How can record labels survive the mp3?

i will be discussing how record labels can survive the mp3 era which has seen album sales plummit.

Why have album sales dropped?

With the introduction to mp3 formats, people have been able to illegally download the music for many years now thanks to the internet. When this happened millions of people decided to get the music they wanted for free instead of the £10 they will pay for an album.

It's very hard to police something like the internet where there are so many places to get music for free illegally which makes it almost impossible for record labels to bring piracy of the music under control.

With the introduction of streaming services such as spotify entering the scene this has been almost the nail in the coffin for album sales. A consumer can now pay £10 a month for a incredibly vast library with almost all artists and bands on the site (there are exceptions to artists who refuse to be on spotify, such as taylor swift).

As a consumer its a no brainer to use this service, instead of £10 for one album, they pay £10 for hundreds of thousands!

How can a label adapt to this?

With album sales now essentially making no money for the label and the artist, the main way to make money is merchandise and touring. What I think the label should do is treat the album almost as a bolt on item to sell to customers, for example, perhaps make the album a give away with merchandise. An example is that if you sell a band t-shirt, with the album for £20 instead of the t-shirt for £15 by itself. the customer would be much more inclined to pay for that as they are more willing to pay for a shirt then an album, as they could simply stream it.

This is a way they can make more money off of merchandise and entice the consumer to get the bundle. This is just one way I can think of a label making up some of the money they would lose.

Essentially the label would use the albums as loss leaders to drive the sales of the merchandise, which I think will be the labels main income in todays marketplace.

This along with touring is the main way for record labels to sruvive this new era of mp3's, now I do believe record labels will survive as there are always a need for them, for things such an distribution, promotion and giving advances to record albums but the industry is going through changes and who really knows what new shape labels will take? We will have to wait and see.