Owing to the phenomenal increase in online downloading in recent years, the music industry has undergone a dramatic shift in the way it does business. In most cases it is no longer profitable to produce CDs, and they are now viewed chiefly as promotional items for the industry’s new cash cow, tours. In a bid to avoid financial ruin, every cog in the music industry’s machinery has had to significantly change its operations.
The new face of the music industry is undoubtedly iTunes. Apple, the company behind iTunes, has developed a business model that caters for consumers who demand huge choice while being reluctant to pay high prices for it. Apple has capitalised on a new wave of portable technologies, such as smartphones, tablet computers and netbooks, to allow users easy access to iTunes’ huge catalogue of songs and albums. In February of this year, Apple celebrated the 10-billionth song download from iTunes.
HMV, which owns one of Dublin’s biggest record stores and controls an empire of 700 retail outlets, has responded to the pressures exerted by iTunes and various other online music providers by diversifying its operations into electronic games, live concerts and venue management. By taking these steps, HMV has seen its profits grow in recent times, and it is likely to survive in an industry which has been decimated by the advent of illegal downloading.
Formerly, many music tours were regarded by industry executives to be merely a means of boosting album sales, and consequently many band’s tours were lossmaking. In recent years, however, tours have taken on a new dimension. The Rolling Stones’ “A Bigger Bang” tour, which grossed €340.5 million, and U2’s 132-date “Elevation” tour in 2000 are testament to this. U2’s current “360°” tour is anticipated to generate €1 billion in revenue for the band and its promoters.
The tough economic climate has forced many fledgling bands to pursue alternative means of funding. Young entrepreneurial bands have taken to seeking money directly from investors. The UK-based duo Honey Ryder, whose debut album “Rising Up” was released in 2009, came up with one such innovative funding scheme. “We offered investors shares that yield dividends based on future sales and royalties. There are 100 shares at £3,500 each. If we sell as many records as Dido, each share will be worth £250,000”. Investors in the band include former Global Head of EMI, Eric Nicoli, and founder of Caffè Nero, Paul Ettinger.
The music industry is a prime example of a sector which has adapted to changing trends. It is beyond doubt that in coming years many other sectors of the business world will have to adjust in a similar fashion to survive.