New York, NY (Top40 Charts) Digital music has shaken up the industry, with sales below those being lost by traditional sales.
The digital revolution has had a marked effect on the operations of music production labels large and small. The three major record labels (Warner, Universal and Sony) are slowly adapting, while smaller independent labels in this industry are diversifying revenue streams to adjust to the changing landscape. Despite revenue growth from digital album sales, physical CD sales in
America have dropped by more than 50.0% in less than a decade. As such, IBISWorld expects revenue for the Independent Label
Music Production industry to fall per year on average in the five years to 2014. In 2011, total album sales increased for the first time in more than six years, as the economy slowly began to turn around and incomes strengthened. In 2014, industry revenue is expected to decline, as indie labels continue to adjust to the digital music landscape.
According to IBISWorld
Industry Analyst
James Crompton, "In addition to the digitization of music, advancements in technology and online media platforms are creating a second wave of challenges for indie labels." As music recording, mastering and distributing abilities become more widely available, new competitors are expected to enter the industry. At the same time, increasingly affordable technology allows artists to record, market and distribute their own music without signing on to an independent music label. Self-distribution is decreasing demand for industry services and is causing an ever-growing number of players to share a shrinking amount of revenue.
Looking forward, labels are expected to focus on creating growth in digital and other nontraditional revenue streams to offset continuing declines in physical CD sales. Successful operators will implement innovative business models to counter the forces constricting growth. "The industry is highly fragmented and many industry operators are small, which can be an advantage in times of economic uncertainty," says Crompton. Smaller firms are more flexible and can adjust their business models quickly to improve efficiency, allowing them to keep up with preferences and benefit from nontraditional revenue streams. Externally, improvements in the general economy and consumer spending will help support marginal increases in overall revenue. Given these conditions, IBISWorld forecasts industry revenue to grow at an annualized rate in the five years to 2019.
IBISWorld industry Report Key Topics
Independent record labels find musical talent, record songs and distribute the work to retail and digital outlets. These labels have smaller budgets and operations than major labels, and independent labels frequently outsource manufacturing and distribution of physical records. Major labels are included in the Major Label
Music Production industry (IBISWorld report 51222). This industry also excludes sole proprietorships.
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