On June 6, 2012, the Joint Research Centre of the European Commission presented a report about the major economic developments in the music industry and the transformations the industry brought about by digitization. Below follows a summary of the most important findings of the study. 

Four major labels - Sony Music, the EMI Group, the Warner Music Group and the Universal Music Group - dominate the global music industry: together they possess 70% of the world market and 80% of the US market. Revenues from recorded music have decreased since the late 90s. Slowly, people are spending more money on digital music, but it does not compensate the losses in physical sales yet. However, music companies become more willing to sign deals with legal online music providers. Also, they try to increase revenues from other services and products, like live performances and merchandising. The so-called '360 degree deals' become more common. In this business arrangement, the music company owns all the rights of the artist and receives a percentage of all the income, including income from recordings, live performances, merchandising and the rights for online services, radio plays, use in films, games and TV series. In return, the music company takes on all the business risks.

A problem that arises for online music providers in the European Union is that different rights are owned by different right holders and are laid down in different contracts managed by different collective management organizations. Besides, the limitations and exceptions from the Copyright Directive are implemented differently in Member States. This makes it hard for online music providers to negotiate the terms of use of protected works for a large territory within the EU. Multi-territory licenses could be a possible solution of this problem.

For consumers, music changed from a physical product to an entertainment service. They now have a choice of different business models provided by online music providers, from free advertisement-based models, to paid subscriptions and models where users pay for individual pieces of content, like songs or albums. Paying for digital music has become more common. Also, social networks play an increasingly important role as they allow consumers to share music and recommendations.

The study of the Joint Research Centre makes clear that the internet and digitization has had an enormous impact on the music industry. According to the Joint Research Centre, the industry is challenged to adapt to the digital environment and to develop new business models which are beneficial for businesses, artists and consumers. The digital environment offers not only challenges, but also new opportunities. It is important that the music industry sees those opportunities and responds on them, instead of holding on to traditional business models.

The whole report can be found here.

Read more about the developments in the music industry on FutureOfCopyright.com:

• Different obstacles to digital distribution of music, movies, games and e-books
• Digital radio royalties start to make a difference for labels and artists
• Dutch provider T-Mobile offers customers discounts on Deezer

Source: Joint Research Centre