To understand the chaos that is the emerging digital music market, it's useful to think of it as a vibrant ecosystem. And like all ecosystems, the digital music market is complex, unruly and constantly changing.
The most important player in this ecosystem is content. Without it, there ain't no music industry. Right now, the so-called Big Five record labels control the majority of content. But thanks to artists' increasing dissatisfaction with the majors, the independent labels have been gaining strength, and they're turning to the Internet in a gambit to extend their power.
Content creates a need for the ecosystem's second player: Even though the Internet obviates the need for physical products and manufacturing, the market needs software companies to digitize and encode the music so that it can be downloaded quickly and easily over a Net connection at any speed.
In turn, digitized content generates the demand for the system's third element: distribution systems that help consumers find and access the content. Traditionally, consumers have bought the bulk of their content from bricks-and-mortar retailers, but increasingly they are spending money online because it's often cheaper and more convenient.
The ecosystem's final element is the hardware. After music fans have downloaded the music to their computer hard drives, they'll need a gizmo that allows them to transport the music and play it. From portable MP3 players to recordable CD drives to digital home stereo units, a whole new range of hardware devices is springing up to service this need just in time for the holiday season.
series Digital Music Unplugged explores the investment rewards and risks created by the digitalization of the music industry. Forget what other business publications have written: pieces focusing on the new technology, the threat posed to major record labels and the darling of the industry,
. This package uses that information as a starting point to examine deeper implications that this trend will have in the business and finance worlds and the companies that will set the standard.
On Wednesday, the report kicks off with my
overview of the major industry trends, including a
time line of the history of recording and listening technology.
examines how digital music is rocking the retail industry -- online as well as bricks and mortar, while
looks at the new hardware devices. Plus, our tech heavy-hitter
takes a look at some of the primary suppliers of digital music on the Net, including MP3.com and
The package wraps up Friday with a focus on content when I highlight the music industry's
leading player. Seymour also
speculates on the future of a much smaller player in the field,
Special thanks to
Steven Schoenherr, a professor of history at University of San Diego, Calif.
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