The rise of digital media with high-speed internet access fundamentally changed the relationships between artists, record companies, promoters, retail music stores, the technology industry, and consumers.
With the à la carte sales models increasing in popularity, consumers no longer downloaded entire albums but rather chose single songs.
By 2001, the cost of hard drive space had dropped to a level that allowed pocket-sized computers to store large libraries of music.
The iPod and iTunes system for music storage and playback became immensely popular, and many consumers began to transfer their physical recording media (such as CDs) onto computer hard drives.
"[2] The 2000s period stands in stark contrast from the "CD boom" of 1984–1995, when profit margins averaged above 30% and industry executives were notorious for their high profile, even frivolous spending.
[3] In the early years of the decade, the industry fought illegal file sharing, successfully shutting down Napster in 2001 and threatening thousands of individuals with legal action.
)[5] In order to benefit from all of an artist's income streams, record companies began to rely on the "360 deal", a new business relationship pioneered by Robbie Williams and EMI in 2007.
[6] At the other extreme, record companies also used simple manufacturing and distribution deals, which gives a higher percentage to the artist, but does not cover the expense of marketing and promotion.
Inexpensive recording hardware and software made it possible to create high quality music in a bedroom and distribute it over the internet to a worldwide audience.
[10] (at Suggested List Price in millions USD)[12][13][14][15] Napster was an online music file sharing service created by Shawn Fanning while he was attending Northeastern University in Boston and operating between June 1999 and July 2001.
Its technology allowed people to easily copy and distribute MP3 files among each other, bypassing the established market for such songs and thus leading to the music industry's accusations of massive copyright violations.
Although the original service was shut down by court order, it paved the way for larger decentralized peer-to-peer file-distribution programs such as Kazaa, Morpheus, Grokster, iMesh, and Limewire, which have been much harder to control because they practice more technically and legally creative approaches.
Examples of such studies include three papers published in the April 2006 issue of the Journal of Law and Economics (Liebowitz, Rob and Waldfogel, Zentner).
[21] Using aggregate data Stan J. Liebowitz argues in a series of papers (2005, 2012) that file sharing had a significant negative impact on record sales.
In March 2007, The Wall Street Journal found that CD sales had dropped 20 percent in one year, which it interpreted as the latest sign of the shift in the way people acquire their music.
With the explosion of formats and the creation of legitimate digital content, the IFPI observed that three main business models had risen to dominance.
[27] Sector leaders included: Advertisement-based services offer music free of charge to the consumer, while funding is derived from advertisement.
comScore reports the top 10 in internet radio viewership in the United States: Other sector players: See also List of Internet radio stations YouTube (owned by Google Inc.) is the premier site for finding music videos for both independent bands and mainstream bands that have released their music on CD or digitally, while also being useful for finding rare songs.
MySpace (owned by Fox Interactive Media) was also a key player and Rolling Stone reports that it hosts more than 70 million users monthly and that "visitors to the site can hear both Bob Dylan's or The White Stripes' entire catalogue".
In January 2009, MySpace made partnerships with the following independent labels: Nettwerk, INgrooves, Iris Distribution, RoyaltyShare, and Wind-up Entertainment.
Format Market share Note: These figures represent data collected only from RIAA member labels, which constitutes only a portion of total online music exchanged.
Today a single artist release can be packaged in multiple formats including video downloads, ringtones or mobile full tracks.