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The Music Industry on the Brink of Revolution

Strategic Insights

— 1 min read

The way we buy and consume music is set to change dramatically with the rise of the Internet and online music distribution. As global record sales continue to soar, the major record companies are facing a threat from new forms of online distribution, including web-based music stores and online marketplaces. According to a report by Market Tracking International (MTI), global record sales in 1997 were estimated at $40.2 billion, with just 0.1 per cent sold through the Internet. However, this proportion is predicted to grow to 7.3 per cent ($3.9bn) by 2005.

Key Takeaways:

  • The music industry is on the brink of revolution, with the rise of online music distribution threatening the position of major record companies.
  • Global record sales in 1997 were estimated at $40.2 billion, with just 0.1 per cent sold through the Internet, but this proportion is predicted to grow to 7.3 per cent ($3.9bn) by 2005.
  • Major record companies, including EMI and PolyGram, are facing a threat from online music distribution, with new entrants such as Microsoft and N2K racing to lead the way in the sector.
  • Companies such as Music Boulevard are already allowing consumers to download tracks from their own record labels, with security systems in place to prevent piracy.
  • Record industry executives believe that their position will be secure, as the morass of music websites will always need filtering and that this is a role for something akin to today's record labels.
  • However, some industry experts, such as Alan McGee, president of Oasis's record company, Creation Records, believe that the rise of online music distribution could lead to the demise of record companies, as new bands will be able to sell their music direct from websites.

Statistics:

  • Global record sales: $40.2 billion (1997)
  • Internet record sales proportion: 0.1% (1997)
  • Predicted Internet record sales proportion: 7.3% ($3.9bn) (2005)
  • Number of music websites: 76,000
  • Number of universities with piracy networks: unknown
  • Number of music piracy incidents: unknown

Sources:

  • Market Tracking International (MTI) report
  • Creation Records
  • EMI
  • PolyGram
  • Microsoft
  • N2K

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