The Evolution (or not?) of the Music Industry in 21st Century

Posted at June 8th, 2015 | by PulkitTaneja | in

Over the past decade or so, the music industry has seen itself evolve immensely. The kind of music being played has changed, new genres have been added and the quality of music being produced has enhanced. However, the most important evolution has been of HOW we acquire the music we want to listen to. This is evident from the fact that the number of total albums sold in the year 2000 in USA was 785 million compared to 257 million sold in 2014. The biggest losers of this decrease in album sales haven’t been the recording artists, but the recording labels that own the marketing rights to these artists. The reason behind this downward trend, as you may have already guessed, has been the introduction of digital downloading & streaming over the internet. Now, people have a choice of either downloading low quality music from an abundance of websites or stream high quality (album-like) music from streaming sites. For the latter, you have to pay a fixed amount via subscription packages.
 
The question that remains now is – How are music labels still flourishing despite these factors? The BIG 3 of the music industry – Universal, Sony & Warner Music Group have had to be smart in coping with this change.
 
Last year, Warner acquired a stake in SoundCloud, in the process allowing SoundCloud to legally stream music of some of its artists. What did Warner gain from it? A 5% stake in a company valued upwards of a billion dollars. And that is just the tip of the iceberg. What we don’t know and what hasn’t been discussed publicly is that the BIG 3 have slowly clawed into the digital music sharing business by acquiring minority stakes in music streaming behemoths like Spotify & Rdio by bartering cheaper deals which revolve around giving these apps access to a larger database of artists.
 
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Also a major source of revenue for recording labels has been via live shows. Artists sign contracts which give a percentage of the earnings from tours & concerts to recording labels in return for marketing the tours extensively.
 
So yes, the record labels have coped really well with the changing trends in the music industry, but the status of music artists has not changed much. The dearth of a solid income generation source for small and medium scale musicians still persists. On one hand, the revenue model of streaming services like Spotify (which gives artists between $0.006 to $0.0084 per stream) is not very substantial for artists that don’t have a massive following. On the other hand, record labels eat up majority of the revenue generated from record sales, merchandising & YouTube. Now, by acquiring stakes in streaming companies, record labels have fueled their own revenue channels, but don’t provide a clear revenue model for the artists whose music is now being legally played across streaming services.
 

In this revolution of the music industry in the 21st century, a lot has changed, but the monopoly that record labels have over recording artists is the same as it used to be 2 decades ago.

PulkitTaneja

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