General, Music, Social Media

Web2.0 Integration in Music Industry

The music industry was one of the earliest adopters of Web 2.0 technologies; quintessentially – social media channels like RSS, blogs, downloadable podcasts, online distribution channels like iTunes etc. This not only revolutionized the entire industry as a whole – but completely altered the course of how, when, where music is created, produced, marketed, sourced and sold currently, as we know now.

Traditional record label companies, which used to create revenues for themselves from standard procedural processes, have noticed massive decline in their profit margins. Companies like Slicethepie, which is a web based artist-financing engine that raises money for artists to professionally record an album, have heralded a new dawn. “The internet has enabled us to build a parallel system.says David Courtier-Dutton, founder of Slicethepie. Customers now have an option of not purchasing an entire album in CD/DVD format but rather opt for a single track they wished for. Apple took the first major step in this direction by creating iTunes enabling end-users easy access to a massive digital music library, and additionally, the choice of purchasing the specific track they wished for.

From the social networking perspective, was perhaps the very first community wherein musicians and bands could have their own space in the online social domain and could freely communicate with their fans frequently. Besides social networking, high profile artists are increasing using Entertainment Online Interaction (EOI) methods like RSS, blogging, using video and audio for personal messaging, micro blogging (tweeting) or using WAP sites etc. to create, sustain and build a fan base.

Also, a series of new B2C companies like Lala (which later got acquired by Apple Inc.), YouTube (acquired by Google Inc.), and download site SpiralFrog (this one shutdown in 2009) have sprung up – with over a billion visits monthly combined together. Besides creating and distributing music merely, these companies are more customer focused – by making a serious effort to enrich the user experience as well. A great example is Pandora Radio who compliments the existing music data that they have with data built from the user-generated content received from the network. As a result – they have access to a zillion-byte database which is not only richer in quality, is less expensive to create, and yet a valuable music database since users have earlier either listened to it or rated it or interacted in some way or the other.

But have the traditional record label companies being able to restructure and reorganize themselves so as to benefit from all this financially? Definitely, yes. With a stronghold on artists and bands gone with the advent of social media, and multiple channels of real-time and streaming music distribution, traditional record label companies have either gone out of business (the ones which didn’t embrace social media) and the ones which did, such companies have started creating 360 deals, which are essentially contracts that allow a record label to receive a percentage of band’s activities instead of just record sales. Warner, Universal Music Group, Sony BMG and EMI Music – the top four record labels struck a deal with YouTube in 2009 so that YouTube does pay for the right to have their content on the website. Dawn C. Chmielewski in her article for the Los Angeles Times presented the figures that CD sales were down 45% 2000 to 2008 and that this deal for music videos on YouTube would produce an approximate $300 million for the Music Industry.

Thus, besides empowering artists with a direct-to-fan model and cutting middlemen, social media has essentially changed the revenue streams for artists and recording companies. Record labels are diversifying their revenue sources from 360 deals and partnering with dotcoms; whereas artists, their managers and promoters are expanding their B2C reach by various Web 2.0 communication channels as well.

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