increased. Music fans bought 582
million digital singles in 2006, up
65
percent from the previous year, and
pur-
chased $600 million worth of
ringtones.
However, these new revenue sources
did
not make up for the shortfall
record
companies were still experiencing.
Record executives were not happy
to
see iTunes/Apple/Steve Jobs making
such a healthy profit off their
product
while their own earnings were
shrink-
ing. In late 2007, Universal Music
Group
announced they would not renew
their
long-term agreement with Apple. As
a
temporary solution, and possibly to strengthen
their own bargaining power for a
higher royalty rate, Universal formed an "at
will"--meaning the record company
could pull their titles at any
time--arrangement with iTunes. This also opened the
door for the record company to make deals with
other online distributors. According
to Nielsen SoundScan data, Universal's titles
account for one out of every three new
releases in the United States.
TRADITIONAL MAJOR RECORD COMPANIES
MAY
BE ON THE VERGE OF EXTINCTION
The Internet and emerging technologies have
broken their hold on the distribu-
tion of recorded music. While some artists find
ways to raise funds or barter time in
the studio, advances in technology have made it
possible for others to purchase hard-
ware and software that enables them to produce
quality recordings at home. In the
past, once the recordings were finished,
artists struggled to get marketing and distrib-
ution--national exposure and distribution
required the backing of a major record
label behind them. Thanks to the Internet, that
is no longer the situation.
The advent of social networking sites and web
radio have enabled artists to reach
potential fans all over the world. Artists can
produce their own video and get it played
on YouTube, MySpace, Facebook, and other
Internet sites and sell their recordings
and merchandise over the web. Online exposure
can build a fan base that supports
live performances, where many acts make the
majority of their income.
For some artists, the remaining functions that
record labels fulfill, namely artist
development, publicity, and radio and retail
promotion, no longer (if they ever did)
seem to warrant the financial and artistic
rights signed away in a traditional recording
contract. More and more artists are beginning
to question the premium cost of being
with a major record company and are instead
opting to develop their own game plan.
Are major record companies a
thing of the past? That is the
question many artists are
asking themselves. In the past,
major record companies had a
monopoly on the creation and
distribution of recorded music,
but advances in technology and
the Internet have changed that.
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