The impact of the Internet on the law and economics of the music industry

Business as usual in the music industry is over. Online music is a force to be reckoned with now and increasingly in the future. This paper first describes the current revenue streams and cost causers that characterize the traditional business model in the music industry. Then, the impact of the Internet on the current business model is described, especially as it relates to the distribution stage of the value chain in the record business. Also, the impact of the Internet’s disruption of the distribution stage on the state of existing copyright law, as manifested through the introduction of Napster’s peer‐to‐peer innovation, is explained. Third, an analysis of salient economic, political/legal, and technological issues arising from these changes on the entire industry is presented. Finally, the paper identifies characteristics of a viable business model in the music industry and offers lessons for other digital content industries.