“ More Artists Steer Clear of iTunes”

1. A presentation on an article excerpted from The Wall Street Journal; by Chelsea Eggenschwiller, Ryan Damman, & Kyle Foley “More Artists Steer Clear of iTunes”

2. Fall of Album Format • Albums typically have one or two hit songs • Most of album considered “filler material” • Leads to listeners purchasing singles to save money

3. What is all this? iTunes… Apple software allows consumers to purchase single songs or full albums digitally; files can be added to mp3 player or computer hard drive Cost is $.99/ song or specified price for album (usually $10) File sharing… Users download a program that facilitates swapping of digital files from hard drives of all users who have the program installed Cost is free to users but in most cases is illegal

4. iTunes • Software licensed through Apple • Purpose was to make adding music files to iPods more convenient by downloading directly from a single compatible, protected source • Artists sell music to iTunes; iTunes sells to users; users have music & artists keep percentage of proceeds • By selling through iTunes at a cheaper rate, artists lose profit because full albums rarely sell online

5. Peer-to-Peer File Sharing • Began in 1999 with Napster as primary source • Music distributed without permission; birth of illegal downloads made access to free music easy • Lead to dramatic drop in music industry sales • iTunes and others help boost music industry sales by charging for downloads • Napster reformed; now charge subscription fees to facilitate legal downloading

6. Kid Rock vs. … • Never licensed music to iTunes • Sold 1.6 million albums in U.S. (2008) • Complete album sales more profitable for artist; less economical for consumers • ex: $10 x 1.6 mil. CDs sold > $.99 x predicted number of single “All Summer Long” sales • Producers insist artist profit would be lower if full albums were not sold

7. …Estelle • “Shine” album had meager sales on iTunes (95,000); single “American Boy” one of top 10 bestselling songs on iTunes • Producers removed Estelle from iTunes after seeing Kid Rock’s hard copy success • Goal to maximize profit & “…promote the long-term development of the artist.” (Warner Music Group)

8. How Other Artists Fare… • Katy Perry's "I Kissed a Girl" sold 2.2 million downloads on iTunes; only 282,000 full album downloads • Rapper M.I.A. sold 888,000 downloads of "Paper Planes“ single; only 272,000 “Kala” album downloads • Conclusion: consumers take advantage of buying singles; artists lose profits through iTunes

9. Leaving iTunes? • Leaving would hurt little-known artists unless big names also opt out • Without iTunes, consumers resort to illegal downloading rather than pay for full album in stores; artists face provoking file sharing or decreasing profit

10. Singles vs. Albums • Last year in the U.S. • 844 million songs downloaded • 50 million full-length digital albums downloaded • Vast majority of music downloads came from iTunes

11. End-of-Year Sales (1997-2007)includes CD, CD single, cassette, cassette single, LP/EP, vinyl single, music video, DVD audio, DVD video, SACD 1997 - 12.2 billion 1998 - 13.7 billion 1999 - 14.5 billion 2000 - 14.3 billion 2001 - 13.7 billion 2002 - 12.6 billiion 2003 - 11.8 billion 2004 - 12.1 billion 2005 - 11.1 billion 2006 - 9.8 billion 2007 - 7.9 billion * Large drops in recent years due to online music stores such as ITunes