Monday, February 5, 2007

Downloading Music: Harming or Benefiting the Music Industry?

The Music Industry has been going through some major changes since music became available for downloading off the internet. Downloading music became popular when people were able to share music files for free. Some issues with copyright laws became a factor because people were not paying for the music. The band Metallica (image on right) created a stir about these copyright laws being broken through a company called Napster, and record companies were loosing money. Metallica went to court and won. This created music downloading sites that charged for downloading music.

Today there are many websites that one can pay as a member to download music. These websites are proving to be profitable in the long run. But in the short run CD sales have been declining and will keep declining. What will balance out the CD sales decline is the fee-based digital download websites. According to Jane Weaver of MSNBC, Forrester Research projected that downloading music from the internet will reach $2 billion in sales: or 17 percent of the music business in 2007. Global CD sales declined 5.1 percent in 2002 and in 2003 had a decline of 6 percent.

So, the transition from CD sales to profitable music downloading for the music industry is a slow and painful transition, but in the long run it can prove to be profitable.
What is harming the industry today is the file-sharing sites like KaZaA. Sites like KaZaA came about after Napster was sued and forced to comply with a US District Court Injunction. These free websites are proving to be very controversial and most law experts agree that it is illegal to download music that is copy written or owned by a person or company. People who use KaZaA share their music files with other KaZaA users. If free downloading continues this could cause record companies and musicians to continue to loose money. The recording industry is cracking down on illegal file sharing and has started suing people who engage in this activity (as image below and to the right shows a kid downloading music). A mother of a 12-year old downloader had to pay $2000 to settle a lawsuit by the recording industry for illegal downloading. According to Cary Sherman, President of Recording Industry Association of America, “We want people to stop engaging in the theft of music so that people can go on making it. This is a terrible thing where people are biting the hands that make the music and destroying the very music that they want to continue to be created.” The Recording Industry Association of America (RIAA) plans to file many more civil lawsuits against offenders who are illegally downloading and distributing copy written music on peer-to-peer networks.

Other countries besides the U.S. have had a decline in CD sales since internet downloading. Canada claims to have experienced significant financial losses due to music downloading. The loss is due to decreased music sales and is attributed to peer-to-peer file sharing. Canadian artists have also suffered material loss. Graham Henderson, president of the Canadian Recording Industry Association (CRIA) argued that music downloading has devastated the industry. The decline in CD sales for Canada, over a 6 year period, has been approximately C$ 431.7 million.

Tower Records appears to be a victim of music downloading. On August 20, 2006, Tower Records filed chapter 11 bankruptcy in order to facilitate a purchase of the company prior to the holiday shopping season. On October 6, 2006, Great American Group won an auction of the company’s assets. Tower Records had going-out-of-business sales at all U.S. Tower Records locations and closed by December 22, 2006. The Tower Records website was sold separately. Many people believe that Tower Records filing bankruptcy had much to do with music downloading and decreased CD sales. Tower Records had been in business since 1960. This is a huge company that has been in business for many years. It is not coincidental that Tower Records would go out of business during this major transition in the music industry. Some companies are bound to pay the price when it comes to music downloading. Music companies today need to be smart and cash in on the legal music downloading sites that are making a profit. Once this transition is complete, music companies will definitely make millions of dollars in profits. The transition may not be a smooth one, and certain companies may get hurt along the way. But, in the long run music downloading can prove to be a very profitable business.

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