The Digital Music Revolution

May 2nd, 2013
in econ_news

by Felix Richter,

Ten years ago, on April 28, 2003, Apple’s iTunes Store opened its gates and rang in a new era for the music industry.

statistalogoIn the early 2000s, CD sales had started to decline and the music industry was struggling to adapt to the new realities. Instead of working on a digital distribution model that was affordable and convenient to use, the industry tinkered around with digital watermarks and other copyright protection mechanisms that put off many potential customers. In the meantime, illegal filesharing services such as Napster, Kazaa and others flourished as they offered consumers easy access to virtually unlimited amounts of music.

Follow up:

In 2002, Apple’s CEO Steve Jobs once again proved his impeccable sense for what consumers wanted and identified an opportunity to promote his company’s young iPod business. He believed music fans wanted easy and affordable access to music files and he decided that Apple should provide them with that access. Jobs started talking to major record labels and won them over with presentations that showcased early versions of the iTunes interface and its seamless integration with Apple’s digital music player, the iPod. Against his beliefs, he agreed to include some digital rights management, but in turn pushed hard for what became the iTunes killer feature: the option to download individual songs for 99 cents.

Within its first week, iTunes sold one million downloads and quickly became the largest music retailer in the United States.

For the music industry, iTunes was both a blessing and a curse. On the one hand the industry had finally found a digital distribution model that was accepted by consumers, but on the other hand iTunes was another nail in the coffin of the industry’s biggest cash cow, the CD.

Ten years later, digital music accounts for roughly 60 percent of music revenues in the United States as the next revolution is knocking on the door. Music subscription services such as Pandora or Spotify are increasingly popular and even Apple is rumoured to be working on a subscription model next to its “traditional” per-per-download model.

Today’s infographic illustrates how the U.S. music industry has changed in the past 15 years, as digital downloads gradually displaced physical music distribution.


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