As it stands, 2012 is projected to be the first year in which digital record sales surpass physical record sales. Right now iTunes annihilates all competitors when it comes to legal downloads. Via their 70/30 split, Apple made something around $6.3 billion in 2011 just by playing middleman. Furthermore, since the inception of the iTunes Store in 2003, Apple’s paid out around $14 billion to record labels in royalties, a staggering amount that soon may no longer be going to the execs.
Now, as the trend keeps shifting towards total digital dominance, Apple continues to gain leverage, a tighter grip, and more power over the music industry, thanks to the all pervading iTunes Store. At the end of the day, the labels need Apple much more than Apple needs them. Don’t think the company doesn’t know this. Yes, if iTunes suddenly ceased to exist, the tech giant would lose a good chunk of their revenue, but they have other outlets to recoup it (MacBooks, iPhones, etc).
Unfortunately, the same can’t be said for Interscope, Universal, and the other big players. Without one centralized marketplace to sell their music, they stand to lose millions upon millions of consumers who, in their quest for instant music, will once again turn to bootlegging and piracy if their favorite tunes aren’t conveniently available for purchase. And once again, the labels will lose their only source of revenue, plunging them into the dark abyss for the second time.
The all-digital-everything trend also affects the artists. The clear advantage the big labels have always had is the influence to put physical copies of records onto shelves. But if/when the CD becomes a niche market, they instantly lose that edge. So now Liisten.com’s Tyler Hayes hypothesizes what would happen if Apple decides to do what it already does for app developers: charge an annual fee of, say, $99 that allows subscribing artists to upload their music on the iTunes servers. Artists, no matter how established or new, will then have the ability to put up their content for purchase without the need for any third party assistance. Think of it as a universal distribution deal that has a 70/30 split with the 70% going directly to the artist, instead of pennies trickling down the mountainside from the suits. No more damned 360 deals. No more strangulating contracts. No further need for record labels.
Whether anyone openly acknowledges it or not, Apple holds the fate of the music industry in its hands. If not today, in the very near future the company will be able to make any move it wants and the masses will be forced to follow. It happened with the iPod, it happened with the iPhone, and it happened with the iPad. Apple already turned the music industry on its head once. If it wants to do it again, rest assured it will happen. History will repeat itself. It always does.