Digitalization of the Music Industry
Introduction
In the past, the music industry relied on a bundled business model that focused on selling large quantities of music albums in order to finance the cost of producing records and radio airtime, in addition to offsetting other losses (Harrison, 2000). Additionally, customers were encouraged to buy a whole album in order to access only one or two songs that they wanted (Kurtzman 2016). However, since the early 2000s, the music industry has undergone significant unbundling with regard to how music is distributed. Similar sentiments have also been echoed by Bostrom et al. (2013) who note that ‘the internet has been disrupting and revolutionizing the global music industry through the past two decades’ (p. 102). For example, unbundling of music occurred through the creation of mix tapes. Internet technology has further transformed the music industry by enhancing the capability to distribute music digitally (Kurtzman, 2016). Spotify is one of the notable ventures that have played a vital role in this disruption of technology on how music is distributed. The platform provides clients with an opportunity to listen to and share music playlists online (Bostrom et al., 2013).
One of the notable factors that have spurred the aforementioned transformation has been the innovations facilitated by the advent of internet technology. In particular, internet technology has created an opportunity for streaming music. Owing to the fast pace of internet growth, music streaming is poised to ultimately replace traditional purchased music (Kurtzman, 2016). These aspects underline the changes that have occurred in the music industry. However, the growth and penetration of Internet technology have also created a myriad of challenges. One of the major challenges associated with the growth of internet technology entails increased piracy and illegal sharing of music. Bostrom et al. (2013) affirm that ‘the traditional pre-recorded forms of music distribution have been heavily distributed by illegal file sharing, downloadable tracks and, and more recently cloud-based streaming’ (p. 102). It is estimated that over 12 billion songs were downloaded annually through different peer-to-peer networks during the early 2000s (Kurtzman, 2016). This paper evaluates the impact of digitalization on the music industry and the legal approaches to dealing with the challenges posed by digitalization.
Impact of digitalization on the music industry
According to Mathew (2013), digitalization which entails the conversion of analog information into digital information has impacted the music industry both positively and negatively as examined herein. First, the growth of internet technology has enhanced the success with which firms in the industry distribute and sell their music. Wikhamn and Knights (2016) are of the view that digitalization of the music industry has provided musicians and firms in the industry an opportunity to generate revenue from different channels as opposed to the traditional methods of distributing music. According to Gonsalves (2015), digitalization of the industry has provided artists with two main forms of digital distribution, which include streaming and digital downloads. Digitalization has also enhanced artists’ capacity to reach fans across the world. Musicians can conveniently promote their artistic work through online platforms. Similarly, customers can purchase music through digital platforms. Digitalization of the music industry has therefore increased the artists’ market reach (Drury, 2013).
Digitalization of the music industry has also provided artists with sufficient control of their music. For example, artists do not have to depend on publishing or record companies to distribute their music. On the contrary, artists can determine the online platforms that they can distribute their music through depending on customer usage (Wikhamn & Knights, 2016). Similarly, music composers can self-publish and apply online marketing tools in to reach the target customers. Digitalization of the music industry has further enhanced interaction between artists and their fans. For example, artists can effectively and efficiently interact with their fans through different digital technologies. Thus, digitalization has increased the likelihood of artists increasing their revenue stream (Haque, 2011).
While digitalization has created new avenues through which artists can distribute music hence increasing sales, digitalization has resulted in a major challenge in artists’ quest to maximize their sales revenue. One of the notable challenges relates to an increase in the rate of piracy, which according to Stafford (2010) entails ‘illegal copying or downloading of music without the consent of the recording artist, composer or recording company releasing the piece of music’ (p. 113). Piracy leads to lead of loss of revenue because the perpetrator does not pay. Bernstein, Sekine, and Weissman (2007) identify online piracy as one of the major challenges facing contemporary artists. Additionally, digitization has increased the rate of illegal music sharing.
The development of online file-sharing sites such as KaZaa, Napster, and Spotify has resulted in a remarkable increase in peer-to-peer transfers of music without the parties involved paying (Flew 2012). Additionally, digitalization of the music industry has provided individuals with the capacity to share music through social media platforms such as YouTube. Zittrain (2008) asserts that ‘YouTube does not pull down content shared through it unless it receives a specific complaint from the copyright owner’ (p.120). Illegal music sharing negatively affects the competitiveness of music in the industry. Music sharing reduces the celebrity effect, which is a major asset in the music industry (Stafford, 2010).
Legal problems encountered in the US and European jurisdictions and how they have been dealt with in law and in policy
The music industry constitutes a fundamental component of the United States economy and that of various European countries. In the United States, for example, the music industry is categorized amongst the copyright industries such as the movie and publishing industries. In 2014, the copyright industries contributed $1.1 trillion to the US Gross Domestic Product and created employment opportunities for approximately 5.5 million people (Friedlander, 2014). Similarly, the music industry contributed £1.6 billion to the UK GDP in 2013 (UK Music, 2013). This indicates that the music industry is valuable to the country’s economic growth. However, the contribution of the music industry is threatened by increases in the rate of digitalization.
