Remake, Remodel: The Evolution Of The Record Label

This pre-draft version is strictly for review purposes only and is not for general dissemination or sharing.
However, there is also a body of opinion that says that P2P isn’t really the issue, and that
the problem is major corporations trying to defend traditional and outmoded business
models and not developing sufficiently compelling new ones quickly enough .
Meanwhile, the industry has experimented with a variety of digital business models
since the advent of Napster 1.0.
In 2001 AOL Time Warner, EMI and BMG teamed up to form MusicNet, described as a
digital music platform. Around the same time, Sony and Universal Music created a joint
venture in the shape of Pressplay – an online music store.
Neither of these models got off the ground due to limited catalogue range, stumblings
over the cross-licensing of catalogue and also because the labels had very little
experience in retailing and consumer marketing (indeed their price points and usage
terms, restricted by DRM, came in for huge criticism at the time).
It was the launch of Apple’s iTunes Store in 2003 in the US (and 2004 in Europe) that
provided the first commercial digital music offer to capture the imagination of the
mainstream consumer.
Fully integrated with Apple’s hardware (computers and iPods) through the iTunes
ripping and music management software, the iTunes Store provided a compelling
consumer experience in fixed-line downloads and part of the key to its success was its
simplicity of use.
The positive knock-on effects for the take up of Apple hardware from the music store
enabled Apple to invest in iTunes with powerful marketing campaigns, the costs of
which could be justified because of the cross-marketing benefits. It is unlikely that
iTunes could have afforded to make such a big noise had it been a standalone digital
store that wasn’t part of something bigger.
The iTunes model has dominated the digital music market with an estimated share of
over 70 per cent of the total market – despite a raft of new entrants and start-ups. In the
UK alone, there are over 60 digital business models licensed by music labels – all
offering access to music in a variety of ways.
Despite this enormous diversity, in March 2011 a report by independent label trade
body AIM showed that just three services made up over 94 per cent of total indies global
digital revenues – iTunes, Amazon MP3 and Spotify 33 .
Amazon’s service uses its massive consumer database to sell music as MP3 in direct
competition to iTunes and uses price differentiation as a marketing tool, often
undercutting iTunes (with tracks for as little as £0.29 compared to a general standard of
£0.79 on iTunes). The Amazon download service dovetails very smoothly into the
iTunes music management software but, despite this, it remains a distant second to the
Apple service.
33 AIM Submission To The Hargreaves Review, Mar 2011 – last accessed 09.05.11
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