Restructuring and risk in the digital music industry

The Rise of Digital Technologies and the ‘MP3 Crisis’ As the world connected to the ‘information super-highway’ and the music industry came face-to-face with the MP3, the virtuous circle of growth was radically altered. [...] In a recent article, Leyshon (2009) updates his analysis of file sharing and the impact of the MP3-crisis on recording studios in the U. K. Crucially, he argues that the scale and scope of illegal downloading has accelerated rapidly in recent years and now dwarfs the legal sale of recorded music in both physical and digital formats. [...] In theory, this plan had the potential to bring consumers back to the market, but in practice a series of technical, logistical, and strategic problems limited the effectiveness of the plan, and instead exacerbated the crisis. [...] The Post-Crisis Restructuring of Music Retailing At the height of their power, the major record labels, through a combination of market power and vertical integration, dictated the terms of marketing and distribution to less powerful retailers, which were dependent on the sale of recorded music. [...] As the practice of downloading ‘free’ music over the Internet started to snowball, and the aforementioned market trends served to slow music sales even further, the major labels lost billions of dollars, but the traditional retailers, who failed to react and diversify their product offerings, bore the brunt of the crisis.