Most of us who were old enough to fully experience the changing of the millennium (not a given, now 13 years since!) remember the epic battle between the Recording Industry Association of America (RIAA) and Napster. Though similar services existed prior to the service, Napster delivered its music downloading application in a user-friendly package that minimized end-user effort, and almost overnight, attitudes toward pricing and intellectual property law shifted dramatically. In the face of such rapid change, how could the industry adapt without alienating customers that were ideologically opposed to their current business model? And what new opportunities did the internet offer for the artists looking to break into an industry in flux? Continue reading ►
It took some convincing, but in the years that followed, the recording industry would eventually stop trying to force consumers to accept their outdated sales models and settle on a handful of digital solutions that instead aligned with public demand. Music distribution was fragmented to allow the purchase of single tracks, which lowered prices into ranges that would be accepted by modern audiences; the sun had all but set on the institution of the $18 album. But despite these handicaps, and even for all the pity-seeking perpetrated by the RIAA, the industry continued to thrive, and finally surpassed its revenues from its pre-Napster days last year (2012).
The profits came as a result of embracing change in the market. Career paths for musicians had changed as well, thanks to the power of self-promotion through social media, and record labels found themselves forced to adapt to a world where their value was no longer quite so obvious. The great boon of the internet for artists was that their potential exposure had increased by orders of magnitude, but musicians still found themselves struggling to draw revenues–while the barriers to entry for international exposure were lowered dramatically, the overall supply of music had therefore increased while demand remained somewhat constant. It is not uncommon for a band to be in a situation where they have thousands of fans, but the overall willingness to pay has decreased so significantly since the 1990s that it is impossible for a group to sustain themselves. Record labels offer value here behind the scenes–arranging for live tours, merchandising, and establishing the tertiary sources of income that represent the highest costs but also allow artists to realize the most capital.
The future for the recording industry looks bright, and the RIAA is feeling so charitable about it that they’ve finally agreed to stop suing single mothers who want to make a mixtape. But did the industry learn anything from its struggle, and will it resist change so vigorously in the future? Michael Janes, formerly of Apple, shares his takeaway from the events of 1999, which contains a greater truth about meeting consumer demand:
This article was written by Eric Yockey
Eric is a Global MBA candidate at the Johns Hopkins Carey Business School and a Certified Personal Trainer with the NSCA. Click here for more information or to contact him.