Internet Music Sharing Continues to Hurt Record Labels

Now that the significant recording mediums have been established we can consider those responsible for the actual distribution of recorded music.  Record labels were not late to jump on the bandwagon of success as the oldest brand name in recorded sound. Columbia Records, agreed to help sell and distribute Thomas Edison’s Phonograph invention back in the 1880’s.  Ever since, Columbia has set a standard and helped form an industry of highly competitive labels. Columbia today is a joint label partnering with SONY while sharing the industry spotlight with four other major record companies, Universal, EMI, BMG and Warner.
 
In the beginning, the purpose of a record label was to help give the artist maximum amount of exposure to the public.  Getting an artist’s name out there is difficult and the most important thing is to reach out to the specific demographics that find the artist most appealing.  To do that, a label’s responsibility is to distribute the artist’s music in places where it would create a buzz, for example through television, radio outlets and record stores both nationally and internationally.
 
Today, in addition to creating artist buzz through television and radio mediums we have started to see that many artists are being promoted through the internet.  This is detrimental to music companies because the majority of the profit that they make is through the physical albums they sell.  If people are downloading mp3s via internet, through iTunes or any other mp3 downloading service, then labels are not selling physical CDs in stores. 

It makes sense to zero in on CD sales over the past five years as the internet is a relatively new medium, and the effect it has on annual record sales is the most evident during this time. 
Physical CD sales have been in decline over the past 5 years, and according to various estimates they are expected to fall another 15%-20% again this year. 

In the past 5 years, legally downloaded music has been responsible for 15 percent of the world’s music sales.   Many labels have had no other choice but to make deals with mp3 service providers in order to profit off their own signed artists.  Record companies face a dilemma: They want to take advantage of the Internet as a delivery system, but they don’t want to risk torpedoing the existing sales model, which has been highly lucrative over the years.      

Although record labels do make a profit off of legal piracy-free services such as iTunes, they only make a percentage of actual albums bought by iPod users.  Granted they are making money, but not nearly as much as if the albums were being purchased in Virgin Records or any other popular music retailer. 

Unfortunately, many entertainment consumers who use iTunes music store are downloading more individual singles over entire albums and at .99 cents a song; you can imagine it would be difficult for a label to survive on single sales alone.  Leverage single sales as a segue to introduce new artists and promote concert ticket sales, merchandise sales, ringtone sales, are just a few of the sales strategies record labels are using today.

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