The Music Industry and Business Models

Over 2.8 million Australians download music illegally each year (Music Rights Australia, 2012.) So why is the music industry still pursuing a decaying business model?

On August 22, 2012, The Project reported on the push for harsher laws on people who illegally download in Queensland (The Project, 2012). The Project revealed that 95% of all music downloaded in Australia is illegal. The Project interviewed Mark Pesce, an internet pioneer on the topic.

Mark Pesce: “When people steal something from the shop, it’s gone from the shop. When they take something from the interweb, they’ve made a copy of it and people see that as being different. I think we need to make business models that appreciate that difference.”

The Project: “If so many people are fine about doing this, then shouldn’t the laws of our country reflect that, rather than imposing harsh penalties?”

“We saw parliament pass laws today that make it even easier to go after people who are file sharing in this way. What we really want is a government that create laws that allow the best possible outcomes for both artists and people who want to share the works of great artists.”

With the rise of new media, it’s no longer possible for the music industry and government to continue to incriminate illegal music downloaders. Current laws see the less IT savvy, such as young children, or parents responsible for the internet connection as victims of litigation, rather than the IT savvy  responsible for mass file sharing (Doloswala, 2011.)

I propose a different business model for the music industry, aimed at Generation Y. It would embrace new media and content would be distributed over multiple platforms. This is similar to marketing of “The Matrix” (Nightingale, & Dwyer, 2007, pp 29). The communication between artists and their fans will become multi-faceted, where consumers will learn about the real personality of the artist through multiple platforms. By increasing artist interactions, “grassroots marketing” (Vellar, 2012) will be encouraged and a shared responsibility or trust is likely to be established between the artist and fans. An artist would be promoted as a brand, rather than just promoting their songs.

But if people aren’t paying for their music, how will artists make their money?

I propose 5 ways in which artists can continue to make money from music, and use new media:

  1. Immediacy and patronage

Generation Y are renowned for their thirst for instant information and communications (Venetis, 2010). Artists and record companies could embrace this by “pre-releasing” albums online for a small cost. This would be before it reaches shops, the online iTunes store, or torrent websites. Only a limited number of albums would be released, to give fans a “first in line” experience.

In 2007, Radiohead streamed their album “In Rainbows” to fans online (Devilla, 2008). Furthermore, they didn’t set a price, and allowed fans to pay a “donation” for the album – whatever they seemed fit. A year later, they released figures which proved the decision to be a success. Although more people downloaded the album than paid for it (Kreps, 2008), Warner/Chappell confirmed that “In Rainbows made more money before the album was physically released than the total sales for the previous album, Hail to the Thief” (Devilla, 2008).

  1. Personalisation and authenticity

Artists could embrace this by selling merchandise which is created through collaboration of fans and artists. This was demonstrated by Amanda Palmer (of the Dresdon Dolls) in 2009, when she raised US$19,000 in 10 hours (King, 2009). She achieved this by working with fans in the production and selling of t-shirts. This is an example of successful utilisation of free labour (Hesmondhalgh, 2010), as fans volunteer to produce commodities. Other ways artists could use this is by auctioning off autographed merchandise online.

  1. Accessibility

With new media, music is already accessible just about anywhere and anytime. Illegal downloading programs have aid this. For example, “Headphones” allows users to search for an album, and the program will immediately download it when it becomes available (Daemox, 2011). The music industry could create a legitimate app for phones with a similar functionality. Instead of paying for each album, users could pay a monthly fee for a certain amount of music downloading each month. For example, they could choose 5 albums per month, which would be downloaded immediately upon release, and accessible from mobile devices.

  1. Findability

This could be done through “hidden tracks” and “treasure hunts”. It could be employed in a number of creative ways. For example, an iPhone app where participants enter in trivia information about the artist and their music before being able to download a “hidden track”. This could be information as simple as “what is the name of the most recent album” down to trivia such as where the artist was born. It could also be done on a larger scale, where a step-by-step real life trivia hunt is created, with a certain number of the first participants to reach the end receiving concert, or “meet-and-greet” tickets. This is similar to, and would employ “grassroots marketing” (Vellar, 2012).

  1. Embodiment

Embodiment consists of concerts and festivals. This would be the main income for artists and the music industry, as I believe people will always be prepared to pay premium price to witness live performances. The above methods would help create a strong fan base, as well as promote upcoming concerts.



Doloswala, K. N., & Dadich, A. (2011). The accidental criminal: Using policy to curb illegal downloading. First Monday, 16(6).

Hesmondhalgh, D. (2010). User-generated content, free labour and the cultural industries. Ephemera, 10(3/4), 267-284.

Ludovic, H. (2010). The Music Industry’s New Business Model. Business and Economics. Retrieved from ProQuest Central.

Nightingale, V., & Dwyer, T. (Eds.). (2007). New media worlds: Challenges for convergence. In New media worlds: Challenges for convergence (pp. 19-36). South Melbourne, Australia: Oxford University Press.

Vellar, A. (2012). The recording industry and grassroots marketing – from street teams to flash mobs, Participations: Journal of Audience and Reception Studies, 9(1), 95-118.


Kelly, K. (2011). “Better than free: How Value is Generated in a Free Copy World.” [Video File]. Retrieved from

The Project. (2012). Seg 6: Downloading; Top 5. [Video File]. Retrieved from

Lukinhasgaga (2012). The Album ‘Fame,The First Ever Black Eau De Parfum”. [Video File]. Retrieved from:


Daemox. (2011). Headphones: Sick Beard and Couch Potato like Application for Music! Retrieved August 23, 2012, from

Devilla, J. 2008. Radiohead’s “In Rainbows” Experiment was a Success. Global Nerdy. Retrieved August 23, 2012, from

Kreps, D. 2008. Radiohead Publishers Reveal “In Rainbows” Numbers. Rolling Stone Music. Retrieved August 23, 2012, from

Music Rights Australia. 2012. Retrieved August 23, 2012, from


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