Discuss the real impact of peer to peer file sharing on the music industry

At present there?s a lot of discussion about the real affect of peer to peer file sharing on the music industry, many say it?s the downfall of the music industry, others say its evolving into another business model or format and all that?s happening is simply the redistribution of market shares and assets from one side of the music industry (namely the ?Big Industry labels?) to the new emerging industry sectors such as gaming and entertainment. Others say the commercial music industry brought it upon themselves due to the lack of unwillingness to change with the times? In this essay I will try to look at the true extent and impact that file sharing has had on the music industry.

Should the labels have embraced the new business model? During the first 10 years of the online music frenzy, the commercial industry labels either couldn?t understand how to handle the issues of selling music online or were simply unwilling. With many labels simply refusing to license their catalogs to the first pioneers in the new emerging sector of online music distribution. These labels wanted to keep complete control over the business they?d previously had complete dominance over, with the attitude that this is ?our music? and we won?t endorse downloading. The result of this was that music fans seeked the unlicensed services of peer to peer. The first ever peer to peer system was Napster, the way in which it worked was by letting people access each other?s hard drives remotely rather than access a main server, because of the decentralized nature, millions of users could access thousands or even millions of files at the same time. Many believe that sites like Napster actually stimulated the growth of CD sales allowing users to check out what was ?hot and what was ?not?. In 2002 the commercial music industry made 32 billion globally, the only complete year Napster was operating (2000) CDs sales were up 3.1 percent from the previous year. The year that MP3?s became widely used and Napster first appeared revenues were up 12 percent. When the commercial labels finally had Napster shut down (2001) sales were down by 4.1 percent , the following year (2002) sales were down by 9-10 percent. Due to lack of compromise and cooperation on the part of the major labels in enabling new business models to be tried, this overall has encouraged peer to peer and the software systems that enables people to file share ?widespread file-sharing systems is a direct result of the incumbent failing to come to terms with the new digital reality?. (Kusek, D. & Leonhard, G 2005, p8) The failings in the commercial sector seem to point not just to peer to peer, but a change in the industry and other competing industries, such as the gaming and entertainment industries, electronic company?s ,DVD and CD technology?s, all of which enable the user to ?burn/rip? their own CDs, on personal computers , gaming consoles and other media devices. Without these factors, peer to peer wouldn?t exist on the scale it does today, if it exists at all? With the advent of these new technology?s bringing about massive change to an industry the major labels did not want to embrace the change of adapting to a changing market.
If you look back to when television and radio first came on to the scene the theater owners and record executives all tried to have the radio stations shut down , television was seen as the end of movie theatres , both are still here today. ?When industries are forced to face extremely painful and sometimes counter intuitive changes, established companies often whiter away leaving room for the more agile entrepreneurs??. (Kusek, D. & Leonhard, G. 2005, p8) Peer to peer is merely the change in business model for the commercial industry ?with any major industry transition, the most successful business do not waste time negating the new , rather they figure out how to embrace it before being out moded by it?. (Kusek, D. & Leonhard, G. 2005, p8) So with the commercial labels still fixated on a business model that simply isn?t applicable in today?s climate (CD revenue) what is the effect of peer to peer on the music industry as a whole?
Although CD sales are down, the rest of