EBM Assignment 2: Trends, PEST Analysis

JaPaul Vines

January 18, 2021

EBM Assignment 2: Trends, PEST Analysis

The Music Industry

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Why I Chose This Industry:

I chose the music industry because music has always played a major part in my life. I have been involved in music for 32 years of my life. From growing up in my home being exposed to various genres of music, singing in the church Youth & Young Adult Choir, Progressive Choir, and Mass Choir, to singing in school choirs from Elementary to High School, music is something I could never escape. Music impacts my career because it is a strong part of every production that my company does. It has always been fascinating to me to see the many ways music was distributed. As a child, I remember my parents playing music on their vinyl records. They also played music on cassettes. In the late eighties, compact discs (CDs) became the last way people enjoyed music. Although CDs are still an option today, many people take purchase music via the internet and digital download.

Background of the Music Industry:

In 1999, music was still being distributed by CDs and cassettes. Vinyl albums were still available, but not as popular as they once were. Digital downloads, known as MP3 music files, had come on the scene by this time now. Many record labels had not had the opportunity to get used to the fast-growing trend when the music industry was disrupted by Napster. This disruption was like something never experienced before. In June 1999, Napster launched an application, which only focused on sharing MP3 files. Users who used the program also could search for and download tracks. Napster was the first music downloading services which had approximately over 80 million registered users when it reached its peak. In 2000, Dr. Dre, Metallica, and the Record Industry Association of America all filed lawsuits against Napster.

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The lawsuits came as result of copyright infringement. Napster went on to loose because they would not monitor and limit access to music files that were copyrighted. After being shut down, the company later went bankrupt. The company was later with another music streaming service, Rhapsody, after changing leadership numerous times. Other sites including Rapidshare, Zippyshare, and Megaupload came after Rhapsody. These sites allowed people to download music and other files that are copyrighted, free of charge. By 2001, Apples’ iTunes arrived, launching the beginning of a new era. When iTunes was launched, it was the only digital download service that provided catalogues from all five of the major record labels. This gave an option to attract users who had been using illegitimate filesharing sites. iTunes became the largest music vendor in the U.S. had become the world’s largest music vendor in 2010. The music industry used TV, radio promos, ads in publications and radio to promote. As the internet continued to grow, ads on various websites were seen to promote music artists and their albums.

Two Companies:

Sony Music: In 1999 Sony Music and Microsoft Corporation released a statement that both companies would join forces to promote software, music and video products on the internet. This joint-venture allowed both companies to cross-market and promote both companies’ online items. This was inclusive of streaming audio and video events. As a result of the agreement, Sony Music distributed downloadable music content that was protected from its long list of available artists with Windows Media Player being made available to consumers. “The Internet has proven to be an amazing tool for marketing and promoting our artists,” said Fred Ehrlich, senior vice president and general manager, New Technology and Business Development, Sony Music Entertainment. “More and more music fans are anxious to access music from their

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favorite artists via the Internet, and this agreement will provide a way for them to do just that.”

(Ehrllich, 1999) Sony music is still dominant today with Columbia Records, RCA Records, Epic Records, Arista Records, Arista Nashville, and RCA Records Nashville under their umbrella.

Columbia Nashville, Legacy Recordings, Sony Music Latin, Masterworks, RCA Inspiration, Provident Label Group, and Sony Classical are also under the umbrella of Sony Music.

EMI: EMI’s history began at one of the companies Emile Berliner founded. Breliner had already created the Gramophone, which was used to record and reproduce. Discs were used to complete this process that would the way people experienced and listed to music. As the years progressed, EMI continued to experience growth bring many companies and businesspeople that were successful in the group. By 1999, the company continued to expand purchasing 40,000 song copyrights from the catalogue by Windswept Pacific. EMI continued to remain gamechanger in the music industry, which was not a shocker considering the company’s beginning. EMI was acquired by Universal Music Group in 2012.

PEST ANALYSIS Political •

Licensing Change: Title I of the Orrin G. Hatch – Bob Goodlatte Music Modernization Act, which is included in the Musical Works Modernization Act removes the current song by song structure that is licensed for creating and issuing music with a blanket licensing system that was created for digital music providers. With this system, they can create and issue digital phonorecord deliveries.

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Metadata is plaguing the music industry: Metadata, which is are the song credits seen on music streaming platforms such as Apple Music, Spotify, Pandora, etc. Metadata is also inclusive of the information that is connected to an album or song that has been released.

This information includes song titles, songwriter’s and producer’s names, the publisher, the record label and more. This information needs to be sent out to ensure that when songs are played, the correct people receive credit and are compensated. This is something that doesn’t happen a lot.

Economic •

Decline in sales in 2010: In 2010, the music industry witnessed a strong decline in sales.

326.2 million albums were sold in 2010. Statistics from Nielsen SoundScan show that this was the lowest for the music industry since they begin compiling the data in 1993.

There was nearly a decline by 13% in album sales when sales were measured against 1999. Digital music sales increased by 1%. Every genre of music failed in 2010 including classical, jazz, and Latin which all saw declines of 25% in sales. Rap music increased sales by 3%.

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Increase in sales in 2017: Music consumption overall saw an increase of 9.9% over 2016.

