. Jen: give a little history about iTunes proprietary beginnings. Music Business Handbook and Career Guide 10th Ed. (c) Sherwood Publishing Partners

The New Economic Order Mobile: On the Go Proliferation of mobile phone distribution strategies Streaming music sees rising share Streaming music brings little revenue to artists. Paid on a monthly subscription fee, royalties are not based on song plays but rather on how well the service performs financially during a given period. Music Business Handbook and Career Guide 10th Ed. (c) 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. (c) Sherwood Publishing Partners

The Digital Future Consolidation Mergers and acquisitions (down to 3 Majors) Old school companies = exploiters of catalogs Digital companies = engine for new creative directions Catalog: In the music industry, a collection of musical compositions is cataloged into a music catalog. The owner owns the copyrights of the cataloged compositions Music Business Handbook and Career Guide 10th Ed. (c) Sherwood Publishing Partners

The Digital Future Price Versus Value Digitization means more music more accessible more affordable BUT popularity still adds premium value It also means: MORE COMPETITION and a change in profit models. Music Business Handbook and Career Guide 10th Ed. (c) Sherwood Publishing Partners

The Digital Future Streaming 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. (c) Sherwood Publishing Partners

For Further Thought. . . What other potential implications can you see digital technology bringing to the music industry? What is your view on civil litigation? Whose responsibility is it to ensure legal downloading and file-sharing: record labels, ISPs, or the consumer? How has social networking impacted on the distribution of music? Music Business Handbook and Career Guide 10th Ed. (c) Sherwood Publishing Partners