How Digital Distribution Changed the Music Industry (Part 1)

At L1NEUP we think it’s important to go back to our roots, and realize how we got to this age of online streaming services, soundcloud artists, mix tapes, albums and how the music industry has evolved so much since the days of vinyls and record players.

For most of the younger generation today, they don’t remember a music industry that didn’t have some sort of streaming capability. Nowadays music discovery happens everywhere whether it’s on music streaming services or social media platforms. Digital distribution changed so much for the music industry but was not immediately welcomed when it was first introduced. Music executives struggled with this new business model and it left many of them unsure of what the music industry would turn into.

In the 1970s, the formula was the same. Record labels would go out and find the next big artist, sign them and release album after album and they would tour the world. This went on for years and not only helped music executives profit but introduced the world to acts like Queen, Elton John, The Beatles and Elvis. In 1974, approximately one billion records were sold worldwide. Flash forward to 1999, and the number of records sold had more than tripled. This was a period of growth the recording music industry never expected and it went on to last almost a quarter of a century, until 1999. But something revolutionary and unexpected would occur shortly there after that would shake up the music industry and physical record distribution forever.

It was then, Napster was born. In 1999, Shawn Fanning and Sean Parker launched Napster, a file sharing service that allowed anyone to download and share music without payment given to owners of the music. The service exploded, and consumers could have hundreds of albums right on their computer in a matter of minutes. The music industry was quick to sue and have Napster shut down as it greatly affected what the music industry had been used to for decades.

Although the take down of Napster was a success for the music industry, the fight had only just begun. As one music sharing service was shut down, a new one would emerge. The likes of Limewire, Frostwire, Grokster, and Pirate Bay were popping up all over and being downloaded on computers worldwide. This went on for years, and there seemed to be no solution. This put almost a complete halt in the sale of physically recorded and distributed music. In 2013, unit sales for physically distributed music were as low as they were in the 1970’s.

Following the explosion of music sharing services, and all the applications that were products of Napster, it was back to the drawing board for the music industry. The system they had been operating for decades was thrown out. The industry had to stray away from physical music distribution and find the next best thing. They had to figure out how to use technology to their advantage and enter into the depths of the digital music distribution world.

After going above and beyond to stop the online piracy of music, the industry understood the age old tale of “if you can’t beat them, join them.” They began creating new models for how to distribution music online legally. They knew they wanted to create a system that would not replace revenue from physical sales but simply add to it.

This is when Apple came into the picture. Not even a player in the music industry at the time, Apple Computers notoriously created one of the most successful legal online music distribution services we still use today. In 2003, the model Apple created would influence the whole world. Their plan was simple. They believed customers would be more inclined to buy music legally if there was a service that not only allowed them to buy and download the music but have an online space where it could all live. An even bigger incentive? All tracks were less than a dollar each. This became the iTunes Music Store.

iTunes was the beginning of an era for the music industry. They are able to offer countless music catalogues from major labels and give customers the ability to buy whole albums and also individual tracks of their choosing. iTunes became the model of online music streaming and distribution. In 2013, it was the world’s largest music retailer both on and offline. The service has sold more than 25 billion songs since its initial launch back in 2003.

A number of competitors have slowly made their way onto the music scene, with many modeling their businesses off of iTunes and any other digital download music markets. If we can take anything from history, it’s that there will always be competition, especially in the music industry. New services will appear that will continue to shape the digital market as we know it.

In part 2 of this series, we will introduce streaming services and online music libraries. This was the idea of not offering individuals tracks for purchase but access to an even larger library of music that you could listen to at your leisure. We will also dive into the struggles they had when first launching including trying to convince music executives to hand over artists entire catalogues rather than individual tracks. The music industry has changed immensely since our parents' time and will continue to as the years past. It’s important to remember this history as it has such an influence of how we listen and receive music today.