The digitization of the music business goes back to the market introduction of the CD by Philips and Sony in 1982. However, the CD was considered as a record format with a larger music storage capacity. Despite the very different production technology, the CD did not disrupt the recorded music industry's value-added network. The rapid growth of high-speed internet connections and the widespread use of MP3 data compression technology triggered the spread of P2P file-sharing networks and the emergence of the digital music business. In a “war against piracy”, the major record companies and music industry bodies around the world sued file-sharing and file-hosting providers and – after some setbacks – eventually succeeded.

However, the emergence of fully licensed and therefore legal digital music services also made file sharing less attractive. Since Apple launched its iTunes music download store in 2003, the digital music market has evolved. As already highlighted in Chapter 5, digital music sales outperform physical sales in most of the national recorded music markets. However, global digital download sales – single track and album sales – peaked in 2012, whereas streaming revenue is further growing at a high rate. Thus, the question arises whether music streaming consumption is cannibalizing download and CD sales.

With the advent of music streaming, music consumption has shifted from an ownership-based to an access-based business model. This implies also a negative effect – a “cannibalization effect” – of music streaming on recorded music sales. The issue of cannibalization was addressed before the US Copyright Royalty Judges when the US-based music streaming service Pandora lobbied for lower licensing fees it has to pay to copyright holders by presenting a commissioned study by Stephen McBride (2014). The study claimed that plays of an album track on Pandora increase its sales by an average of 2.31 per cent. The study also compared tracks from albums/songs released from major music companies with those from independents. A positive promotional effect of 2.82 per cent was measured for new music from major record companies.