One of the hottest -- and most contentious -- markets for digital media is music. The music industry, however, needs to turn to their cousins in Hollywood and see how film and television have adapted to the Internet and maybe learn some lessons.
A couple of years ago, no one had heard of the RIAA (Recording Industry Association of America). Now it's a household name, and depending on whom you talk to, usually equated with tyrannical evil. Despite this, one of the mainstays of media sales online is digital music, and it likely will be that way for some time.
The ham-handed approach the RIAA has taken in the past with users and distributors does not seem to have slaked the public's thirst for digital tunes. According to the International Federation of the Phonographic Industry (IFPI), digital music sales rose worldwide by 9.2 percent in 2009, gaining 10 times their total dollar value from 2004. Record companies in the US, according to the IFPI, now count 43 percent of their market and trade revenues as digital music.
Despite this, the recording industry claims to suffer huge losses due to piracy. Still, world digital music sales comprised 25.3 percent of total music sales in 2009.
The IFPI says there are just over 400 digital music services offering media worldwide. These companies offer a combined 12 million tracks for download. And one of the largest driving forces of digital media in the past two years has been mobile devices.
The NPD Group, a market analysis firm, shows that 16 percent of people in the US over the age of 13 use a device other than a home computer to download content from the Web. Most of those (about 75 percent) are iPod/iPhone users, and the rest are mainly game console and Blu-Ray set-top users.
Yet, the music industry has continued to pursue a model of top-down sales. Their digital music sales are treated as just another aspect of their traditional record sales, despite nearly half of their sales not being put on physical media at all.
What’s more, the music industry's business model of heavy-handed control over sales and distribution is likely holding back the industry rather than promoting it.
Film and television have taken a much different approach. Hollywood producers and studios/distributors have partnered with several digital media providers, such as Hulu LLC and Netflix Inc. (Nasdaq: NFLX), to offer both paid subscription streams and commercial-based revenues. Users can access content for free or with a fee and are often happy to do so. Studios and production facilities in the film industry embraced the new online media at its outset and are moving forward with it, not against it.
Most of the film industry's anti-piracy efforts have been aimed at both policy (law) and public awareness. According to the Information Technology & Innovation Foundation, most video piracy happens outside of the United States now, and the industry is working hard to find the "sweet spot" between free content (pirated) and paid content.
So the music industry is finding itself combating public perception on two fronts: perception of how piracy does or doesn't affect the industry, and the public's disapproval of the industry's crack-down methods for enforcement.
The music business needs to get with it.
— Craig Agranoff is an entrepreneur and national social media consultant as well as a published specialist in online reputation management and monitoring.