Challenges in The Music Industry Essay Example | Topics and Well Written Essays - 2500 words

Challenges in The Music Industry - Essay Example The music industry is going through a hard time due to a decline in CD sales over the years. This is mainly due to the free digital downloads from file sharing sites. The artists are no longer earning much from royalties since the record companies are not selling as much as they once did. This has created the need for the artists and the record companies to seek other alternatives. The music industry is a massive one and consists of producers, artists, retailers, songwriters, marketing agencies, publishers, record studios, record labels engineers, manufacturers and distributors. Essentially, artists, who could also be songwriters, are signed under contracts by record companies to produce a given number of albums or singles. More often than not, record companies pay for the production, manufacture and marketing of albums worldwide. Any revenue generated from album sale goes towards covering the cost of its production. A number of record companies also have ownership rights to the back catalogue of artists. This in essence means that they can decide how this catalogue will be used. For instance, another artist may wish to re-record the song, or an advertising agency may want to use it in its campaign. The record company has the discretion of deciding whether or not to reissue the material. This could probably be in a reformatted version consisting of bonus tracks or could be completely re-mastered. In numerous cases, certain types of music do not have sufficient demand to warrant spending of a lot of money on them. As a result, the record company may make big losses on that artist. The record companies usually regard the artists they work with as among their product portfolio. This leads to very successful artists effectively subsidizing lesser known ones. Record companies therefore base their business on the ability to provide music capable of satisfying the consumers' wide range of tastes. They therefore have to manage their product portfolio carefully to make sure that the cash that flows into the business is adequate in maintaining all its liabilities. Many record companies are usually owners of other companies that they may either have set up or bought. For instance, Universal Music Group also owns other companies such as Deutsche Grammophon and Verve. The company also owns a number of labels distributing both rock and mainstream pop material. It is therefore common for the industry to be dominated by five or so major companies accounting for about 75 per cent of all recorded music sales worldwide. However, within these five companies may be many other companies and labels, which may be well- known in their field of operation. These smaller companies may actually have been set up or acquired by their parent companies. The challenges A number of record labels have seen their sales fall tremendously over the years. This fall has been attributed to increased piracy that has greatly affected the music industry. Artists get their royalties from their music's sales by the record companies. Piracy means that any sales made are not official, and therefore no payment for the artists. The advancement of technology has not made the situation any better. It has led to an increase