How the Music Industry Makes its Money

Posted by: Stephen Baker on March 30, 2005

Think back to the heyday of Napster, when a befuddled music industry was confronted for the first time with massive file sharing. It was a crisis. Since then, the tech market has responded with all sorts of innovations: Selling songs online, subscriptions, packaging music with video, and limiting file sharing through software. Compared to those early days, content companies have lots of ways to make money in the era of broadband—even though file sharing persists. Mark Cuban provides examples.

My question, as the Supreme Court debates Grokster, is this: Is the music industry fighting to survive, or simply to return to the days of easy money?

Fact is, both extremes are unlikely. No matter what happens with Grokster, the traditional music industry will keep on swinging. But the days of easy money are long gone.

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Reader Comments

fred de sena

December 13, 2007 08:01 PM

I am a 30 year verteran of the msuic industry. most recnetly having a cd mom & pop shop for 15 years. the mucis industry killed itself through greed. Several sins were committed. One is instead of selling a50 plus minute cd for 17.98 they should have stuck to the traditional 40 minute format for less than 10 bucks $8.99). Next instead of empowering lawyers and accountats (traditional corporate fare) they should have stuck to the time honored a&r (artists & repertoire) guys to spot strends and select up and coming artists with potential. they were good at this. There are no more Ahmet Erteguns or John Hammonds. This is a moajor wound for the industry. Next they needed to commit to and support their stable of artists. Led Zeppelin sold an initial 25,000 copies on their debut release. Enough to get them canned form any major label by todya's standards. Bands such as L.Z. were formula 4 . That is they hit on their 4th album release. And hit big. led zep - 4, Jethro Tull- aqualung, Moody Blues - Question, Grateful Dead Workingman's, Traffic - John Barleycorn, pick your band. Some bands were fromula4 plus2 such as Fleetwood mac. The point is talent has to be nurtured by a loving label through the guise of an enthusiastic a&r person. The record industry through all of this out the window for corporate profit aper share now for the share holders. Avoiding the investment for the future that was necessary to maintain and grow an industry that is more art and human expression than vinyl or aluminum widgets. Not only have they killed the goose they lays the golden eggs for themselves, but they have killed an artform for humanity. All this is born out by the fact that there is a golden age to recorded music. it is the period between the 50's and might possibly extend into but not beyond the 80's. This is the period where the conditions I have mentioned above existed. This music is timeless and has afforded the industry the opportunity to re sell this catalogue to generation after generation now for some forty years.....to be continued

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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