How the internet transformed music

Now that so much music is available online, more people than ever are listening - but piracy is still a threat to the industry, and its performers. So, how can we get our tunes legitimately?

Every so often, an event occurs that changes everything and people stumble, blinking, into the light and gaze upon a brave new world.

Music experienced this twice in 2001: first, when Apple released the now iconic iPod, and then when the industry was dealt a solid kick in a very sensitive place by illegal file-sharing. It's only now that the dust has finally settled and listening to music has become a totally different experience - one that will continue to change apace over the next few years.

The need to out-market the music pirates
Thousands of tracks are purchased and played every day - and none of them are contained on any 'physical' medium. So, where's all this music coming from? And is piracy still the huge problem it was nearly a decade ago?

"Music fans don't want to act illegally but they do want to have everything at their fingertips instantly," muses Daniel Ek, CEO and founder of the new free online music service, Spotify. And that neatly sums up the Hobson's choice that the industry finds itself faced with. Charge too much for music, suffer piracy and lose money? Or give it away and lose money anyway?

"Spotify exists because of piracy" Daniel Ek, CEO

According to the BPI, which represents the UK's recorded music industry, 85 per cent of music downloads in the UK are still illegal – rising to a whopping 95 per cent worldwide.

"Spotify exists because of piracy," says Ek. "The best way to compete with that is to come up with a better product, which gives them everything music piracy can offer and much more besides, while also compensating the labels and artists."

Indeed, some bands have now grown disenfranchised with the whole idea of the music industry's structure. Radiohead famously released their 2007 album In Rainbows without a pricetag, instead letting fans set their own.

In an interview with Time magazine just before the band started writing material for In Rainbows, singer Thom Yorke said: "I like the people at our record company [EMI/Capitol], but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say 'f*** you' to this decaying business model."

Radiohead released In Rainbows without a pricetag

Will free music destroy CD sales?
This is a dramatic example. "Notwithstanding its repeated calls to the industry to adopt new business models, the Government should accept that taking valuable content for free is not a 'business model'," says the BPI's director of Public Affairs, Richard Mollet.

"It creates no value. Only if illegal downloading is properly addressed can new business models have the room to breathe and succeed."

But if music is made available for free, even just in streaming form from the likes of Spotify and the massively popular streaming and community-based site, aren't labels risking losing a huge chunk of potential revenue from physical sales?

Absolutely not, says Mollet. "If you see these services like radio, it becomes clear that listeners are getting an introduction to music that they then want to physically own," he explains.

Downloading music has become hugely popular

Ek agrees: "We want a way to discover new music, whether on your own or through shared and collaborative playlists." It almost goes without saying that digital music is most popular with the young - with 16- to 24-year-olds being the most clued-up.

The figures speak for themselves: in January 2009, 30 per cent of The Script's eponymous debut album sold online; Take That's new set, The Circus, shifted just 10 per cent online - a sure sign that the band's fans are 'maturing'.

Why are there no standards?
What is clear is that the record industry appears to have cottoned on to the fact that punters have voted with their wallets and want to pay less – or even nothing – for their content.

But it hasn't yet got its house in order, according to Dan Haikin, brand director at Bowers & Wilkins. "The industry's a mess at the moment," he says. "There's no one driving the bus; computer companies can't champion a particular format because they don't have any experience in the music business."

The problem is a lack of standards leading to a disparate market, which means the average consumer – who neither knows nor cares about the minutiae of bit-rates or file-formats – has too much choice when it comes to a service. Especially when price comes into the already complex buying equation.

It's a cinch to download music nowadays but is the concept of transferring a music file from an online business to your computer already becoming archaic – and is there any point at all to CDs? In our next blog, we'll look at streaming...