In the 21st century, consumers spent far less money on recorded music than they had in 1990s, in all formats. Total revenues for CDs, vinyl, cassettes and digital downloads in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008. The downward trend is expected to continue for the foreseeable future—Forrester Research predicts that by 2013, revenues will reach as low as $9.2 billion. This dramatic decline in revenue has caused large scale layoffs inside the industry, driven music retailers out of business (such as Tower Records) and forced record companies, record producers, studios, recording engineers and musicians to seek new business models.
In the early years of the decade, the record industry took aggressive action against illegal file sharing, successfully shutting down Napster in 2001 (the leading online source of digital music) and threatening thousands of individuals with legal action. This failed to slow the decline in revenue and was a public relations disaster. Some academic studies have even suggested that downloads were not the true cause of the decline. Legal digital downloads became widely available with the debut of the iTunes Store in 2003. The popularity of internet music distribution has increased and by 2007 more units were sold over the internet than in any other form. However, as the Economist reports, "paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDs."
The turmoil in the industry has changed the balance between artists, record companies, promoters, retail music stores and the consumer. The leading music retailers are now box stores (Wal-Mart and Best Buy) and music-only stores are no longer a player in the industry. Recording artists now rely on live performance and merchandise for the majority of their income, which in turn has made them more dependent on music promoters like Live Nation (which dominates tour promotion and owns a large number of music venues.) In order to benefit from all of an artist's income streams, record companies are increasingly relying on the "360 deal", a new business relationship pioneered by Robbie Williams and EMI in 2007. At the other extreme, record companies can offer a simple manufacturing and distribution deal, which gives a higher percentage to the artist, but does not cover the expense of marketing and promotion. Many newer artists no longer see any kind of "record deal" as an integral part of their business plan at all. Inexpensive recording hardware and software has made it possible to create high quality music in a bedroom and distribute it over the internet to a worldwide audience. Consumers now have access to a wider variety of music than ever before, at a price that is gradually approaching zero.
In the early years of the decade, the record industry took aggressive action against illegal file sharing, successfully shutting down Napster in 2001 (the leading online source of digital music) and threatening thousands of individuals with legal action. This failed to slow the decline in revenue and was a public relations disaster. Some academic studies have even suggested that downloads were not the true cause of the decline. Legal digital downloads became widely available with the debut of the iTunes Store in 2003. The popularity of internet music distribution has increased and by 2007 more units were sold over the internet than in any other form. However, as the Economist reports, "paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDs."
The turmoil in the industry has changed the balance between artists, record companies, promoters, retail music stores and the consumer. The leading music retailers are now box stores (Wal-Mart and Best Buy) and music-only stores are no longer a player in the industry. Recording artists now rely on live performance and merchandise for the majority of their income, which in turn has made them more dependent on music promoters like Live Nation (which dominates tour promotion and owns a large number of music venues.) In order to benefit from all of an artist's income streams, record companies are increasingly relying on the "360 deal", a new business relationship pioneered by Robbie Williams and EMI in 2007. At the other extreme, record companies can offer a simple manufacturing and distribution deal, which gives a higher percentage to the artist, but does not cover the expense of marketing and promotion. Many newer artists no longer see any kind of "record deal" as an integral part of their business plan at all. Inexpensive recording hardware and software has made it possible to create high quality music in a bedroom and distribute it over the internet to a worldwide audience. Consumers now have access to a wider variety of music than ever before, at a price that is gradually approaching zero.
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