Music labels thrive, but will online music services?

By Derek Sooman on
"Of the 99 that stores such as Napster and iTunes Music Store charge for tracks, the labels get up to 87 of it. That leaves 8 for the publishers and a paltry 4 for the stores themselves. The net result is that the labels are increasing their profits while reducing their overhead (which is good business). Downloads require no physical packaging, shipping, or other manufacturing costs for the labels yet bring in more revenues. Bandwidth, marketing, and other costs are absorbed by the store."

I was, like many of you probably, under the impression that mp3 downloads, bittorrents and things like that were killing the music industry. Sales have dropped by X amount because Y amount of mp3s were downloaded from Kazaa, etc, etc. I thought the music labels were in serious trouble. Looks like I was wrong.

Far from being the ruined businesses that they might like us to believe, it appears that their profits are actually growing strongly as a result of the boom in online music, and that some online music services may disappear, whilst music labels continue to make better and better profits. It also appears that only a slim portion of profits made through online sales make their way to the online music services. And I think we can guess how much makes its way to the actual artists, who in a dream world I would like to pay directly for their works.

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