The Music Industry: Then and Now

By: Kyle Jennings

Today, everything is digital; music is no exception.  The music industry is almost entirely online. Yesterday’s Walkman is replaced by today’s iPhone.  Record stores are out, streaming services are in.  Streaming services make music easy to access, even while on-the-go.

Record labels and publishing companies are closing in increasing numbers.  Traditionally, labels provided artists with start-up money, marketing and production.  Artists today can record music themselves easily and inexpensively. They distribute music and gain audience through social media.

New music is always accessible today.  Streaming apps recommend songs based on the subscriber’s prior listening experience.  Twenty years ago, to hear new songs, fans had to hear it on the radio.  Or, they bought an album based on the performer.

How music is sold and priced changed significantly.  In 1991, a popular album such as R.E.M.’s Out of Time sold for $19.  In the early 2000s, iTunes and other downloadable music sites took over.  Listeners could purchase individual songs for an average price of about $1.29 instead of the entire album.  After Spotify’s release in 2008, purchases declined further.  Subscribers listen to their personal playlists.

Consumers demand free music.  While streaming services can be free, playback is interspersed with ads.   Spotify, the largest music-streaming service, charges a $10 monthly subscription fee to eliminate ads.  Despite this low fee, 57% of Spotify’s 140 million active users pay no fee.

Industry experts believe streaming saved music.  The internet which once harmed music with pirating is now the largest source of revenue.  The industry struggled before two separate lawsuits settled in 2000 halted Napster and other peer-to-peer sharing sites from providing illegal music downloads.  Since then, streaming companies, such as Spotify and Apple Music, have emerged and taken control of music.  In 2016, industry revenues grew for the second consecutive year; the first such consecutive increase since 1999.  The decrease in sales of music to individuals is more than offset by the increase in streaming revenues.

Artists believe streaming devalues their work.  In past years, artists received royalties from album sales on CD, vinyl or other media.  Artists receive comparatively little revenue from streaming services.  According to The American Society of Composers, Authors and Publishers (ASCAP) which collects and processes royalties for artists, the average royalty songwriters earn for a song streamed a million times on the major audio streaming services is only about $125.  Royalty rates range from $0.0006 to $0.0167 per play.  In 1990, artists received 9.1 cents for every song sold.

In December 2015, the Copyright Royalty Board (CRB) set new streaming-music rates for 2016 at 17 cents per 100 plays on free, ad-supported services and 22 cents on subscription-based platforms. It does not apply to platforms like giants Spotify and Apple Music which allow subscribers to create playlists.

The music industry and YouTube are at odds.  Many stream music on YouTube, yet there is a “value gap” between what YouTube earns in advertising and the royalties it pays.  YouTube paid the music industry $1 billion in 2016, a little over $1 per user.  Spotify paid record labels an estimated $18 per user in 2015.  YouTube counters it generates revenue from users who would not pay for a subscription streaming service.  This is not satisfactory to the music industry.

As royalties from music sales decline, more artists are turning to live performances for income.  Ray Waddell, at Oak View Group, a live-business consultancy and development company, claimed: “It used to be that you toured to help sell the record, now the record helps support the tour.”

There is no better time to be a music fan.  The music industry continues to evolve; it will be exciting to see what new directions it will take next.