The effect of technology on the music industry

We are seeing a shift in the music industry's business model. Consumers may now access a more comprehensive library during a subscription time rather than purchasing individual music goods, opposed to the former business model where music was bought to be preserved as a collection (cassette, vinyl and CD). The streaming service providers (e.g., Spotify) make money by charging customers a monthly subscription. Advances in music compression and internet technology, have provided a significant threat to the music business, changing the methods in which music is created, consumed, and distributed.[1]

Consumers now have more options, and artists now have greater reach. Artists may become famous from a single song with minimal studio cost and without having to construct a whole album, which was previously tied to prior sales and the old economic model. Furthermore, customers have a choice; unlike football fans, that are bound to a single club. A customer may choose “music a la carte”, choosing for playlists and devices that include individual song choices rather than full-length albums.[2]

Model of consumption rather than ownership

The nature of music ownership has changed. From a music business based on "ownership" to one based on "access," there has been a seismic shift.[3] The "democratisation of music" is a term used to describe the trend toward decentralised, non-physical music storage and delivery.[4] This has transformed the way we listen to music and, as a result, the supply of music. The issue stems from copyright legislation, which safeguards music that was not created with today's digital music market in mind. A good example of this is Napster.

New social platforms

By early April 2020 amid the Coronavirus outbreak was a widespread shared sense of boredom. Among the social media jokes we saw TikTok was ‘the ideal medium for the fractured attention spans of confinement'.[5] Starting in 2016, the video-sharing social network enables members to make and share films of 3-60 seconds with music and graphic effects. Currently, the social network has 800 million worldwide members.[6] Videos on TikTok do not instantly contribute to the success of a song in the charts, as is the case with other social media platforms. However, there is a significant correlation between a song becoming viral on TikTok and it acquiring popularity on music streaming services such as Spotify, Apple Music, and YouTube, all of which contribute to the Billboard charts as a consequence of the song's success on these platforms.[7]

TikTok has agreements in place with music distributors and record labels in order to get music licencing for the app. Artists are then compensated for the usage of their music on the site, with royalties going to them.[8] Distributors such as Distrokid, CD Baby, and TuneCore enable artists to post their music to TikTok, as well as to streaming platforms such as Spotify, via their websites or mobile applications. The majority of musical labels and distributors signed to licencing agreements with TikTok in 2020. Artists will be compensated for master streams on TikTok as a result of this. The usage of music on TikTok was previously mostly uncompensated prior to the signing of these agreements.[9]

Development of streaming such Spotify

Although Napster, the Internet's first extensive excursion into free music, was shut down in 2001, the service's repercussions are still felt in the business today.[10] The concept of Napster was ahead of it time with no infrastructure to support it. All five major recording firms sued Napster for contributory and vicarious copyright infringement since the majority of the music on its network was copyrighted. As a result, the music business has waged a ferocious campaign against any infringement, suing P2P firms like Napster and Grockster and even bringing customers to court. During the same time period, copyright was attacked from numerous sides as being unsuited to the digital era.

Despite Napster's demise at the turn of the 2000, the Recording Industry Association of America (RIAA) estimated a $4.2 billion loss in 2001.[11] Following the fall of Napster, iTunes became the major legal option for customers, particularly younger people, to access music over the Internet quickly and inexpensively. The loss of the full-length CD and the rise of single songs as the standard for customers eventually led to Spotify's on-demand streaming model, which offers a legal alternative to illicit file sharing.[12]

In some ways, Spotify's rise might be considered as a beneficial for the music business in the wake of Napster. Generally, music download retailers provide rights to listen to songs bought. As a result, each song or album receives a one-time payment. High competition pressure leads to poor vendor profit margins. So music download stores struggle to make money.[13]

