The music industry has been going through a rough patch for a number of years. That wasn’t always the case. A number of decades ago, before the information age known as the 21st century, the music industry was flourishing. The arrival of the internet changed the game.
The slow and painful death of physical music:
The evolution of physical music has been an interesting story so far. For decades on end, vinyl dominated the playing field drawing flocks of consumers towards dedicated record shops, exchanging their hard-earned money for the right to listen to the newest hits in the comfort of your home, whenever they chose to. Eventually, new mediums, such as the cassette and the CD, found their way to the marketplace and lead to the gradual decrease of production costs as well as the associated retail prices.
The arrival of the internet, combined with the digitalization of music through the development of CDs, drastically changed the internet: Websites like Napster, Soulseek and Piratebay enabled consumers to skip music stores altogether and share music among each other over the web, free of charge. This constituted a turning point as it taught younger generations that music can be consumed for free. This caused a dramatic decline in profits across the industry and considerably
The Rise of the Platform
But things were about to get even worse. The emergence of platforms like YouTube, Spotify and Apple Music weakened the industry’s position even further. Under the premise of democratization of the music industry, streaming platforms have cut out several middlemen (resulting in the death of numerous music shops, labels, and distributors) and now leverage cross-side network effects to capture a ridiculously disproportionate share of the profits. The consequences of this shift are heterogeneous: While big mainstream stars such as Taylor Swift and Kanye West still earn outrageous amounts, the share of profits for new entrants declines by the day, driving new and promising artists out of the industry and stifling creativity.
Sources:
https://festivalpeak.com/spotify-is-ruling-the-music-industry-but-is-it-also-ruining-it-69a864428a78
Interesting post Yannis, however, I would argue that before the so called democratisation of music through the internet, individual artists did not have the chance to access the market. Access went through agents and labels and infamous label bosses decided on whether an artist was worth placing their bets on. The entry barrier to the market was basically the record labels’ front desks. And although one can agree or disagree about the quality of today’s mostly electronic music, video and music sharing platforms that followed illegal platforms like Pirate Bay have also enabled unknown artists to share their music with the world, and in this way, have lowered entry barriers and made the market more accessible. In addition to this, the rise of festivals as well as income from youtube and e.g. Spotify clicks has opened up new revenue stream for artists. Although these revenues are much lower compared to the days of vinyl and CD, these incomes also do not need to be shared with as many agents and record labels as before and hence let artists benefit from their art more directly.
Dear Yannis!
A very interesting article! As an avid fan of music, I too follow closely the trends and changes that the global music industry is currently undergoing. And similarly to you, I also have wondered whether or not streaming platforms and their business models are a boon or a burden for the industry. I concur with your assessment that for large, mainstream artists and their labels, streaming platforms have greatly increased their profits. I am not so sure, however, if all other parties in the music industry have suffered from Spotify and the likes. One often made claim is that streaming platforms have made life for upcoming indie artists almost impossible as all money is being siphoned away from them to the big labels. However, a recent study by the Merlin Network revealed that paying customers of streaming websites listen to indie artists in particular. Although it is only anecdotal evidence, the indie artist VÉRITÉ has written in an article on forbes.com that her by far largest and most regular source of income are the streaming platform residuals. Overall, however I think the most important thing to realize is that streaming platforms are not sources of income but rather ways through which the audience can discover new artists. The added income is nice, however one should treat Spotify more as an monetized alternative to YouTube, where individuals currently browse and discover new music without the artists in many cases ever being paid a penny. It can be stated that overall, the streaming platforms definitely saved the music industry that prior to the creation of Apple Music and co has experienced a string of years which were characterized by a decrease in revenue. These new streaming platforms were able to revert this trend and for the first time, the music industry is actually experiencing a net revenue growth. And as the saying goes “a rising tide lifts all boats”.
You can find more information in the following article:
https://www.forbes.com/sites/bizblog/2018/03/19/spotify-isnt-killing-the-music-industry-its-a-tool-for-enterprising-indie-artists/#7b469817476b
Dear Yannis,
Intereseting take that you are presenting in this post here. Even though I partially agree with some of your points, especially concerning how streaming services have led physical sales and a lot of stakeholders of the CD industry to die, I have to disagree with your conclusion that streaming services are driving new and promising artists away. In my opinion it is quite the opposite, whereas before one needed to have a label deal and proper management behind yourself as an artist, now anyone can make a osng and upload it on soundcloud or Youtube and become famous. There are numerous examples of modern day rappers out there that have gained way more popularity than before due to streaming services. Streaming services also enable users to listen to more music through a well applied recommendation system that can identify your unique taste of music. The problem with music streaming for artists is the compensation granted by the streams. Since streaming is way cheaper for the consumer, less money flows in for the label and the artist. Ultimately, the label takes a large cut and the artist sees little of the money. Therefore, it is even more important for music artist nowadays to become independent. The music industry has shifted away from labels and other middlemen. Artist have now the opportunity to become fully independent and own all of their music. Therefore, I believe it helps the music industry to grow into a new era where anyone can become a star.