The international music industry has been steadily growing since the introduction of the CD technology in 1983. Recently things have changed dramatically; the growth has slowed down, the market has started to shrink and music executives talk about an industry in crisis. Many executives have blamed this behaviour on the growing, uncontrolled flow of digital music on the Internet. This thesis shows that though the Internet may be causing trouble to the music industry, there is another and maybe more critical problem facing the industry. The problem is manifested by accelerating marketing costs and an increased use of back catalogue material. A systems thinking model is presented which shows that though the root of the problem is found outside the record industry, the industry itself is actually making the situation even worse. Keywords: cultural industry dynamics; record industry; systems thinking modelling; risk aversion; diversity; innovation; promotion; radio; back catalogue