A presentation on an article excerpted from The Wall Street Journal; by Chelsea Eggenschwiller, Ryan Damman, & Kyle Foley

Fall of Album Format  Albums typically have one or two hit songs  Most of album considered “filler material”  Leads to listeners purchasing singles to save money

What is all this? iTunes… Apple software allows consumers to purchase single songs or full albums digitally; files can be added to mp3 player or computer hard drive Cost is $.99/ song or specified price for album (usually $10) File sharing… Users download a program that facilitates swapping of digital files from hard drives of all users who have the program installed Cost is free to users but in most cases is illegal

iTunes  Software licensed through Apple  Purpose was to make adding music files to iPods more convenient by downloading directly from a single compatible, protected source  Artists sell music to iTunes; iTunes sells to users; users have music & artists keep percentage of proceeds  By selling through iTunes at a cheaper rate, artists lose profit because full albums rarely sell online

Peer-to-Peer File Sharing  Began in 1999 with Napster as primary source  Music distributed without permission; birth of illegal downloads made access to free music easy  Lead to dramatic drop in music industry sales  iTunes and others help boost music industry sales by charging for downloads  Napster reformed; now charge subscription fees to facilitate legal downloading

Kid Rock vs. …  Never licensed music to iTunes  Sold 1.6 million albums in U.S. (2008)  Complete album sales more profitable for artist; less economical for consumers  ex: $10 x 1.6 mil. CDs sold > $.99 x predicted number of single “All Summer Long” sales  Producers insist artist profit would be lower if full albums were not sold

…Estelle  “Shine” album had meager sales on iTunes (95,000); single “American Boy” one of top 10 bestselling songs on iTunes  Producers removed Estelle from iTunes after seeing Kid Rock’s hard copy success  Goal to maximize profit & “…promote the long-term development of the artist.” (Warner Music Group)

How Other Artists Fare…  Katy Perry's "I Kissed a Girl" sold 2.2 million downloads on iTunes; only 282,000 full album downloads  Rapper M.I.A. sold 888,000 downloads of "Paper Planes“ single; only 272,000 “Kala” album downloads  Conclusion: consumers take advantage of buying singles; artists lose profits through iTunes

Leaving iTunes?  Leaving would hurt little-known artists unless big names also opt out  Without iTunes, consumers resort to illegal downloading rather than pay for full album in stores; artists face provoking file sharing or decreasing profit

Singles vs. Albums  Last year in the U.S.  844 million songs downloaded  50 million full-length digital albums downloaded  Vast majority of music downloads came from iTunes

End-of-Year Sales ( ) includes CD, CD single, cassette, cassette single, LP/EP, vinyl single, music video, DVD audio, DVD video, SACD billion billion billion billion billion billiion billion billion billion billion billion * Large drops in recent years due to online music stores such as ITunes