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Universal Music's market share is 25% and its annual revenue was about 6 Bln in 2008. Meaning that the total worldwide revenue from music was about 24 Bln worldwide. The US music market is about 35% of the total, so about 8 Bln, which is correct according to RIAA numbers. Which means that almost 100% of major labels income... [Read All]
Universal Music's market share is 25% and its annual revenue was about 6 Bln in 2008. Meaning that the total worldwide revenue from music was about 24 Bln worldwide. The US music market is about 35% of the total, so about 8 Bln, which is correct according to RIAA numbers. Which means that almost 100% of major labels income comes from selling and licensing music.
Their revenue stream however has been stagnating during the last 3 years, exactly for the reason that they see music as a commodity that can be sold, rather than an experience, as an event.
Because of this the labels are holding on so tight to the copyright law, as their business model is solely based on selling tracks and albums and deriving income from it.
Their profits are about 15% of their revenues, if we imagine that 15% goes into advertising, 15% into distribution, and another 15% into production, the rest 40% is left to cover the actual costs of running the staff, renting offices, etc. â the artist barely gets about 10% of the sales at the end.
At the moment digital sales is the most commercially feasible channel, the labels will slowly eliminate record shops as their middle men (currently still 30% of their sales go through them), and focus on digital music distribution channels such as iTunes, direct downloads, Amazon, etc. This will allow them to cut their costs by about 30% (production + distribution), which is already reflected in the price of music online. Companies like Apple will get most revenues because they aggregate music from providers.
Apple and other software companies that found feasible business models for music (Spotify) will be able to dictate their terms to labels then. In addition to this, they win in the situation where music labels are defeated â the artists can already come directly to them and sell music bypassing the labels. With the further development of recommendation systems, curatorial role shift go to end users, while the distribution infrastructure and advertising will shift to online music stores. Labels will slowly lose their influence and die off unless they manage to shift their business model and realize that providing the actual music doesn't mean anything â it's about organizing communities and events around it. That's where the labels might get an advantage â creating their own advanced download portals allowing users to connect and socialize around the music they listen to, be informed about future events, and so on. In this case even P2P networks would not be such a big threat, because they merely provide infrastructure, not the actual social function (yet). The ideal situation for artists and listeners though would be a different copyright law that would allow free distribution of music and the actual services around it would be something to monetize on.