Wednesday, September 26, 2012

Music from the Clouds (Digging Deeper)

Recent technological advancements have been greatly influencing the music industry's economy. We went from vinyls to CDs to mp3s, ect... and now the industry is run by "cloud" technology through applications like Pandora and Spotify. In Randall Robert's article in the LA Times, he discusses the pros and cons of such applications. Though the sentimental value and physical aspect of owning a collection of vinyls is no longer present, Robert agrees that having all his music at the touch of his fingertips is indeed an appealing convenience. He goes on to say that variations of the apps like Match and iCloud are worth the price as he uploads his musical archives onto them. Though Pandora is a free application, Spotify does charge membership fees that vary in price as well as in benefits. And while Pandora doesn't charge it's customers, its revenue is retained solely from advertising. In Ben Sisario's article of the The New York Times, he discusses how Pandora's ad-based revenue has yet to result in a profitable year due to royalty rates. Though he states that Spotify made 83% of it's revenue from subscriptions, Sisario goes on to say that their cost of sales last year was a hefty 97% of revenue. Despite having different business models, both companies face the same economic issues of high costs of musical royalties. This is subject to change in the future if royalty rates ever go down. This simply shows how poorly the digital music industry was handled. Digital services have the potential to boom into a successful and profitable industry if they are economically proportionate.

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