The Current Landscape of the Indie Music Industry.
Like the record sales of indie music, the live entertainment industry has also gone through several interesting changes in the new millennium. I have written about this in detail in my blog Cloud Computing and Indie Music. An article in the ABC News noted in the early 2000s that while music sales fell from $13 billion to $11.5 billion, concert revenues soared from $1.3 billion to $2.1 billion simultaneously. The relatively small size of the live music industry, though, indicated that the music business couldn’t yet be fully sustained by concert revenues.
In the last decade, a number of academic articles have attempted to understand the impact of the Internet and peer-to-peer file sharing on the music industry. The rapid progression of the Internet, and its relative young age, has led to widely inconclusive results. However, these works provide interesting commentary into the landscape of this portion of the industry at specific points in time and remain valuable points of reference when building a model. A few academic papers have also explored the concert industry, as it relates to file sharing and i am going to discuss it in my future blogs.
The “annihilation hypothesis” has been evaluated looking at a number of demand factors, aside from piracy, which could contribute to the decline in sales. Before turning to time series aggregate data from 1973-2002, researchers observed some of the underlying trends in the industry that may provide alternate explanations for the downward movement. Noting that the market for single indies had, at the time, been steadily declining since the 1970s, they divert focus to indie music album sales as the main indicator of the market. Unlike singles, album sales had shown mostly positive growth with revenues, adjusted for inflation, jumping from $4 billion in 1973, reaching well over $8 billion before the downturn at the turn of the century. However, this growth was non-linear with four notable dips in sale of indie music during the thirty-year period suggesting that the decline from 2000-2002 is not, by itself, “cause for alarm”. Shifts in recorded media formats may also relate to the trends in album sales as well. For example, the largest increase in album sales occurred between 1986 and 1994, coinciding with the rise of CDs as the main form of recorded music.
While many scholars predicted a complete collapse for the record companies, several argued that these assumptions might have been somewhat premature. They forecast that, “the established business model in the industry may indeed have a relatively short life span”. However, they also noted that the entertainment sector has generally preferred “technological stability,” but ultimately benefitted from advancements. Scholars then turn to other factors that may help explain changes in sales over the observed time period. These include price and income, copying using cassettes, portability, impact of substitutes, general interest in music and changes in audience. After finding price and income largely insignificant, they turn to copying using cassettes, the most historically analogous scenario to file sharing. Finding that sales thrived at the height of the cassette tape, scholars point to the expanded locations for listening to music as a contributing factor to the rise in sales, which brings to light the possible demand impacts of changes in portability. The resistance to adaptation is embodied by the extensive legal action taken against peer-to-peer networks such as Napster, but victories in court were expected to be short-lived. As discussed in my blog File Sharing for Indie Artists, with the all-time low in record sales, labels started using the internet for minimal and wary, distribution of music and project promotion. However, the arrival of P2P file sharing technology, introduced by Napster became the true impactful development, appropriately at the turn of the millennium. This millennium brought with it a unique and difficult set of challenges; not just for the indie music industry, but for nearly all the business industries. The advent of internet and its prevalence has had a wide range of implications on how work is done. Today, a large part of academic literature in the music industry focuses specifically on the negative impacts of file sharing on the internet and resultant loss of sales in the recording sector.
Citing a survey by Jupiter Communications that found that Napster users are 45% more likely to increase music purchases, scholars conclude that, at the time, it was not clear that music file sharing had a negative impact on sales, while envisioning a scenario in which “the Internet supplements radio and television as a means to inform consumers and generate publicity for the firms in the industry”.
In my next blog I am going to write about the impact of internet on indie music business as a whole. Please share your experiences and I will add them to my future blogs.
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