The late Steve Jobs, Apple’s CEO, saw the digital transformation of the music industry coming before any other major player in the industry and he realized that a new business model for online distribution and sales was needed in order to make legal music available to consumers at a reasonable price point. He also understood that it was crucial to convince all of the major labels of his vision before moving forward with iTunes Music Store. In fact, Jobs’s success with iTunes can be attributed to his ability to convince the majors that they should allow him to create a new business model for online music distribution and sales and that there were substantial profits in this venture if they would de-bundle their products and sell them on an individual basis rather than as “albums”; which had previously been sold on CD for $15–20 and included only 10–15 tracks out of 100 or more total tracks on each album release. The majors agreed to let Apple set up its own pricing structure for individual tracks which allowed them to charge 99 cents per track—a price point at which consumers were willing to pay but still not so high as to threaten physical sales where CDs were being sold at roughly $10–12 per album including several extra bonuses such as liner notes, cover art, lyrics, etc., many of which are now found online as well—but with much higher quality content.
After establishing an extremely simple interface for downloading songs from iTunes Store (the service had just five options: search for song title, browse by genre, browse by artist, look at recommended albums, or view top 100 chart) Apple created a magical combination of low prices (compared with physical retail) and easy access via desktop computer devices owned by most people in developed countries who already had their credit card information registered with Apple since they usually used those computers when buying software from Apple’s App Store or iPods/iPhones from any Apple retailer around the world.
While Steve Jobs never made it clear how much revenue iTunes generated per year during its first decade, we have some information about revenue estimates from other sources such as Billboard magazine . According to their estimates , iTunes accounts for about 24 percent of all recorded music purchases worldwide ($3 billion) during 2012; however, this only includes downloads from third party digital services such as Amazon MP3 Music Store or Rhapsody Digital Music Service while excluding purchases directly via Apple’s iTunes store. While the latter 24 percent seems significant, it is important to remember that iTunes is just one of the digital services that are available to consumers. In fact, there are hundreds of digital music retailers around the world, and each has some market share in its respective country or local region (although globally iTunes still dominates with a market share of about 50 percent). The global digital music market can be estimated to be somewhere between $5 billion and $8 billion per year, depending on the definition of a digital music “purchase” that is used. The success of iTunes Music Store was just the beginning. Apple was able to convince other major music labels that it could build a similar service for all types of content and not just music—which resulted in the creation of iTunes Books Store and iTunes App Store which are now two more massive businesses for Apple. In addition, independent artists started their own online music distribution services such as CD Baby (now a division of Amazon) because they wanted to avoid paying high commissions when working with traditional record labels. For example, in most cases independent artists pay 50 percent commission to record labels when their song is sold via iTunes or any other third-party services, but only 15 percent if they sell directly through CD Baby. Thus, even though there are hundreds of online retailers for consumers to choose from today, the number of artists who distribute their works directly is also increasing rapidly—and this trend will continue as many artists become more aware about how much money they lose by signing with traditional record companies that take most revenue streams from each artist while offering very little in return compared with what an independent artist can do by himself via social media and direct communication with his listeners/fans.
THE BATTLE FOR CONTROL OF THE RECORDING INDUSTRY
The battle for control over the recording industry has been raging on since its inception some 100 years ago. Initially it was between recording companies and performers; then it was between performers’ unions (such as AFM) and publishers; then it shifted back to battles between recording companies; then it shifted among record labels again; now we see rivalries emerging among copyright owners such as songwriters or performers who hold rights over their copyrighted work (as opposed to publishing companies which hold copyrights on behalf of songwriters). The conflict continues endlessly because there are always new challenges arising among players within the industry due to changes in technology or new business models that emerge. While some players may gain temporary dominance over other players within one market segment at one point in time (like Apple did during early 2000s), there will always be another player that comes out later with a better business model than its predecessor (for example, Google has replaced Apple as leading mobile device maker).
This ongoing battle makes sense because no one player or group within this industry has ever had absolute power over others. It would have been impossible anyway due to market forces that keep the whole industry in constant flux, which makes it a very interesting and exciting place to be. While we are now in an age of digital distribution, the music industry is not as simple as it was back when performers could sell sheet music on their own or record companies could sell discs in record stores. Today’s recording industry is divided into three main segments:
1.) Digital distribution services
2.) Physical distribution (e.g., CD and DVD)
3.) Live performances (e.g., concerts)
Each segment has its own set of stakeholders with different business interests that sometimes overlap but at other times compete with one another . This section will briefly discuss each of these segments from the perspective of a rights holder within a particular segment who might have some conflicts with others.
1.) Digital Distribution Services - The owners of copyrights can sell their copyrighted content directly to consumers via various digital distribution services such as iTunes Music Store or any other service that allows artists to upload their tracks online for sale by consumers.
2.) Physical Distribution - The list of current digital music retailers includes Amazon MP3 Music Store; Apple iTunes Music Store; Rhapsody Digital Music Service; Google Play (Google’s online store); Nokia Music Store; Spotify Premium (streaming); Xbox Music (Microsoft digital music service); eMusic Digital Music Store (streaming); and a few others.
3.) Live Performance – Owners of copyrights can get paid when a song is performed live.
In conclusion, we can see how fragile the old guards of the music industry are and in no small part we have Steve Jobs to thank for that.
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