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Last Updated: Thursday, 18 May 2006, 22:51 GMT 23:51 UK
The online music revolution
By Terry Messenger
BBC Money Programme

The creators of the JCB song have proven themselves hard-headed
Luke Concannon and John Parker are unlikely looking pop stars.

No bling or pop star pretensions for them.

And they play an unusual, some would say odd, brand of music.

Known to the world as Nizlopi, they are predominantly acoustic, Luke on guitar, John on double bass.

Yet they hit number one just before Christmas with The JCB Song, an unashamedly sentimental tribute to Luke's dad Kieran Concannon.

In the song, Luke recalls how he was bullied at school as a five-year-old.

And his dad, a former builder, would, every so often, let him off school and take him round on his JCB instead.

John says they were told by the head of a major label that "this will never sell".

Yet "it was in the Top 10 selling singles of last year," John says triumphantly.

Viral JCB

Nizlopi commissioned small internet web design company Monkeyhub to produce a video to illustrate the song, featuring childish drawings of five-year-old Luke on his dad's JCB.

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Monkeyhub sent the video in an e-mail to 20 people who then sent it to their friends, who sent it to their friends and so on.

The technique is known as viral marketing.

Luke's anti-bullying message struck a chord all around the world and they sold nearly half a million copies.

They released The JCB Song on their own small FDM record label, shunning offers from major labels.

Already familiar

The Arctic Monkeys also used the internet to market their music.

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Someone close to the band released unfinished versions of their songs onto social networking sites like MySpace.

Fans were already familiar with the group's work when they released their debut single, I Bet You Look Good on the Dancefloor, and album Whatever People Say I Am, That's What I'm Not.

The album and single went straight to number one, again released on an independent label, Domino.

Power and influence

The use of the internet to promote bands was pioneered by Mick Hucknall of Simply Red, who launched his website way back in 1994.

Recently he launched his own label Simplyred.com, using the web as a means of marketing his music without the massive publicity machines used by major labels.

The move came when he finished a long contract with Warner.

"The Internet was absolutely crucial in our decision to go independent," says Simply Red manager Ian Grenfell.

"It gave us a lot of confidence as well. It gave us a feeling that there were tens of thousands of people out there that were willing us on, that were with us.

Adds Mr Hucknall: "We would never have gained the attention without a major label throughout the world initially. I just got tired of them taking all the money."

Mr Grenfell has calculated that by releasing music on their own independent label they get three times as much per CD and six times as much when music is downloaded.

"Warners had made approximately 179m profit and Mick had made about 20m, which is still a lot of money, but we felt that the balance should be slightly different."

More and more bands are opting to go independent, he says, insisting that this is shrinking the majors' influence and power.

Legitimate online sales

As head of the International Federation of the Phonographic Industry, umbrella body for the record companies, John Kennedy takes an overview.

He reckons any drift by bands towards independent labels as a result of the new ways of marketing bands is good for the record companies as a whole, including the majors.

"It will show the industry different directions in which to go... which has always happened," he says.

The majors are going to turn the internet revolution to their advantage by scouring music sites used by bands to release their music for new talents, believes Rob Wells, head of new media at Universal.

They are also delighted by the growth in legitimate online sales driven by the success of iTunes, the online music store launched by computer giant Apple.

Before iTunes launched in 2003, online music was dominated by pirates who uploaded CDs onto the web for others to share, with no money going to record companies or artists.

Internet piracy flourished from about 1994.

When it was at its peak in 2003, one million tracks were being illegally downloaded at any one time.

Soaring sales

The big record companies, who own rights to the vast majority of the world's music, were at first reluctant to put their product up for sale legally online.

Arctic Moneys website
The Arctic Monkeys' website sells albums and accessories

They concentrated on cracking down on the pirates.

First they struck at the sites used to swap music illegally, like Napster, founded by Californian student Shawn Fanning.

They used the courts to force its closure.

Then they sued a handful of consumers to make examples of them, hitting them with penalties, typically at around 2,500.

But Apple showed them there was a better way.

They had launched the iPod portable music player, a miraculous little device holding thousands of songs.

They wanted iPod owners to be able to buy their music legally, so they launched iTunes.

After nearly a decade of delays and fighting, Apple managed to persuade the majors to license their music to its online service.

In tandem with the iPod, iTunes was the first legal online record store with mass appeal.

The floodgates opened, other online stores opened up and now there is a healthy market in legal online music.

Before iTunes, the numbers were so small, they were not even recorded.

In 2004, six million online tracks were sold in the UK rising to 27 million the following year.

Gnarls Barkley scored the majors' main online success, hitting number one in April with their song Crazy on download sales only.

It was released by Warner.

Gaping hole

But two problems remain for the majors.

The net does allow bands like Simply Red, the Arctic Monkeys and Nizlopi to achieve success without them.

And some experts reckon the industry may have left it far too late with legal services to prevent a generation of pirates growing up out of the habit of buying music legally.

Warns Mark Mulligan, analyst with Jupiter Research: "If younger consumers hit 25 when they've got a job, when they should be the bread and butter of music spending, if they've grown up never spending money on music, never having downloaded or listened to music in a legal setting, will they ever start buying music?

"There's a very real possibility they won't. If that happens, that will leave a gaping hole in music revenues."

The Money Programme: The Online Music Revolution, BBC Two at 7pm on Friday 19 May.

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