Reports confirmed that 293 million project units in 2017 compared to 2016’s 266.6 million album project units. Song consumptions also increased 29.5% over 2016, 1.5 billion song project units to 1.2 billion. Audio streaming also witness a drastic increase in 2017, ending at 179.8 billion up by 58.5% over 2016. Customers also begin embracing paid subscriptions on services like Amazon Music, Spotify, and Apple Music. Paid

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subscriptions saw an increase of 69.3% accounting for 78.6% of total audio streams in 2017 increasing by 73.6% compared to 2016.

Social •

Millennial Generation: Millennials born between 1981 and 1996 have embraced the everchanging world of music and contributed to the increase in sales. This increase is due to them gravitating to the many ways’ music is now distributed. In 2016 the number of Spotify’s paid subscribers globally was 30 million. This amount tripled in 2019 to 100 million. Apple Music launched in 2015 has over 60 million paid users globally. Other platforms such as YouTube Music, Soundcloud, Pandora, and Tidal continue to see an increase in users. “It’s a little bit easier to appease the older generations who aren’t investing as much time into new music,” says Libby Koerbel, a recent Kellogg School MBA graduate and now a strategist at Pandora, who queried millennial music listeners under the guidance of Marketing Professor Kent Grayson. Their goal: provide music industry leaders with a deep understanding of the discovery process for this demographic.” (Grayson, N.D.)

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Generation Z: Known as the children of millennials, Generation Z was born into the world of technology. This generation took what the parents started and took it to another level. Even with the wave of digital music increasing Generation Z hasn’t forgotten about the radio. “Young people do listen to the radio. It’s just that in comparison to their parents and grandparents they spend way less time listening to the radio,” Vartan pointed out. The data shows AM/FM accounts for 48% of audio listening time with Americans

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25+, more than double that for Gen Z, while streaming audio among 25+ is much lower at 15%. (Inside Radio, N.D.)

Technological •

Digital Downloads: Before 1998, downloading music digitally was unheard of. People could only listen to music on cassette, CD, vinyl records, and of course on the radio.

When you weren’t in your car, you had to have a boombox, compact disc player, or a Walkman (a cassette player with headphones). You needed batteries or an adapter to be able to enjoy these products. You would also need to have several CDs and cassettes on hand. iTunes, created by Steve Jobs in 2001 would forever change the way people enjoyed music. Before iTunes, people could rip CDs, put music on computers, and created playlists. People also burned playlists to CDs to listen to in the house, at work, or in the car. “Music player apps were too complex. They are really difficult to learn and use.” (McElhearn, 2016) When iTunes was introduced to the world, it set the tune for Apple’s next decade. Today iTunes offers 60 million songs, 2.2 million apps, 25,000 tv shows, and 65,000 films.

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Streaming Sites: Before streaming music sites became a hot thing, music videos were found on MTV, BET, and VH1. In May 2005, YouTube came available to the public.

Founded by three former PayPal employees, the streaming site is widely popular as is it is a free video-sharing platform. The creation of YouTube allowed users to input the name of the artist or the name of the song in the search box. After putting the info in the search box, the user can enjoy all videos by their favorite artists. As YouTube has grown over

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the years, artist release new videos and singles via YouTube. As of 2020, YouTube has 2 billion users worldwide.

Conclusion Digital music changed the entire spectrum of the music industry. When music lovers had become accustomed to CDs, cassette players, and vinyl records, digital music would provide a new alternative that would soon become the way artists released new Eps and singles. Napster came on the scene in 1999. This application only focused on MP3 sharing. With over 80 million users, Napster soon had lawsuits filed against them as a result of copyright infringement. After losing the lawsuit and later filing bankrupt the app later became merged with Rhapsody. iTunes, created by Steve Jobs, being introduced to the world in 2001 would change the way music lovers enjoyed their favorite songs. Jobs wanted a way where users could enjoy music with the method not being too complex. YouTube, a free streaming site, has gained instant success upon its launch in May 2005. Users can search videos by their favorite artists. Users can also search for religious content, movies, news interviews, cartoons, and so much more on this free application.

While music continues to change one can expect the digital world of music to launch new things that will continue attracting new users and its old users wanting more.

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McElhearn, K. (January 9, 2016). 15 years of iTunes: A look at Apple’s media app and its influence on an industry. Retrieved from https://www.macworld.com/article/3019878/15-yearsof-itunes-a-look-at-apples-media-app-and-its-influence-on-anindustry.html#:~:text=In%20January%202001%2C%20Steve%20Jobs,we%20buy%20and%20c onsume%20media.&text=Jobs%20said%20that%20music%20player,other%20than%20its%20o perating%20systems.

(May 18, 2020). ‘Share Of Ear’ Offers Encouraging Picture Of How Gen Z Uses Radio.’

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Leskin, P. (May 30, 2020). YouTube is 15 years old. Here’s a timeline how YouTube was founded. Retrieved from https://www.businessinsider.com/history-of-youtube-in-photos-2015-10 Mohsin, M. (May 11, 2020). 10 YouTube Stats Every Marketer Should Know In 2021. Retrieved from https://www.oberlo.com/blog/youtubestatistics#:~:text=Summary%3A%20YouTube%20Statistics,Here's%20a%20summary&text=YouTube%20has%202%20billion%20users%20worldwide.,mo st%20effective%20video%20marketing%20platform.

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