Page last updated at 17:56 GMT, Friday, 13 February 2009

Record labels must work 'harder'

Online music retailer
Record labels have had to adapt their business models to downloads
With an ongoing battle against illegal downloading, Marc Cieslak asks how record labels can actually benefit by embracing new digital business models.

Digital distribution and piracy have troubled record companies over the last few years, but the sector has emerged as one of the few still growing in the industry.

But the big four major record labels have been slow to respond to changes in how music fans want to access music online.

The International Federation of the Phonographic Industry estimates that the music industry lost 180m in the UK last year to online music piracy.

'Leaner and cleverer'

Musician Tom Findlay from Groove Armada said labels are finally beginning to understand that things are changing.

"They were so scared initially, scared of digital revolution. Now they actually realised the only way to survive, for them, is to get onboard," he said.

He added that getting the industry members to work together and coming up with licensed music services has actually benefited them.

"Now people have decided that they want to consume music in different ways, all the subscription services seem to be doing well and I think the labels have got leaner and cleverer".

What you are seeing now is that the artists really have to go out and have to really perform
Tom Findlay
Groove Armada

One way music retailers have mounted a defence is by offering in-store kiosks where customers can download music direct to their MP3 players.

Exploit the net

Web retailers such as iTunes allow users to browse huge back catalogues, but they expect the user to actually pay for each track they listen to.

Other services include subscription-based website Napster that allows paying members to consume as much music as they want.

Plus ad-supported We7 where consumers can downloads songs for free, but each track is preceded by an advertisement

A new player in this market is Spotify which is currently in beta, but enjoys support from the major labels.

This service has streaming access to millions of tunes, without downloads, and adverts still feature occasionally.

But the record industry are not alone in trying to exploit the net, as artists themselves are taking a more active role in using the download to dominate pop charts.

However, Tom Findlay said artists have to work a lot harder now to earn a living.

Tom Findlay from Groove Armada
Tom Findlay said artists have to work a lot harder now to earn a living

"The bottom line is the revenue from the actual recording royalties have really gone down massively and that is something you got to live with. What you are seeing now is that the artists really have to go out and have to really perform," he said.

'Dynamic time'

Radiohead started their own experiment in 2007 by allowing fans to pay what they thought the band's album In Rainbows was worth for a limited time.

Groove Armada launched its own marketing venture by releasing an EP in conjunction with a drinks brand.

Fans were able to receive the first track of the EP for free, but to get the rest of the EP, they had to share that track with a certain amount of users. The more songs they shared, the more they got for free.

Tom Findlay believed that record labels having to adapt has resulted in a "really dynamic time for music" with great bands coming on the scene.

"Whatever is going wrong with the business side of things, there is still so much to be positive about creatively that I feel really good about the future of music".

"But I think it is in a massive state of flux and nobody knows where it is going to go," he admitted.

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