The birth of online music, first since Thomas Edison invented the wax recording cylinder the entertainment industry and record companies have enjoyed complete market domination for almost 100 years with a few companies signing artists to contracts, producing the entertainment and distributing their works through exclusive channels and controlled media outlets like radio or television for high profits. Then the onset of digital recordings arrived or otherwise known as the compact disc (CD, MP3 format for audio and DVD for audio and visual), the digital recording quality of these maintained near perfect replay to the player in almost any condition of the disc itself, virtually making the copy last forever with good care and easily copied to new disc's to back up files additional discs or share with friends, unlike vinyl records or reel tapes that have a limited play life not easily copied or shared, plus these delicate recordings were easily damaged promoting future buying of these works. The CD / DVD invention improvement to recording and distribution started a new trend of the reduction in sales and profits of the record companies, first by the Cd's lasting virtually for ever unlike the vinyl records that were rated for number of plays and very easily ruined, thus needing replacement. The CD / DVD sales skyrocketed for the first couple of years until low cost copying eventually started a bootlegging market for all types of digital recording on CD or Digital video disc. (DVD). But online music was right around the corner with the onset of the world wide web of interconnected home computers.
This pirating had a negative impact on all sales and profits for the world wide markets of entertainment loosing about $4 billion loss to the United states entertainment companies alone in the early 1990's With the arrival and proliferation of the of the web online music was now available to file transfer play and copying for free and really unidentifiable to track for copyright infringements by the music companies. Online music was there to stay.
Moreover the internet connections of people all over the world having the ability to send, receive downloads as user files, copy any electronic files, upload to the internet as a file, burn to CD or DVD all from a users home equipment has entertainment suffering it's hardest decline in sales and profits in the history of entertainment actually forcing companies into bankruptcy from online music sharing. These digital electronic files (i.e. MP3, DVD's) are actually protected under many copyright laws, but with out of control copying on a mass scale and sharing of the files with grey area's in the internet laws (Safe harbor act) make real effective and popular policing very difficult task for the entertainment industry to stop the practice or recoup any real monies from individuals in civil cases only. One company Napster.com set up a site for file sharing with the new law in mind, but did involve its business model to actually accumulate (steal) songs and put them on the site. Big no no! They got sued and permanently shut down in the very first such case sending a giant scare through the web communities. It did slow down the sharing of online music down for a couple of years and many people even went under ground and invented the torrent sharing method that actually finds little pieces of a song from thousands of users and assemble them at the speed of light to give you a seamless copy of a song. Powerful, un-sue-able and untraceable, this type of online music is still in use today. Back to the record companies taking litigation against the very people who buy and love the music, everyone sees this practice very negatively as the very people they are suing are random targets that are actually previously customers and fans of the artists they are suing about. Kind of an Online Music David and Goliath story! So the current environment of the entertainment industry is strained from paying the writers, artists / actors, entertainment production and distribution, royalties and then has the high cost international advertising. The state of the art currently is a new business method with corporate online stores (I Tunes) selling the digital electronic files of the favorite artists for $.99 cents per copy, forcing the consumer the time and expense of opening of an account, using a credit card and exact protocol procedure each time they want to buy and download a song, then have a long delayed download of the song itself to the customer. The public has only accepted this in partial as it is much easier and almost free for them to find the copies for free on the many file sharing and overseas free sites that actually allow high speed selecting and downloading of batch (many at one time) entertainment files from sharing constituents.
Thus the record company loses the sale and sales information to help identify direct advertising to certain established fans for concerts, accessories, special releases, news, memorabilia, thus loosing a critical edge in marketing and sales trends for future marketing and improvements to the entertainment business methods. On the other side fans customers have broke the law by downloading and distributing these files and they do not feel as good about having and enjoying the entertainment as they would if they legally obtained the entertainment media through online music downloading.
In 2008 the damage is much worse to the record companies in the sum of $40-100B in lost sales and some musicians are offering their online music for free, (radiohead), Aerosmith. Law suits continue and raising the replay costs to radio station is ongoing as a means to recoup some of the money. Some long term agreements have been signed with Rhapsody, Amazon, and Itunes to sell their online music, but there are going to be new and very creative new models coming out for all peoples to enjoy the online music for free. Imagine guilt free online music and fun, this hardly sounds like America anymore.
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