The transition that the music industry has gone through over the past decade has certainly not been easy. By the end of the 1990s, record labels acquired the vast majority of their revenue through CD album sales. Vinyl had become a niche product favoured only by traditional-minded audiophiles, cassette tapes had become obsolete, and mini-discs were used primarily for their record function, rather than as a medium for new music. The CD, on the other hand, was reasonably cheap, convenient to use both at home and in the car, and provided good sound quality.

However, since peaking in the year 2000, CD sales have dropped significantly. This in turn has led to a significant drop in revenue for the music industry - according to the latest figures from the Recording Industry Association of America ("RIAA"), the total value of CD sales in 2006 was US$9,162.9 million, down from US$13,214.5 million in the year 2000.

There are several factors that have accounted for this drop, factors that relate both to how we buy music, and also to how we listen to it. Ultimately, it is our preference for personal, portable music, and the new technologies that have accommodated this preference, which have led to the downturn in CD sales - and given rise to a new digital music industry.

This is a trend which began several decades ago with the invention of the personal stereo in the late 70s. The Sony Walkman, released in 1979, was the first personal stereo player to make waves in the market. By the mid 90s, new technologies such as the personal CD player and the MiniDisc player gradually took the place of the cassette player. These new formats still suffered from one major fl aw: as physical discs were required to store and play music, there remained a physical limitation on how many songs a user could carry with them. However, parallel developments in personal computing and music compression technology meant that, by the end of the 90s, an alternative that solved this problem was available: digital audio.

MP3s arrived at just the right time. By the end of the 90s, many households had their own personal computer, and these computers had increasingly large hard drives. For the first time, it was possible to store your entire music collection on your computer. Portable MP3 players followed, allowing vast quantities of music to be carried in an increasingly small device. Consumers have been remarkably quick to adapt to the new technology: within a few years, a large number of people have come to use either their computer or their MP3 player as their primary audio player.

At first, the majority of MP3 player users filled their music libraries by 'ripping' music from CDs onto their computers, and then transferring the compressed files onto their players. However, internet connection speeds had drastically improved by the early 2000s, making it possible to download single tracks or even whole albums in a reasonable length of time. Moreover, the controversial popularity of peer-to-peer ("P2P") download networks had proven that there was a substantial market for music downloads. However, early collaborations between the music industry and online distributors failed to take off, due to high prices and a lack of convenience.

This was all to change in 2003, when Apple launched its iTunes store. Apple's iPod, released in 2001, had already revolutionised the portable media player market with its innovative design and user-friendly interface. The iTunes store was to have a similar influence on the music download market. Apple had signed deals with the five major US record labels to sell licensed music from their catalogues; several independent labels quickly joined the service as well. With reasonably priced downloads (US$0.99 for a single track; US$9.99 for a whole album) and an extensive library, the service proved hugely popular: there were 1 million downloads within the first five days. The iTunes Music Store has remained the dominant force in the online music market, with a market share of around 70% and 4 billion tracks sold to date. In the US, iTunes recently overtook Amazon.com and Wal-Mart to become the single largest music distributor.

However, the rise of digital music has posed problems as well. Music piracy has long been a thorn in the side of the music industry, and the ease and speed with which files can be shared over the internet has meant that piracy has reached unprecedented levels. The International Federation of the Phonographic Industry ("IFPI") estimates that for every legal music download, twenty tracks are downloaded illegally. The financial cost of internet piracy to the music industry is hard to calculate, but it has certainly contributed to the revenue loss seen in recent years.

As a result, there have been several attempts made to stamp out online music piracy. In order to prevent legal downloads from being transferred between multiple listeners, the industry originally required online stores such as iTunes to use Digital Rights Management ("DRM") methods to protect their files. However, in the last year there has been a notable shift away from DRM. In February 2007, Apple's cofounder Steve Jobs released a statement asking for DRM to be removed from all music downloads, claiming that this move would actually increase legitimate sales. One of the four remaining major labels, EMI, allowed its catalogue to be downloaded without DRM through iTunes; not long after that, all of the US majors licensed DRM free tracks to Amazon's new music download service.

So what does the future hold for the music industry? Fortunately the digital era has spawned a huge variety of alternative products and business models to replace traditional album sales. According to the IFPI, the number of different formats surrounding an album release has skyrocketed in recent years. Even as recently as 2003, there were only 10 formats used to sell music, and the CD was dominant. Now there are more than 100 formats. For example, the IFPI Digital Music Report 2008 points out that sales of Justin Timberlake's recent album Future Sex/Love Sounds incorporated 115 distinct products. These included video downloads and mobile ring tones, as well as more traditional formats such as CD and vinyl, selling a total of 19 million units overall.

Indeed, mobile phones have opened up a whole new market for the music industry, one that has proved particularly popular in Asia. The sale of 'mobile music', music which is downloaded and played through a mobile phone, has become a huge industry in the region. Mobile music sales account for 85% of digital music sales in the region, and on a global scale, almost half of all mobile internet purchases are made in Asia. Moreover, the distinction between portable music players and mobile phones has become increasingly blurred, with the release of Apple's iPhone and music-capable phones from mobile manufacturers such as Nokia and Sony Ericsson. As a result, this is a market with huge potential, both in Asia and in the rest of the world.

Although the online music industry has been surprisingly slow to develop in Hong Kong, with major distributors such as iTunes yet to establish online stores for the region, local providers are beginning to fill the void. These providers are making full use of 'Web 2.0' to distribute music, providing a wide range of products and making use of popular online social networks such as Facebook to promote their services.

Like the rest of Asia, mobile music constitutes a significant portion of Hong Kong's online music industry. Several mobile service providers now have a music download service, taking advantage of 3G phone capabilities to send music straight to people's phones. One of the most popular services, PCCW's 'Moov on mobile', allows subscribers to stream tracks directly from Moov's database, allowing instant access to over 100,000 songs without the need to download at all.

The digital music industry remains in its infancy; its vast potential has yet to be tapped, particularly in Hong Kong. However, despite early teething problems, the music industry has successfully taken hold of this new technology, and is pursuing a course of action which will indelibly change the ways in which consumers purchase and listen to music. With more than 6 million tracks for sale online, there is now an unprecedented level of choice for modern music-lovers. Music has never been so easily affordable, or so readily available. The digital revolution is truly underway.