Streaming disrupted the business model of recording labels, which consisted digital music, iPod and mp3-players. The Streaming services like Spotify, Apple music and Deezer allow users to stream music online without the need of downloading each song separately. On the internet, streaming services created a platform which connect artists and consumers. This platform business model changed the revenue and cost structure and led to several new advantages for the companies and to disadvantages for the artists in the music industry.
Streaming services like Spotify make money by offering two different versions (versioning) of the service: 1) through subscribers, who pay a monthly fee, and 2) by advertising to ‘free users’. Different groups of subscribers are also offered a different price, for example students can get a student discount (group pricing).
Using the internet to stream music leads to several different advantages for companies. First of all, streaming services are able to customize ads and customize the music they recommend to users. Secondly, companies are able to offer individual songs instead of entire albums. Lastly, customers are able to share their playlists, increasing the attractiveness of the service.
However, the artists suffer from this business model. Artists get a certain cut of the revenue streaming services earn for streaming their music which is only 70% of the revenue that the song raised. Moreover, artists might not have full rights to their own music and therefore may have to split this part of the revenue with other parties.
The upcoming technology can disrupt the music industry and bring back the ownership of music for artists is blockchain. The blockchain is an immutable distributed ledger that can validate information and register transactions without the need for a central authority. The blockchain exists in communities which are all operating on the same blockchain and are connected, can share information and can transact with each other on the blockchain. Because of the validation of information and security that blockchain provides, intermediaries remain unnecessary.
Currently, one of the biggest problems of the music industry is the fact that there is no verified global registry of artists and their music. The blockchain could help build such a registry. Creators can upload their music and the associated metadata on the blockchain. Companies and consumers can search and play the music of the ledger. Smart contracts will ensure that the owners of the content will be paid automatically for its usage. This leads to several different advantages.
One of the advantages of blockchain for the music industry is that, blockchain can solve the piracy problem. Artists can publish their music on the blockchain, on which every song gets a unique ID and timestamp in a way that is unalterable, so that music can’t be downloaded at the leisure of users.
Secondly, blockchain can revolutionize the way money is earned in the music industry. Currently streaming services offer a pure bundle of all songs available and they pay out artists based on their share of streams. In the future people will be able to choose individual songs to listen to, so artists will receive money directly for each stream. Finally, the blockchain can establish a more direct relationship between the creators and consumers of content, leading to disintermediation.
References:
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