Industry Ears

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The business model for the record industry has left them behind. Bad music with a new world of digital and social media spell trouble.

Paul Porter
Industry ears

Music sales took nose-dive in past decade

By Kim Hart

The music industry’s sales have been chopped in half over the past decade, due to changing consumer tastes and business models.

A report by Forrester Research shows total revenue from U.S. music sales and and licensing fees plummeted to $6.3 billion in 2009. That’s down from $14.6 billion in 1999.

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The growth of digital music–and consumers’ reluctance to pay for it online–is the biggest culprit for the industry’s staggering losses. Napster, the free file-sharing site, debuted in 1999, followed by others such as Kazaa and LimeWire.

People didn’t seem willing to pay for music until Apple’s iTunes entered the scene in 2003. But that gap did irreparable damage to the industry, according to Sonal Gandhi, Forester music analyst told CNN Money.

“That four-year lag is where the music industry lost the battle,” Gandhi said. “They lost an opportunity to take consumers’ new behavior and really monetize it in a way that nipped the free music expectation in the bud.”

Forrester says just 44 percent of U.S. Internet users and 64 percent of Americans who buy digital music think they should have to pay for music.

Illegal downloads represent about 90 percent of the digital music market, according to BigChampagne Media Measurement.

The music industry has long struggled to find ways to deter unauthorized downloading and file-sharing. The latest proposal would suspend a consumer’s Internet access if they are caught violating copyright laws a certain number of times.