In an effort to promote the growth of the music industry, the US and European countries have enacted intellectual property laws that are aimed at protecting artistic creativity. The intellectual property laws are aimed at guaranteeing inventors and authors of artistic work exclusive rights to their creativity. The US government has protected artistic creativity under Article 1, Section 8 of the US Constitution (Farmer, 2014). Similarly, the UK government has incorporated copyright and intellectual property laws in an effort to protect the music industry. In spite of the efforts made, the US and European countries continue to experience significant challenges in protecting the music industry from illegal practices such as piracy and infringement of copyright laws. The challenge arises from an increase in cybercrime, which has increased significantly across the world (Practical Law, 2017).
One of the legal challenges facing law enforcers in dealing with the growth in cybercrime entails an increase in expertise that is required to establish involvement in cybercrime such as piracy. Additionally, the ineffectiveness of the laws in curbing illegal file-sharing and piracy is increased by the number of individuals engaged in illegal file-sharing or piracy. For example, the UK government has implemented the concept of individual litigation which focused on suing perpetrators of cybercrimes such as illegal file sharing and piracy under the Copyright, Designs and Patent Act 1998 (Practical Law, 2017). However, this presented a major challenge due to the increase in the number of people involved in the practice. This presents a major legal gap in dealing with cybercrime.
To promote the music industry, it is imperative for the US and European jurisdictions to consider implementing effective laws and policies targeting cybercrime. Some of the issues that governments should take into consideration are examined herein.
Volume litigation: European countries and the United States have also incorporated the concept of volume litigation, which provides copyright owners the legal capacity to identify the file-sharing networks and internet protocol addresses used by individuals in sharing files online and infringing on copyright laws. The courts should subsequently provide the copyright owners the power to pressure Internet Service Providers to disclose the identity of individuals engaged in the infringement of copyright. By identifying the perpetrators, the copyright owners such as music artists can warn the perpetrators of legal consequences for engaging in illegal file sharing and downloading. Alternatively, the copyright owners can consider suing the perpetrators. To enhance the effectiveness of this approach, governments should impose heavy fines on the parties convicted of engaging in illegal file sharing and downloading. This approach will act as a deterrent to individuals who might intend to engage in illegal file sharing and piracy (Practical Law, 2017).
Targeting pirate sites: as an alternative to individual volume litigation, the US and European countries’ governments have developed a law aimed at limiting owners of pirate sites from encouraging individuals from using their sites to engage in copyright infringement. For example, in 2010, Twentieth Century Film Corporation successfully sued Newzbin, an online streaming website, for infringing copyright in the case, Twentieth Century Film Corporation and others v Newzbin Limited [2010] EWHC 608 (Ch), 29 March 2010 (Sinclair & Green, 2016).
Website blocking: the governments further considered blocking websites that are used in infringing copyright laws as one of the ways of dealing with piracy and illegal file sharing. Under the Digital Economy Act 2010, the UK has given the courts the power to block websites considered to be engaged in the perpetration of copyright infringement. However, enactment of this law depends on the extent to which the website has engaged in copyright infringement.
Building alliances with ISPs: in an effort to curb copyright infringement, governments should focus on developing a policy that encourages music artists and ISPs to enter into an alliance aimed at identifying and taking action against individuals who engage in copyright infringement. The rationale of this move is to enhance the effectiveness with which artists and ISPs identify and seek an injunction against perpetrators.
Negotiating rights and licenses: firms intending to stream music should seek a license from the relevant authorities. In issuing the license, the government should compel the streaming sites to pay the content owners. This move will safeguard content owners against illegal streaming of their content. Through this move, content owners will be assured of generating revenue from their artistic work. Additionally, the users of the content will not have involved in copyright infringement by sharing the music files online. The rights and licenses should apply for a specific duration of time, for example annually. This means that they should not be indefinite (Practical Law, 2017).
Education and awareness on music piracy: considering the increase in the number of people engaged in the illegal downloading of music, the European countries and US governments have established a policy aimed at increasing the level of awareness amongst the public on the negative impact of illegal file sharing and piracy. Educating the public will continue to be a major policy in dealing with piracy. In educating the public, governments should consider creating awareness of the negative impact of illegal piracy on the country’s economy.
Conclusion
Digitalization of the music industry has remarkably transformed the music industry. Digitalization has increased musicians’ capacity with regard to the distribution and marketing of their work. Thus, musicians have an opportunity to increase their sales revenue. In spite of this benefit, digitalization has led to the creation of new challenges. One of the notable challenges entails an increase in the rate of cybercrime, which is evidenced by the rate of piracy and illegal file sharing, which amounts to copyright infringement. One of the reasons that explain the increase in the rate of copyright infringement entails a lack of effective policies and laws to curb the practice. In an effort to deal with the problem, the US and European countries have made significant progress in enacting laws and policies aimed at focusing on the problem. The laws and policies implemented target online streaming firms and individuals engaged in file-sharing and piracy. For example, the governments have imposed heavy fines on individuals engaging in illegal file sharing. Additionally, these governments have implemented policies and laws that ensure that websites that engage in such practices are sued and blocked. Alternatively, the governments have implemented a comprehensive education policy that is aimed at creating awareness in the public on the negative impacts of piracy and illegal file-sharing on the economy. By enacting these policies, it is possible for governments to significantly reduce the negative impact of digitalization on the music industry.
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