In the year 1998 e-commerce was a relatively new experience in the business world. All the same, business to consumer online shopping totaled a massive 7.2 billion U.S. dollars, increasing by nearly three hundred percent in the course of a year (Muhammad 1999, 72).
The music industry has reaped the benefits of its online presence along with the entire digital economy. In particular, the music industry has been diligently selling physical products over the Internet as well as music downloads. All industry sectors in the digital age are enjoying the grace of computerization over traditional paperwork. In the music industry, the diffusion of digital music formats allows for the dematerialization and dispersal of music channels as far as music distribution is concerned (Jones 2002). The major music labels are facing heightened competition in the face of technological change. The Big Five of the music industry, that is, BMG Entertainment, Sony, AOL Time Warner, EMI, and Vivendi Universal Music Group, historically holding eighty percent of the music market share, have seen a reduction in their market power in the area of distribution (Fox 2004). Independent music labels are on the rise. More affordable equipment for music production and reception has created opportunities for new players in the industry (Bemis 2004). Yet, there is a downside to the digital age with regards to the music industry. Artists cannot always make money by selling their hits because music on the Internet can be obtained for free. Metallica has sued a company by the name of Napster that used music-swapping software (Mann 2000, 39). And, artists with whole albums out in the market cannot make their albums popular over the free mix of songs that consumers find available on the Internet. Listeners generally pick the best songs on the album through the Internet and add these to a nice mix of songs of various artists on their Ipod's. As a result, album sales have fallen (Drew 2005).
Digital technologies make the production and commercialization of music less costly. In the year 2000, global sales of CDs, cassettes, and vinyl records amounted to around $37 billion. In 1999, this figure was approximately $38.5 billion, and in 1995 it was $41.5 billion. The United States is the world's largest music market, where recording sales are said to have been declining and reaching market saturation. In 2000, music sales in the world's largest music market dropped 2.6 percent, while sales of CD singles slumped by 36 percent. Even music product shipments decreased from $6.2 billion to $5.9 billion between mid-2000 and mid-2001. It was further discovered that an estimated thirty million American adults and seven million younger Americans were downloading music files over the Internet by the year 2001. At least seventy nine percent of all those that downloaded music files did not pay for the music they retrieved from the Internet Younger Americans in particular reduced their music purchases by a considerable amount (Fox).
The music industry, before the advent of the digital age, was known as the music monopoly given that it was able to