New music New Business (BBC Click)

The major record labels were slow to respond to this new way of enjoying top tracks, and blaming the industry's current financial woes on a failure to exploit online and the proliferation of music piracy.

The International Federation of the Phonographic Industry (IFPI) estimates that the music industry lost £180 million in the UK last year to online music piracy.

Tom Findlay, Groove Armada: "I think the labels are definitely starting to understand that the things are changing. They were so scared initially, of digital revolution. Now they actually realise the only way to survive is to get onboard. And you can see now people have decided that they want to consume music in different ways, all the subscription services seems to be doing well. I think the labels have got leaner and cleverer."

Music retailers and record labels are mounting a defence. Stores now boast download stations that allow customers to download music direct to their MP3 players. And there is now a jukebox full of legal music download services online.

Web retailers like iTunes allow users to browse huge back catalogues, but in the online age they adhere to an almost antiquated business model, they expect the user to actually pay for each track they listen to.

The IFPI estimates that 95% of music downloads in the UK are illegal, so it might be a good idea for new business models to be considered

There are a couple of different ways to legally get hold of music at the moment. Subscription based services like Napster allow the user to consume as much music as they like as long as they keep up the subscription.

Compare this to ad funded models such as We7. Users download music for free, but each track is preceded by an advertisement.

A new player in this space is Spotify which enjoys support from the major labels. Currently in Beta, this service has streaming access to millions of tunes, no downloading here but adverts still occur albeit infrequently.

But the record industry suits aren't alone when it comes to trying to exploit the web; artists themselves are taking a more active role in using the download to dominate the pop charts.

Tom Findlay: "The artists have got to be cleverer now. The idea of starting with a major, getting a big cheque, paying off your mortgage and then going out on tour, there is a lot more to it now.

"You've got to think on your feet. The bottom line is the revenue from the actual recording royalties has really gone down massively and that is something you've got to live with. What you are seeing now is that the artists really have to go out and have to really perform."

From Radiohead's 'pay what you like' experiment, where for a limited time users downloaded the album In Rainbows, paying what they thought the album was worth, to Groove Armada's EP released in conjunction with a drinks brand. The plan is that the user receives the first track of the EP for free, but to get the rest of the EP they must share that track with a certain amount of users in order to receive the next track, and so on.

Tom Findlay: "In a weird of sort of way, the fact that the majors have broken down and the fact that the system has changed so much it is actually really dynamic time for music. I can’t remember such a good period for music, artistically.

"The amount of people coming through, great bands are coming through. So whatever is going wrong with the business side of things, there is still so much to be positive about creatively that I feel really good about future of music. But I think it is in a massive state of flux and nobody knows where it is going to go."

With online piracy such a huge problem, actually selling music to consumers is just one way in which the recording industry and artists can earn a crust.

Successful acts will always be able to fall back on the most tried and tested method of monetising their efforts - the live event or tour. More and more artists could be making the lion's share of their profits by taking their show on the road.