Internet set to call the tune

Downloading music over the Net is the biggest threat to the record industry, so many labels are adopting the technology to their own advantage

Mintel International’s new report “Records, Tapes and CDs” looks at the success of the pre-recorded music industry and considers the future trends led by economic factors and new technology – such as the Internet.

The Internet is one of the most important innovations in the industry since the CD and perhaps one of the most controversial, since the delivery of music over the Internet through music files such as MP3 threatens to diminish high-street retail sales.

Music, dominated by rock and pop, continues to hold a unique place in UK popular culture. Artists receive much public attention, particularly through the media, which has become an integral factor in an artist’s success.

The core market for pre-recorded music is those aged under 24. Almost two-thirds of adults aged under 24 who were surveyed had purchased pre-recorded music from a retailer in the past year. A third of this age group believes that buying CDs, tapes or records is a very important part of their lives. The growth in the 15- to 19-year-old population in the UK is set to benefit pre-recorded music, particularly pop.

Apart from economic factors, such as consumer confidence, disposable income and employment rates, the music industry is somewhat immune to consumer trends. Nonetheless, during 1999 the UK market followed the global trend of a decline in sales volume. Album sales decreased by six per cent during 1999, but this was offset slightly by a one per cent increase in single sales, leading to an overall decline in revenue of four per cent in the UK.

The record industry has seen some consolidation over the past two years and the “big six” record companies have become the “big five” because of the merger between EMI and Warner. These dominant major players accounted for 80 per cent of the market during 1999.

Market dominance is also prevalent within music retailing. HMV, Our Price and Virgin Megastores account for more than half of all album sales and two-thirds of singles sales in 1999. But for the chart releases sector, non-specialist retailers such as supermarkets and multiple retailers are becoming a threat and gaining market share. These non-specialist retailers and independent music retailers often sell music products at a lower price than the larger specialist music retailers.

CDs continue to dominate album sales, with vinyl still catering for a niche market. The increase in singles sales highlights the buoyant pop market and the success of new artists and the boy and girl band phenomenon. Dance music is also showing healthy growth.

The introduction of new technologies, particularly digital music, is radically changing the music industry. All of the major five companies are developing online distribution strategies to take advantage of the growing popularity of downloading music over the Internet – albeit from a small base.

Last week EMI published over 300 digital downloads on the Internet – over 200 singles and 100 full-length albums. It is the biggest effort yet by one of the major record labels to sell online.

The Internet has, however, caused much controversy among the industry over publishing rights. During 1999, 30 illegal MP3 sites were closed down in the UK. And the EU is drafting a Copyright Directive to counter music piracy on the Net.

US website Napster allows users to download music tracks free but it is being taken to court by a number of artists who are not receiving royalties and whose tracks have been listed without permission.

However, the Internet does provide a medium for unsigned bands to reach a wider audience and for known artists to release music prior to high-street releases. David Bowie’s Hours album was the highest profile example during 1999, following the lead Public Enemy set a year before.

Many record companies also offer free downloads of artists’ songs as a marketing tool. With the introduction of broadband technologies, the time taken to download music from the Net is becoming quicker and will soon be down to seconds, compared with the current 15 minutes for an average home PC. The time factor is likely to encourage further growth of digital music downloads.

Mintel predicts that in less than a year all the major record labels will be making their artists’ music available to consumers through digital Internet files. The bulk of these sales will be achieved through online retailers, although a significant share will be through the labels’ own sites.

Despite these new technologies, singles sales are expected to continue to rise in volume and the fall in album sales is expected to level off, with CDs continuing to be the dominant format.

Factfile is edited by Julia Day. Mintel leisure consultant Jackie Robson contributed

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here