To determine an artist's compensation, we multiply Spotify's monthly earnings by the artist's share of total Spotify streams in that month. Then, according to Spotify's simplified web page for artists, that figure is multiplied by 70%, with the remaining 30% held by Spotify. This formula returns the total amount paid to all copyright owners. Gone are the days when pop and rock artists, who have historically relied on royalties to support themselves, seemed to be the most involved in the battle against streaming.[14]

No matter how many people work on a song, the Copyright Act creates two copyrights: one for the sound recording and one for the underlying musical composition. The Copyright Act sets the royalties payable to songwriters when their compositions are performed or copied. While distributors like Spotify might enhance artist pay-outs by changing their business strategies, the Copyright Act could be amended to achieve the same goal.[15] Despite this, the worldwide recorded music market rose by 8.1% in 2017[16] and by $2.2 billion in 2018. This rise has been fuelled by rising streaming revenues: 278 million paying customers at the end of 2018.[17]

Spotify the alternative view

The first is the tactile joys of a vinyl record have already been taken away by streaming. It is well known that it abuses artists. Spotify offer a free plan however the sound the sound quality available to free users is only 160kbps, whereas on the premium paid plan users have access to 320kbps of music steaming. Spotify is expensive costing over £100 per year. Spotify is not available in all countries and ads appear in the middle of songs and only being able to skip 6 tracks in one hour. Ellen P. Hagger a different viewpoint that is not enough, we can look at what Spotify and its CEO Daniel Ek (worth $4.7 billion) have been up to in the last year, like the €1 billion stake Ek's tech investment group has taken in Helsing, a "defence start-up" that will use AI to build battlefield maps in a "ethical, responsible, and transparent" manner and exposes the unethical use of music-lovers' membership payments.[18]

Spotify AND the music industry

A significant source of music consumption, on-demand streaming, was not anticipated under the Copyright Act, which has not been changed since 1998. Recorded music with the advent of the Internet opens up a new variety of mobile portable devices (iPhone, and smartphones) and enabled by the mobile internet. Both download stores and streaming services have high client value. Customers may access vast music collections with practically every song or album. While consumers of download stores may download and pay for music, clients of streaming services can instantly access the whole music catalogue. Thus, streaming users believe they can get more music for less money.[19]

The most significant difference is in income generation. Subscriptions with monthly payments or free services with commercial interruptions have replaced traditional payment schemes where users pay per song or album purchased. However, no significant changes are seen in terms of necessary essential resources, activities, or partners. So cost structure adjustments are minor. Affected clients, how they are contacted, and how they pay for music are all tied to the business model's value capture. Moreover, although the underlying value of giving music has not changed, the channels, consumer connections, and income sources have.[20]

What’s coming next?

For decades, the medium through which consumers acquire music has been in continual flux. The CITI reported: “The Internet was bad for the music industry, but the smartphone has been good for the music industry”.[21] For example in 2014, Apple paid $3 billion for Beats by Dre, possibly the single most visible indicator of an industry-wide move toward the on-demand streaming paradigm.[22] On June 30, 2015, Apple launched its "Apple Music" service after a period of upgrading. The new service combines a user's MP3 collection with curated playlists, radio stations, personalised suggestions, and new releases, all of which are included in the monthly cost.

Longevity of resurgent trends in streaming music is attracted to the co-evolution of live music and digital music, as seen in the diagram. As in the case of downloading and streaming music, presence of two sectors in the same business does not always imply co-evolution. However, the outcomes of previous assessments give confidence that by activating and maintaining the co-evolution between live music and streaming music, the resurging trend in the music business can be sustained.[23]

Footnotes

[1] Jones, S., "Music and the Internet", (2000) Popular Music, vol. 19, no. 2, pp. 217-230

[2] Hogan, Molly, "Upstream effects of the streaming revolution: A look into the law and economics of a Spotify-dominated music industry." (2015) 14 Colo. Tech. LJ 131

[3] IFPI, IFPI, "Digital Music Report 2010" (2000) International Federation of the Phonographic Industry

[4] Beer, D., "Making Friends with Jarvis Cocker: Music Culture in the Context of Web 2.0", (20008) Cultural

Sociology, vol. 2, no. 2, pp. 222-241

[5] Haigney, S, TikTok is the perfect medium for the splintered attention spans of lockdown (2020) The Guardian, 16 May. Available at: https://www.theguardian.com/commentisfree/2020/may/16/tiktok-perfect-medium-splintered-attention-spans-coronavirus-lockdown  (accessed 19th March 2022).

