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Report on the Music Industry

Despite a year of headline-generating turmoil, musicians, techies, media executives and lawmakers gathering for the second Future of Music conference on Monday will find that much remains unresolved on the digital-music landscape.

Over the past year, recording companies managed to force the shutdown of the free online song-swapping service Napster and launch services of their own. But they also saw new threats sprout up hydra-like in the form of second-generation free services such as Kazaa and Morpheus.

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Recording artists won a battle with the industry when they secured the right to be paid directly for Internet-based broadcasts. But they still wield little control over the music they create, advocates say.

Tech firms launched a steady stream of digital-music devices and services but saw funding for new ventures dry up in the face of lawsuits and a weakened economy. And players on all sides won the attention of Capitol Hill, only to see the Sept. 11 terror attacks wipe digital-music issues off the congressional agenda.

“It’s really changed very little, which is unfortunate because I think the change would be very productive,” said Eric Schierer, a digital-music analyst with Forrester Research.

On their own

Despite the presence of Capitol Hill players and music-industry heavyweights, the tone of Monday’s conference is expected to be distinctly anti-establishment.

Conference organizer Jenny Toomey, an activist and musician with the punk band Tsunami, hopes to shine the spotlight on independent artists who retain control of their music. Panelists will include musician/entrepreneurs such as Ian Mackaye of Fugazi and Dave Fagin of the Rosenbergs, who have found success outside usual music-industry pathways.

Napster CEO Konrad Hilbers is scheduled to speak as well.

But although the buzz on and off the dais will likely focus on the recording industry’s recent moves, 2001 may be remembered as the year the industry finally caught up with the digital revolution that has swept up so many music fans.

The industry won a key court battle with Napster, forcing the hugely popular song-swapping service to remove all copyrighted songs from its system. Napster, which shut down in July, is expected to test a new, industry-sanctioned service this week.

Recording companies also launched their own digital music services last month, MusicNet and Pressplay, which offer limited access to some music for a monthly fee of between $9.95 and $24.95. Recording giant Vivendi Universal introduced its first copy-protected CD in December and said it intended to format all its releases to prevent “ripping,” or digital copying, by the middle of this year.

But the industry’s biggest trials may still lie ahead. New song-swapping services with names such as Kazaa and Morpheus sprung up in the wake of Napster and quickly gained millions of users. Recording companies promptly filed suit, but the new services, which do not route traffic through a central server, will be more difficult to shut down, analysts say.

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The U.S. Department of Justice has launched an antitrust investigation of MusicNet and Pressplay to determine if Vivendi’s Universal Music Group and the four other major recording companies–AOL Time Warner’s Warner Music Group, Sony Music Entertainment, Bertelsmann’s BMG Entertainment, and EMI Recorded Music–colluded illegally to set rates and terms for the use of their music.

An uphill battle

According to initial reports, the services have gotten off to a slow start.

RealOne Player–the software associated with MusicNet–was downloaded 18,000 times in the past week from software library, compared with 1.5 million downloads for Morpheus and 1 million for Kazaa, according to director Kelly Green. is a division of CNET Networks, publisher of

MusicNet and Pressplay will find little success as long as they offer a limited catalog and restrict how the songs may be used, said Mark Mooradian, an analyst with Jupiter Media Metrix. But immediate profits may not be the industry’s goal, he said.

“It’s important for them to have a proven concept out and start learning about consumer behavior…This year is about watching the business strategy shake out rather than signing up record subscription numbers,” he said.

Hilary Rosen, the recording industry’s top lobbyist, said the services would find success in the long run.

“I think it is a challenge to migrate consumers from what they’ve been getting for free illegally to a pay service, but hopefully, as time goes on, the features and services of the services will win people over,” said Rosen, president of the Recording Industry Association of America.

The music industry is also looking at a weaker bottom line. U.S. album sales fell almost 3 percent last year to 762.6 million units, the industry’s worst performance in at least a decade, prompting some retailers to slash CD prices below $10.

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Rosen attributed the decline to a weak retail environment, restricted radio playlists that leave little room for new artists and the availability of free music online.

Conference organizer Toomey said the industry was paying the price for charging too much for retail CDs. The industry’s troubles presented an opportunity to revamp how business is done, she said.

“When you’ve got a leak in the bathroom, you’re tempted to just fix the pipes. But when you’ve got a whole wall falling down, you can make a whole new bathroom,” said Toomey.

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Report on the Music Industry. (2021, Jan 29). Retrieved February 7, 2023, from