How technology is changing the music industry’s business model?

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The first severe attack against the Music Industry’s business model originated from Napster. Created 15 years ago, in June 1999, the peer-to-peer program soon became the majors’ biggest enemy, and the Majors’ attorneys went on a hunt for Napster’s creator fairly quickly.

But that wasn’t where it started. Before P2P was even created as a filesharing service, piracy was already a concern, but somewhat limited. At the beginning of a wonderful, free music landscape, was the tape.

Containing no DRM (Digital Rights Management) since it was analog, sound could be copied from one player to another recorder, or even automatically transferred at the convenience of a button, in soon-to-be dual cassette players and recorders. At that time, the “fast dub” button is what you were looking for, and a pack of recording-enabled tapes, of course. Albeit slow and painful, the process was easy and rewarded with free copies of your favorites songs, and the latest in music. But sharing wasn’t that easy, as you had to find a friend with the right tape, borrow it, copy it at home on that huge cassette recorder, then give it back. And label everything properly.

The music industry stricked back quickly in 1982 (at the same pace the jedi’s did) with a new technology, and new features everyone would ask for : Cd’s. As music entered the digital age, so did computers. Recorded at unprecedented frequencies, CD’s were kind enough to be much more lasting than their analog counterparts, removed the need for rewind and featured instant track changing, at the loss of your neighbors’ hearing ability. Next and previous were the new thing to crave for, and due to the lack of proper cd-burning hardware, piracy suffered a severe slow down for several years. The only alternative was to copy a disc on a tape, but with the same restrictions that previously applied.

Blank CD-R appeared in the 1990’s, with a price that would make a copy almost out of reach. Fun fact : CD’s were so expensive in the beginning, they had a caddy around to protect them, much like DVD-RAM (yep, I had one of those Betamax-story-sorry technology).

Computer CD-ROM drives (read-only) came to mass market short after 1992, and burners followed a few years after that. In the late 1990’s, you could afford 10 CD-R from taiwanese manufacturers for 3-4$ a pop, which made copying a disc worth it (unless your cd drive messed with the process, that is). Again, the same restrictions applied.

Then, came Internet. And with it, the need for bandwith-savvy technologies, including the MP3 (by Fraunhofer Labs), we all came to love. Where previously, a CD could hold at its best 80 minutes of audio, a data CD-Rom with a 192kbps quality would handle more than 7 times that. You could store so many CD-singles in it (almost 200 songs) that your whole music library would shrunk tremendously in just a few years. Parallel to the MP3 trend, went the MP3 players. As an early adopter myself, I remember buying a 128mb USB player from an obscure Chinese brand, that wouldn’t store much than a cd and a half and quickly went for a MP3 CD player running on AA batteries. Gone were Sony’s efforts to try to lure consumers into miniDiscs, without proper piracy “features”, that died in the wink of an eye…

Back to 1999, pre-DSL time for most of us, Napster allowed us to send and receive songs from all around the world, at the cost of 15 minutes download time per song. ISP’s costs aside, it was free. No costly CD-R’s to buy, no lending, no borrowing. A new era of digital freedom was born, on the ashes of a crying music industry (featuring a laughing Steve Jobs with an iPod) and the smiles of millions of recently freed consumers.

Since then, nothing will ever be the same again (featuring the Spice Girls, of course). P2P had grown to a rate unforeseeable by anyone, and despite several legal hits made by the music (and later on, the video industry joined forces) industry, the trend had become so deeply rooted into everyone’s habbits, that it became a new normal.

Struggling to maintain the insane profits they made in the early days, the music industry is still trying to recover from a worldwide blow to its revenues. As it never really accepted it’s fate, the rate at which it changed has been slower than ever.

But as streaming (and not downloading), cloud based solutions and VOD have become a part of our daily routing, a new business model is slowly emerging. If music is now considered free, service would be the price we would pay. Featuring nothing less than 20 million songs minimum, SPotify, Deezer and other streaming music services now gives you access to the world’s biggest music library, free with ads, or about 9.99$ a month. Much to iTunes’ demise, ownership of music is becoming a thing of the past, and listening to a song now costs around 0.0000000001$ (much-or-less). Mobile apps, offline listening and on-the-go music is now every urban gladiator’s favorite, and is initializing a welcome trend towards artists, whose concerts have never been more successful.

Lucas

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