Digital music downloads and online streaming sales have now overtaken sales of CDs and records for the first time, underscoring just how fundamentally the internet has changed the way we consume.
The UK-based trade group the International Federation of the Phonographic Industry has reported that global market revenue from digital music sales represented 46% of all sales last year, coming to $US6.85 billion. By contrast, physical sales came to $US6.82 billion.
While online consumption and dissemination has certainly made things easier for many creators and consumers, the online market place can also yield monopoly rights for owners of sites like YouTube, Google and Amazon.
Many have described the explosion in online marketplaces for the creation and sale of content as democratisation. However, the sheer market power concentrated in the hands of such few companies represents a formidable hurdle to fair competition.
Economic Power Shift
The internet has shifted economic power to conglomerates such as Google, Amazon, Yahoo!, Apple, and others. This shift was recently put on full display via Google’s threat to shun the indie music sector from YouTube, raising the question of whether this new economic might has reached unprecedented and potentially dangerous levels. If it has, what does that mean for the digital markets in which these giants dwell?
The music industry has historically benefited from its symbiotic relationships with ancillary industries like broadcasting: songs that received a lot of airtime were more likely to achieve commercial success. Likewise, songs that go viral on YouTube today stand a much greater chance of becoming heavily-streamed tracks. And similar to radio stations, more advertising revenue befalls music streaming companies as their audiences increase.
But the comparison stops there. Though the broadcasting landscape has not always been the hallmark of a healthy level of rivalry, it was at least governed and regulated. The economic situation on the internet challenges the very notion of competition altogether.
