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iTunes Is Dead: The Record Industry's Next Steps

Stocks in this article: AAPL P

NEW YORK (TheStreet) -- Two big announcements hit Friday that ultimately highlight the decrepit state of the music industrial complex:

  • Digital downloads are dead. As reported by Billboard, digital music sales decreased -- for the first time ever -- by 5.7% in 2013.
  • Gracenote launched an API that allows brands to create their own streaming music services (i.e., Pandora (P) knockoffs).

Before we dig into the aforementioned decrepitness, a few random, but related clarifications and housekeeping notes:

  • Despite the overall drop in digital sales, Apple's (AAPL) iTunes Store market share increased to 40.6% of domestic album sales in 2013. That said, this article's headline stands because, make no mistake, as I observed throughout 2013 (see, e.g., this article from August), Apple wins no matter what happens. The record industry cannot hang its hat on the still-breathing iTunes Store. That's a ticket to certain death. Put another way, iTunes will not be the sole long-term survivor, as digital sales go the way of the compact disc. That's why Timothy D. Cook hedged his bets with streaming service iTunes Radio.
  • Bold type here: Thank goodness for the creative souls who still exist within or in association with the lame factions of the music industrial complex. From megastars such as Beyonce and Taylor Swift to hard-working indies (wait!, Taylor Swift is indie!) to the great minds who work at the labels and fight against visionless pencil pushers, legal departments and high-level, cigar-smoking industry executives. These people, along with tech- and data-driven music startups and Internet radio pioneers help keep hope alive.
  • The Gracenote move is more of a salvo towards the folks who do excellent work at The Echo Nest than it is Pandora or Spotify. I'm getting to know The Echo Nest folks and early indications tell me they'll be just fine.

With that out of the way, on to the pathetic state of the music industry holdouts, who, sadly, hinder progress the above-mentioned "creative souls" make. This dynamic leads to inspiring stories of individual success (that others can work to replicate), but not the type of widespread organizational acceptance of a new paradigm for making and marketing music.

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