[6] Iqbal, M, TikTok revenue and usage statistics (2020). Business of Apps, 9 June. Available at: https://www.businessofapps.com/data/tik-tok-statistics/  (accessed 19th March 2022).

[7] Salsabila, Fakhira Meshara, Ranti Fauza Mayana, and Laina Rafianti. "Copyright Commercialization of Songs Uploaded in TikTok Application Without the Creator’s Permission." Jurnal Sains Sosio Humaniora 5.1 (2021): 213-224.

[8] Oliver, Paul G., and Stefan Lalchev, "Music copyright, creators and fans" (2021) The Present and Future of Music Law 82

[9] Tasev, Alexandra, "Intellectual Property in the Digital Streaming Age: How Music Becomes a Lawsuit" (2020)

[10] Suskind, Alex, "15 years after Napster: how the music service changed the industry" (2014) Daily Beast

[11] Warren Cohen, Special Report: Copy-Protected CDs, ROLLING STONE, June 7, 2002, at https://www.rollingstone.com/music/music-news/special-report-copy-protected-cds-245618/ (reporting estimated losses to recording industry).

[12] Sinha, Rajiv K., and Naomi Mandel, "Preventing digital music piracy: the carrot or the stick?" (2008) 72(1) Journal of Marketing 1-15

[13] Jakob, H., "Wirtschaftlichkeit in der Musikindustrie" (2008) in Clement, M., Schusser, 0. and Papies, D.

(Eds.), Okonomie der Musikindustrie (pp. 77-83) Gabler, Wiesbaden, GER.

[14] Hogan, Molly, "Upstream effects of the streaming revolution: A look into the law and economics of a Spotify-dominated music industry." (2015) 14 Colo. Tech. LJ 131

[15] THE DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998 U.S. Copyright 17 U.S.C. § 101 (2013)

[16] IFPI (2018a), “Global music report 2018”, available at:www.ifpi.org/downloads/GMR2018.pdf

IFPI (2018b), “The globalmusic market in numbers”, available at: https://gmr.ifpi.org/state-of-the-industry

[17] Simon, Jean Paul, "New players in the music industry: lifeboats or killer whales? The role of streaming platforms" (2019) Digital Policy, Regulation and Governance

[18] Ellen Peirson-Hagger, “Why I hate Spotify Wrapped: We know Spotify exploits artists. We shouldn’t let it exploit music fans too”, (2021) The New Statesman at https://www.newstatesman.com/culture/music/2021/12/why-i-hate-spotify-wrapped (accessed 19 March 2020)

[19] Wagner, Timm, et al. "Streaming killed the download star! How the business model of streaming services revolutionizes music distribution" (2015) 7(1) Journal of Organizational Advancement, Strategic and Institutional Studies

[20] Ibid.

[21] IFPI (2018), “Global music report 2018”, p.4 in Simon, Jean Paul, "New players in the music industry: lifeboats or killer whales? The role of streaming platforms" (2019) Digital Policy, Regulation and Governance

[22] Hogan, Molly, "Upstream effects of the streaming revolution: A look into the law and economics of a Spotify-dominated music industry." (2015) 14 Colo. Tech. LJ 131

[23] Naveed, Kashif, Chihiro Watanabe, and Pekka Neittaanmäki, "Co-evolution between streaming and live music leads a way to the sustainable growth of music industry–Lessons from the US experiences" (2017) 50 Technology in Society, 1-19