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The Changing Face of Music Delivery: The Effects of Digital Technologies on the Music Industry

October 18, 200518 October 2005

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This report investigates recent changes that have affected the music industry, such as the arrival of efficient digital technologies and the adeptness with which music consumers have explored non-traditional methods of music transmission. A variety of research methods and sources are used, including news media scans, a review of retail, record label and artist websites, attendance at Canada Music Week discussions, and 28 interviews with industry stakeholders.

The paper suggests that after years of information overload, many consumers are choosing media channels that allow more control over content. For example, Napster and other peer-to-peer networks have allowed music lovers access to an unlimited supply of free music of their choice from every genre. This has affected the traditional business model of the music industry. Citing figures from the Canadian Recording Industry Association, the paper states that album sales revenue in Canada decreased by 24% between 1998 and 2003. Retail space devoted to music declined by 30% between 1998 and 2003.

The report explores new e-business models for digital media music sales that emphasize partnership among stakeholders, new revenue divisions (e.g. cents per download), and services that represent value to the consumer (such as ease of usage or a wide selection of music within a niche). Marketing of online music sites and the deterrence of piracy are also discussed.

The report predicts that foreign-owned digital music services will “have profound implications for Canadians looking for music that interests them online” and a significant “impact on Canadian artists and labels looking to get their work in front of Canadian audiences.” Many of the stakeholders quoted in the paper urge the government and the music industry to settle copyright law issues and to work quickly to establish a well-marketed, viable and lawful electronic distribution system to protect Canadian artists and digital download companies from foreign competition.

The paper concludes with a list of possible policy actions to improve the Canadian music industry’s vibrancy. These actions include developing a strategy of market development for Canadian online music products, examining possible incentives for the private sector to engage in online development, incorporating marketing plans as a requisite for online media funding programs, and supporting behavioural research into how Canadians use the Internet and media.

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