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2007: What a Disruptive Year it Was
by Paul Resnikoff, Publisher Digital Music News, January 2nd, 2008
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The music industry continued to weather a disruptive earthquake in 2007, and that spelled distress, opportunity, or something in-between for everyone involved.

For Superstar Artists...
the year spelled fresh opportunity, and fearless experimentation.

Perhaps the biggest upheaval came from Madonna, who inked a massive, all-encompassing deal with Live Nation valued at roughly $120 million.   The artist ditched Warner Music Group in the process, and crystallized a movement by big-name superstars away from their major label nests.

Radiohead also flapped its post-major wings, though the experimental skies offered some turbulence.  The group offered their latest album online and allowed fans to name their own price, but mixed results and price tags emerged.  And heavy trading across file-sharing networks also surfaced, despite the existence of a legitimate download destination.

And Prince continued his independent streak, this time with a bundled album release involving the UK-based Mail on Sunday.  Elsewhere, The Eagles also flew free, and inked an exclusive sales pact with Wal-Mart.

But not everyone strayed from their major label roots.  Led Zeppelin suddenly awakened from a digital-unfriendly slumber this year by licensing their catalog for both online and mobile download.  The Warner Music band also reunited for an unexpected gig in London, and struck a short-term licensing deal with both ESPN and the NFL.


But for Labels, the Skies Continued to Gray.
During the year, major labels struggled against a downward spiral in pre-packaged album sales.  Paid downloads continued to increase, though broader album sales plunged roughly 15 percent year-over-year (official numbers have yet to be tallied).  That continued to put heavy pressure on labels to reinvent their models, and pressing financial pressures prompted layoffs and continued cuts.

Elsewhere, the RIAA opened a massive, college-focused enforcement campaign, the latest chapter in a mostly ineffective crackdown initiative.

Meanwhile, EMI Group itself was gobbled by private equity firm Terra Firma for a massive 2.4 billion price tag.  And Universal Music Group parent Vivendi Universal gained European regulatory approval for its 1.63 billion ($2.19 billion) purchase of BMG Music Publishing.


Other Mega-Buyouts, Mega-Mergers, and Mega-Divorces Also Surfaced.
Perhaps the largest involved recommendation startup Last.fm, which was purchased by CBS for $280 million in late May.  But other mega-deals also surfaced, including the $42 million acquisition of Pump Audio by Getty Images.  And towards the tail end of the year, Macrovision grabbed AMG for $82 million, Dolby purchased Coding Technologies for $250 million, Microsoft purchased Musiwave for $46 million, and Live Nation purchased Signatures Network for $79 million.

In the merger category, independent distribution and marketing company The Orchard merged with Digital Music Group, Inc. (DMGI), a cashless transaction.

In divorces, Live Nation confirmed an upcoming split with longtime partner Ticketmaster, and started preparations for a full-scale break in 2009.

And others, including the once-promising Snocap, entered the sales block.


And the Shiny Apple Continued to Glow.
Apple already entered 2007 with immense momentum, thanks to stellar holiday iPod sales.  That story blossomed over the ensuing months, and Apple crossed the 100 million mark in April.

But the biggest accomplishment came from the iPhone.  The game-changing device experienced an immense media blitz in the United States, and subsequent launches in the United Kingdom, France, and Germany.

And Wall Street kept cheering Apple by doubling share valuations towards $200.

But Microsoft experienced a less stellar year, especially within digital music.  The first-edition Zune, released in late 2006, failed to spark consumer excitement in 2007.  A second-generation emerged towards the tail end of the year, though questions linger over Zune sales prospects. 


And the Ice Finally Cracked on DRM.
A shift away from digital protection by major labels became a reality in 2007, thanks to a first step by EMI Music.  Also motivating the move was Steve Jobs, who forcefully urged a departure from protections in a February open letter.  The EMI break, a collaborative effort involving Apple, motivated subsequent shifts by both Universal Music Group and Warner Music Group.

Speaking of DRM-free, Amazon finally entered the space with an MP3-only store.

EMI Music naturally embraced the effort, and Universal Music Group and Warner Music Group eventually followed.


Starbucks Got Serious About its Music Strategy.
The coffee giant minted its new Hear Music label, a collaborative effort involving Concord Music Group.  Paul McCartney kicked the action off and eventually crossed 500,000 units, a result that raised questions over the potency of the Starbucks approach.


The Satellite Radio Sector Decided to Consolidate
but regulators ultimately served a non-event.

The biggest thud remains ahead.  Both XM Satellite Radio and Sirius Satellite Radio aggressively lobbied regulators to approve their proposed merger, though a year-end decision was mostly wishful thinking.


Internet Radio Faced Increased Royalties
and the beginnings of a serious standoff.

For a large part of the year, internet radio stations battled a royalty rate decision issued by the US Copyright Royalty Board (CRB).  The tussling is now spilling into 2008.
 

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Paul Resnikoff is the founder and publisher of Digital Music News (www.digitalmusicnews.com), a premier industry source for news, information, and analysis. Digital Music News has quickly grown from its humble roots as a small, executive news service to the most widely read information source in the field.


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