Troubled years ahead for the big record labels

by Alfred Hermida | January 14, 2008 at 07:31 pm

224 views | 0 Recommendations | 0 comments

A gloomy assessment of the state of the music industry in The Economist, saying that while 2007 was bad, the next few years are likely to be even worse.

The past year was marked by some high profile developments, such as Radiohead splitting from EMI and releasing In Rainbows online in a "pay what you want" experiment.

The problem for the major record labels is that the value of music is shifting. In a time of LPs and CDs, music was a commodity, to be sold to consumers. Now, with so much music available for free or for next to nothing, it has little value as a commodity.

Instead we are shifting to a model where the value of music is as a service, for example, through providing it free to cellphone users:

Perhaps the most important experiment of all is a deal Universal struck in December with Nokia, the biggest mobile-phone maker, to supply its music for new handsets that will go on sale later this year. These “Comes With Music” phones will allow customers to download all the music they want to their phones and PCs and keep it—even if they change handsets when their year's subscription ends. Instead of charging consumers directly, Universal will take a cut
of the price of each phone. The other majors are expected to strike similar deals.

“‘Comes with Music' is a recognition that music has to be given away for free, or close to free, on the internet,” says Mr Mulligan. Paid-for download services will continue and ad-supported music will become more widespread, but subsidised services where people do not pay directly for music will become by far the most popular,