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On the Music Industry and Internet Era

Indonesian music fans are embracing technology and filling up their music players and phones with MP3 files. (SP Photo)

I happen to be a music fanatic, especially for Britpop. Over the years I listened to every British band and could easily make a glossary of acts considered Britpop, from the legendary Beatles to the latest, The Kills.

There were the glory days when you could see bands and feel the ambience that made you shiver down your spine. But these days, where the likes of Katy Perry have come to prominence, I wonder where the good old days have gone in this “megadownload era.” People seem to have less respect for both the band and the genre of music.

There’s been a role reversal between musician and listener. Fans once enjoyed communicating that they worshipped a band (sporting T-shirts or a tattoo of the band’s name). But today, the band or musician does everything they can to draw fans to their live shows just to make a living, pestering them via social media in the hopes of making them aware of their existence.

If you happen to live in an area where technology is not prevalent, you might find it overwhelming. For music, the most notable symbol is the presence of the MP3 format. Seen as the real evolution in music industry, it changed both the price and delivery of music. People used to exchange cassettes tape or CDs, but now both seem to be obsolete.

The basic idea was labels were brokers between song creators and consumers who bought new music, distributing it to listeners. This conventional concept sounds archaic with the presence of the digital format and the democratization of the Internet. With all this innovation, what currently drives the market is consumers. 

According to Rufus Pollock, the co-founder of the Open Knowledge Foundation, album sales have fallen 30 percent between 2000 and 2008. The paradigm shift means that to own an album, it’s no longer required to be a fan.

File sharing gives users the luxury to choose their own selected “albums,” all of which give way to the emergence of indie bands, the concept of singles and a world music genre which everyone used to look past.

There are two important keywords regarding the Internet era, the music industry and a market that could be characterized as a competitive oligopoly: Imperfect information and substitutes. I’ll try to focus on the imperfect information aspect and see the situation through the eyes of the players in the oligopoly.

One aspect that crafts the oligopolistic market is imperfect information, which leads to distortion of market perception. Before the presence of the Internet and free data sharing, music marketing concepts were derived from two kinds of media, radio and print. Thus, the incumbents of the industry — well-known bands under major labels — were making it difficult for new entrants to penetrate the market, because the major labels had absolute control over the product they wanted to expose consumers to.

Nevertheless, with the advent of tech through the Internet, the modern music industry is more flexible through society’s frenetic information transfer. Consumers now can read blogs, download and upload songs and share music through social networks or media, all of which are the enemy of music industry incumbents. They no longer possess total control over the distribution of music, which in turn lowers the barriers of entry into the industry.

I have not yet stated my personal position on the Internet era of free music. It is sadly true that I long for a conventional music industry and the good old days when musicians created real art instead of pure commodity. And yet, I cannot complain about this modern music landscape I find myself in.

The Internetized music industry creates platforms for everyone to join the industry. But whether the free music era bolsters music as pure art or mere commodity with a poor level of musicality remains to be seen.

White Margin is a group of three young economists with opinionated minds and twitchy fingers. They share knee-jerk reactions, half-baked to fully-formed ideas, random musings, angry rants, and the list goes on… mainly on Jakarta and Indonesia, with an undertone of economic theory and logic. We believe that there is always room, some white margin, to fill in perspectives, even for the most rigid theories.