There’s a long way to go for the music industry to work out the kinks associated with the digital age-an age that caught the industry by surprise, causing it to scramble for adjustment while trying to work with outdated business models.
Now, as profits from legally downloaded music soars and CD sales decline, another unforeseen issue as sprung up as musicians (the often forgot about cornerstones of the industry) are seeing their royalties decline-a side effect of modern business deals associated with downloading music.
Artists receive, on average, 12 cents per $3 CD single sold, according to E-Commerce Times. The sticker price of CDs, of course, reflect manufacturing, packaging, and marketing costs, as well as the desired profit margins for labels and royalty fees.
With the dawn iTunes and services like it, that overhead has been greatly reduced. And though the music industry raked in an estimated $790 million from downloads in the first half of 2005, artists are only seeing 6 cents per song royalty, in essence selling their wares at half price.
In the United Kingdom, Apple is being pressured by music managers to up those royalty payments, while record labels want a significant increase in price per song-as much as $2.99 per song–a move Apple CEO Steve Jobs regarded as greedy.
E-Commerce Times points out that the music industry as a whole was unprepared for the digital revolution and have been working with pre-digital business models that are not going to be as effective as they once were.
Haggling over price aside, the most daunting challenge facing the industry as a whole is that of music piracy and file sharing.
“There is a long way to go — digital and physical piracy remain a big threat to our business in many markets,” IFPI Chairman and CEO John Kennedy told E-Commerce Times. “Our industry’s priorities are to further grow this emerging digital music business while stepping up our efforts to protect it from copyright theft.”
While 99 cents per song may indeed be unsustainable in the near future, if you figure in upped royalty payments (which seems a fair thing to do) and the cost of piracy protection, it seems reasonable that the price needn’t rise to $3 per song level that reflected real-world costs of CD production and distribution.
