Between 1999 and 2011, the record industry shrunk by 64%. With the advent of digital music, musicians were forced to find other streams of revenue as opposed to relying on record sales and touring. Several qualities of digital music forced this change; those being the companies hosting the music downloads taking a cut, consumers newfound ability to buy only a song from an album as opposed to the entire album, music streaming, and digital piracy. Ironically, the underlying structure of these services, the Internet, both undermines and supports artists. With the help of the Internet, artists are able to reach listeners all over the world. Unfortunately, the Internet also enables all the factors listed above, to the detriment of the profits of the artists. For instance, the average iTunes user averages .25 albums a year, which equates to nowhere near enough album sales to fund an industry.
Musicians have combated the downfall of the record industry by increasing sales of merchandise, accepting movie and TV licensing, creating fashion lines and beauty products, using crowdfunding websites such as Kickstarter, and finally, selling premium content. Items such as clothing are often sold at live concerts, so musicians that do not have the fan base to tour or play in concert are left without this option of revenue. Rolling Stone estimates that bands such as One Direction net up to $225,000 per every show in merchandise sales. Musicians, provided they have a hit song, are entitled to licensing fees when that song is played in a movie or television show. Green Day licensed their song “99 Revolutions” for the movie “The Campaign” and made hundreds of thousands of dollars as a result. One copyright licensing agent commented, “There was once a time where it was completely uncool for a band to allow their music to go on a TV commercial. Now if you get your song on a TV commercial it’s high five, it’s great, everybody’s happy for you.” Artists have also taken to using their fame to promote select beauty products. One example is Justin Bieber, whose perfume “Someday” netted a three million dollar profit upon the summer of its release. Obviously, this stream of revenue requires sufficient fame, and is therefore not an option for every musician. That being said, musicians who are not yet famous enough to rely on these streams of revenue have taken to using crowdfunding websites such as Kickstarter in order to fund their projects. Rolling Stone estimates that artists average around $200,000 in crowdfunding profits, which is a substantial dent in any expenses associated with creating music.
It seems that the primary way musicians will profit in the digital age is by releasing exclusive content with their albums. One Nielsen study found that a fifth of listeners would be willing to pay for exclusive content if given the opportunity, and that in-between 560 million and 2.6 billion dollars in revenue is possible if artists begin to increase the amount of exclusive content they release. One such artist that uses this strategy is Nipsey Hussle, a rapper from Los Angeles. He has released two studio albums, and each time has released his album for free but also offered a small number of copies of the album with exclusive content. This strategy has proved profitable, as Nipsey made $60,000 the week his second studio album debuted from sales of exclusive material. While music is far from unprofitable, it is obvious that musicians can no longer rely solely on record sales as a source of revenue.
The rise of digital music has certainly caused casualties among other formats that have historically generated greater profit margins for artists. Perhaps stronger laws are needed to enforce online streaming sites like YouTube to take more aggressive action against unauthorized music. The growth of music streaming has also undermined the broadcast radio industry. It is likely that when the audience of FM listeners move online, as they have been gradually doing so for the last few years, so will the advertisers. It also seems likely then, that the future of revenue for recorded music isn’t going to come from selling music to consumers; rather it will come from selling music audiences to advertisers.
On a different note, I do not think that digital streaming of music will replace live music. As live streaming technologies improve and the amount of festivals worldwide increase, financial value will continue to exist for artists to perform live.
The industry changes so fast, I remember when itunes was the dominant platform. Now, Spotify is on top and may even go IPO soon. Spotify is a logistical advancement of what itunes was, and I believe they create better deals with the artists.
I actually took Business of the Music Industry (Music 205) with Professor Spice this semester and a lot of the course covered this topic. It is definitely true that it is harder for the average artist this day and age to earn a decent living. Obviously the stars do extremely well but the amount of revenue earned from streaming royalties from the dominant platforms used today such as Spotify and Apple Music are are not sustainable for most. Artists have to be resourceful in order to make money. Live concerts are big but the most important thing is to develop a tribe of loyal fans who will buy their merchandise, frequent their performances and even buy their music (however rare that may be today).
The future of the industry remains uncertain as it has always been one that is rapidly changing due to technological advancements.
The internet has also changed the way artists gain popularity. With the rise of soundcloud, artists can release music without ever making an album. If they gain a big enough following, they can then monetize this by playing shows and selling merchandise. Since music has gone digital, artists that are independent gain more credibility in the eyes of fans, especially in the “underground” scene.
According to an article by Todd Frankel of “The Washington Post,” it is estimated that 1,500 song streams make up the revenue of a single CD sale. Although this may work for worldwide superstars, I feel like this method of business does not favor many up and coming musicians who do not have the fan base for merchandise or the popularity of movie and TV licensing. I will be interested to see if this affects the dynamic of the music industry and if it will begin to only be dominated by fewer major artists from major record companies.
There is clearly a tradeoff beginning with the advent of digital music. While the internet has made it easier for musicians to be discovered with platforms like SoundCloud or Spotify’s “Discover Weekly” playlist, it has also made it much harder for artists to make money. I feel like this will help the industry as the actual best musicians will start to get recognized instead of those who have major record companies backing them up because they possess qualities that will make them more popular that aren’t necessarily talent (such as image or how controversial they can be.)
I don’t know if I’m sold on exclusive content being the future of the industry. I am assuming that just means an extra song or two on the album, and if that’s the case I feel like it can still easily be leaked.
We should also think about how the other people working in the industry are affected by this shift to streaming services. It is true that artists are not being paid nearly anything for a single play of their song on services on Spotify, so how much are songwriters and instrumentalists being paid now that the recording part of the industry is less profitable?
This is a very concerning problem as there seems to be little incentive for consumers to move back to CD’s or even Itunes as streaming services become more and more popular. The one interesting thing is that in UK, vinyl sales outpaced electronic sales. Obviously this is a novel trend and not sustainable, but that’s just one example of ways to adapt to a changing market.
I’d like to know more about the tradeoffs between increased exposure and diminished CD or song sales. Companies like Spotify who offer free streaming services to consumers have to compensate their artists in some sort of way; however, it is often pennies on the dollar. This is thus minuscule compared to traditional means of selling songs through CDs or on iTunes. Still, I think the potential for free listening has increased consumers access to music, so maybe it has increased exposure of such artists and contributed to cascading effects elsewhere. Increased exposure can lead to quicker paths to success and maybe also opens doors in other areas that generate revenues for musicians in the form of endorsements and advertisements. Sam provides great examples of how the music industry uses licensing agreements, but I think the easy accessibility to music stands to benefits musicians in unforeseen ways as well in the modern day industry.
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