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Tips for leveraging opportunities in the digital music space

At PAIL we work with entrepreneurs in the digital music space to implement their projects and prepare contracts: in digital distribution i.e. Online Music Stores/Download Sites; Streaming sites/Radio sites; and Artist Centric Sites/Music Promotion and Sharing.

The aim of this business tip article is to emphasize the opportunities that exist for entrepreneurs in the digital music space. According to the 2013 report by the International Federation of the Phonographic Industry (IFPI) digital music sales are on the rise.

Entrepreneurs through applying innovation to the new ecosystem can exploit the current flux in the music industry paradigm to create exciting and profitable opportunities.


It will not be easy. There has been fierce resistance to the emergence of a new order through music sites. For example historically, several businesses have failed to get music industry backing including Napster with BMG and CDNow, Virgin Media with PlaysLouder MSP. Even as recently as February 2010 Spotify’s launch in the United States had to be delayed as Universal and other big record companies withdrew from the venture. However the opportunities presented by the new recorded industry ecosystem continue to grow.

Online Music Sites


The conceptual evolution of online music sites from 1999 to 2013 can be divided into 3 distinct categories as shown in the table below.


Music Sites 1.0 Music Sites 2.0 Music Sites 3.0
–       Online music stores/Downloading sites –       Streaming sites/Radio sites –       Artist – centric sites/music promoting and sharing




Music Sites 1.0 – 1999 – 2002

Music downloading came into fashion in the 90s when MP3 file format was introduced. It began as peer-to-peer (P2P) sharing, which allowed different people to trade music files among themselves. Examples of Music 1.0 Sites are: Napster; eMusic; ITunes;  Steamwaves; WebAudioNet; MusicNet; Pressplay; Rhapsody.


Music Sites 1.0 – 2003 – 2005

This period continued to see the development of music sites for downloading. Well-known sites like Audio Lunchbox and Bleep were launched in this period.


Music Sites 2.0 – 2006 – 2008


Music 2.0 Sites are streaming and digital radio sites which emerged from 2006. Streaming has become very popular as of the time of writing. It is set to overtake downloading as the preferred form of digital music consumption and that trend is set to continue. One of the dominant countries is Sweden, where 91% of digital income now comes from streaming sites, compared with just 13% worldwide. Sweden is followed by South Korea, Finland and Norway.


The most popular music streaming sites right now are: Spotify; Last Fm; Pandora; AOL Radio; Facebook; Rdio; and Napster.


Music Sites 3.0 – 2009 – 2013


Most music 2.0 sites stream studio content. In other words they stream content owned by the large record labels or independent labels. Even so called artist-centric business models within the online music space including enable the streaming of studio content.  Music 3.0 music sites are at their base artist-centric site. An artist-centric sites main function is to showcase the work of artists, not simply to stream or share studio music. The notable sites that showcase the music of artists online include:  SoundCloud; Indaba Music;; ReverbNation; Last FM; and Root Music. Last FM is in this category because its MusicManager product allows artists to upload their music to their pages and be heard on FM radio stations.  There are many others and they tend to be music genre specific; i.e. just Drum&Bass or Hip Hop.


It is in Music Sites 3.0 that we at PAIL see the future of the music industry and the next potentially profitable music sites. The market will only continue to be more innovative and competitive because the number of music sites will continue increasing. Entrepreneurs will therefore need to think of more innovative ideas to capture the imagination and create or meet the demand of consumers. It is clear from the data in the IFPI 2013 report that digital sales are increasing. At PAIL we are confident that this change is to a large extent due to more and more consumers finding music sites that fit their needs. The alternative suggestion, that the increase is due to success against music piracy is questionable. None of the legal and technological measures deployed by copyright owners has been necessarily substantially effective in reducing online piracy. The recent European Commission report  ‘Digital Music Consumption on the Internet: Evidence from Clickstream Data’ By: Luis Aguiar and Bertin Martens, also concludes that online piracy does not necessarily have any effect on digital sales.

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About Peter Adediran

If you blend the language of business with the language of music, Peter Adediran is a drummer. His key skills include using his legal, business knowledge and experience in digital media to keep the rhythm/melody of a digital business project flowing. Additionally his proven skill as a creative business writer makes him the ideal solicitor…