As Jaron Lanier tells it, Ted Nelson envisioned his version of the internet (Xanadu) as a single walled garden where everyone could be both a consumer and a producer. Ideas and art could be exchanged in a frictionless environment where a truly free market would emerge. People could make their wares available for free, or charge for them. However, once a price was set, the market would then determine the demand for that information be it a song, poem, movie or software. This truly free and open market would have empowered creators of all kinds access to a marketplace the likes of which we’ve never seen. Ted’s vision would have truly empowered creators and democratized distribution. Unfortunately, Ted’s vision has not come to be.
Much has been written about the record industry in particular failing to “adapt and evolve” to the new online digital economy. Whereas this may have been a valid argument in 2002 it holds little water a decade later in 2012. In the past decade we’ve seen many new offerings to consumers for legal and licensed music services tailored to many different consumer lifestyles. The tip of the iceberg includes such well known offerings as Itunes, Spotify, Pandora, Rhapsody and literally hundreds of others. And yet despite there being over 500 legal music services neither sales nor revenue have begun any significant rebound. The one thing these services still require, that piracy does not, is payment.
Let’s take a look back. In 1999 in the USA there were probably ten thousand retail points of sale for physical music, Tower, Sam Goody, Target, Walmart, etc. At the time they were selling $20 dollar physical discs – much of the overhead due to physical packaging, manufacturing, shipping, stocking fees and the overhead of real human beings being employed in record stores who need to eat, have shelter, etc.
These physical retail locations also had all the problems of supply side inventory management – a band would be on tour, and no stock would be in that market, a song would be played on the radio and the album would quickly be out of stock, etc. An artist could get placed on a TV show or featured in a commercial and suddenly there is demand, but no availability. These supply side inventory issues combined with limited points of sale were a massive problem for the artists and the record industry.
Digital distribution has none of these problems. Today someone can walk from their living room to their computer (or it may be on their lap) to purchase the latest hot song, featured in Gossip Girl. Or not even, they can buy the song/album on their iphone while watching the TV show or in a movie theater or at a club or concert.
So today in 2012 there are an estimated 500 million retail points of sale for prerecorded music via itunes alone. Just stop and think about this for a second. We went from ten thousand points of sale to five hundred million points of sale in less than a decade and removed all of the supply side inventory issues… wow. The promise, size and scale of the internet should have seen sales of pre-recorded music increase, massively.
There is frequent argument made that if music cost less, it would sell more… well, we now have 99 cent songs and $9.99 albums and sales have dropped by half in a decade…
So the recording industry adapted by:
1) removing inventory problems
2) making music instantly available
3) allowing for songs to be sold individually at a price never before possible and…
4) dropped the price of the album by half of the retail list price of a decade ago
All of this should be a net positive, not a net negative except for one very big thing, payment is now optional to everyone, and there are no consequences for not paying… So let’s be clear about what the problem is when talking about potential solutions.
The problem is not a lack of viable new business models, the problem is the proliferation of illegally distributed recordings being monetized by advertising on infringing websites. There is money in the distribution of recordings on the internet, the problem is the majority of that money is being made illegally and not paying the artists a penny.
The Trichordist 
The problem is the means to track illegal distribution and enforce existing laws have been slow to emerge from the technology market which benefits both directly and indirectly from illegal downloading while lobbying for gutting those existing laws and creating a victim culture where the rapist receives more compassion than the raped.
Until the State and the means become a mutually reinforcing system of law enforcement on behalf of IP owners, this problem will continue. The pirates defend themselves with the myth of Big Brother and Big Brother is too ashamed to do his job. It’s pathetic.
If I remember right, units sold have gone up, right? A couple of other places are always posting statistics like that. Revenue is still down, of course, people are buying singles instead of albums, but reducing the price point did result in “selling more music”.
Also, in fringe cases, some albums are selling. It could be that if musicians made albums where all of the songs were good, people would buy the album. In other words, maybe allowing consumers to buy individual songs has revealed a problem that’s always been there and buying songs instead of albums gives consumers a way to circumvent it, resulting in a loss of revenue. But too, it also may very well be that it’s because the age and social demographics for those albums (Red, Babel) don’t pirate music.
Not disagreeing with the article’s assertion, just suggesting that there is an additional factor here.
yes to a certain extent the break up of the album has to have some effect on over all revenue. it would be illogical if it didin’t. But looking at peoples behavior, when they do buy they still mostly buy the album and not just the single. And when you look at all activity, especially if you monitor what happens on bit torrent, the scale of sales lost to piracy is still quite large. Especially globally where virtually everything is pirated.
In 2006 my band cracker had a new album. We went to Spain. We were playing sold out shows across the country. 500- 1200 seats. but our legal sales weren’t even 500 (cds and downloads) for the entire country.