There was a lot of talk, in the past decade, about how the music industry would change, post iTunes and peer-to-peer file sharing. A lot of ideas were proposed about how musicians would make more money than ever before, in a technology enabled utopia. Well, the evidence is now in. How did musicians and recording artists do? Did the new music monetisation schemes pan out as promised?
Proposition 1: Great music will find its audience through the frictionless, social, global nature of networks
The evidence appears to be that much great music is not finding an audience. Promotion and getting the word out appears to be harder than ever, due to the sheer amount of music competing for attention, most of which is not of a standard required by an audience. The great music is getting lost in the sea of ordinariness. There’s great music being made and great music costs relatively more to make, than ordinary music. However, the evidence is that it simply isn’t being found. Attention is scarce and there are more calls on attention, thanks to frictionless, social, global networks, than ever before. Great music is drowned out in a sea of marketing noise about everything else. The revenue stream has not materialised.
Proposition 2: Artists will thrive, producing content especially for niche markets, tastes and audiences
The theory was that millions of discrete, small audiences that really cared about a particular kind of music would find the artists making their kind of music and the artists making it would thrive, through direct relationships with their dedicated fans. There has been little evidence that this came true. Instead, there are fewer blockbuster acts raking in whatever money there is, while the niche artists starve in the doldrums, devoid of an audience. Niche audiences do not provide an income sufficient for musicians to specialise in serving them. There is insufficient revenue here.
Proposition 3: The relative demise of major record labels will make it easier for independent artists to succeed
It was thought that record companies were holding back musical innovation and preventing fans from finding the artists that could produce the music they wanted. Record companies, in short, were seen as a bad thing and perhaps they were. Unfortunately, the record companies of old also served to simplify and clarify the offerings to music fans, curating their music choices for them. Now, instead of a limited number of artists that were clearly supported and visible, no artists have a means of rising above the tide of partly finished, partly polished music being pushed to potential music consumers. It’s harder than ever for fans to discover music of a quality and type that they wish to listen to. Curation and music recommendation has, perversely, not kept up with the explosion of musical offerings provided. With so much free music available to fill up music fan’s limited attention and with so many high quality artists being effectively invisible to them, it has been difficult for quality artists to build revenue streams, since the available audience listening time is being absorbed by music of lesser quality and which is literally given away.
Proposition 4: Major labels will disappear entirely
They haven’t, though they have had to consolidate and several are severely weakened. Major labels are still calling the shots about what popular music comes to the attention of the largest audiences, they’re building and sustaining a handful of musical careers and they still control the industry, for no other reason than sheer inertia. The music industry has always operated this way and so it continues to freewheel, while running down, meaning that real revolution never takes place. Alternatives to major labels appear to be little stronger, even as major labels weaken. They’re not dead yet and not able to operate at the level they used to, so we have the worst of all outcomes.
Proposition 5: Digital downloads and streams will produce more revenue for musicians than physical product
Recording artists earn a pittance from digital streaming services and give up a large share of their revenue to digital downloads. Artists signed to traditional major labels lose out massively on digital streams and downloads (due to contracts that were written before these formats were popular or even existed), while still having to pay for things called “breakages”, which used to only apply to physical products. It was thought that because the digital formats had near zero replication and distribution costs, compared to physical formats, the artist would retain more of the money. Unfortunately, consumers of digital downloads are leaving more tracks from an album un-purchased, than they do with bundled, physical formats. When an artist sells a vinyl album or CD, the consumer buys all the tracks. With a digital download, consumers pick and choose. Artists are currently making more money from vinyl and CDs than they are from digital formats. The promise of increased revenue due to lower production and distribution costs has not been realised.
Proposition 6: Money will be made through touring, with recorded music being a loss leader to promote tours
Fuel and accommodation costs have skyrocketed, in the past decade. As real estate prices appreciate, so too does the cost of staying anywhere. Fans are notoriously difficult to entice to come out to see a live act, especially if the show is on a week night and the venue provides few creature comforts. Even major artists have been forced to cancel tours because the economics of touring just doesn’t make sense anymore. They can’t find venues that can accommodate their audiences in comfort, with sufficient capacity, they struggle to fill the venues anyway and the costs associated with mounting and touring a show is higher than ever before. Many touring acts lose money on the road. It used to be that recorded music sales supported tours. Why that should have suddenly turned the other way around was never explained and turns out not to have been true.
Proposition 7: There will be more artists making a decent living as professional musicians, but not the stratospheric incomes of a previous age of rock stars
It was thought that while there would be fewer bloated, wealth-drenched, rocks stars, more musicians could aspire to earn their living from music, to the extent that they could support a comfortable, middle-class, family life. They wouldn’t swan about in limousines and private jets, but would drive a Volkswagen Golf and be able to pay their bills. Unfortunately, there is no evidence of this happening. If anything, the inequalities in the music industry have never been so marked. We have a handful of rock stars still making the bulk of the money, with the majority living below subsistence levels and minimum wage. It also doesn’t seem to be sensible to suggest that musicians can create middle class, family lives, if they need to spend most of their working year (and all the weekends) on the road. Family time is not going to get a look in.
Proposition 8: Crowd funding will build and sustain professional music careers
Superfans, it was thought, would enthusiastically support an artist’s career in droves, through direct contributions, if given the chance to do so and asked to contribute. It turns out that artists have not been able to ask for their true operating and life costs (either through sheer embarrassment, or other reasons) and fans have been reluctant to part with their dwindling disposable incomes, as real wages have fallen so far behind price rises, especially the price of real estate. It’s a nice idea, but no artists are succeeding through crowd funding. Some are completing projects on a shoestring, but few attract enough funding to give up their day jobs.
Proposition 9: Streaming services are good for recording artists
Streaming services were designed to make streaming services and their Wall Street investors a lot of money, on the back of cheaply licensed content created by musicians, who they would strong arm into providing for peanuts. The fact is that artists do not make anything like significant revenue from streaming services and never will. Superfans, no matter how dedicated, simply don’t stream enough of their favourite music to equal the revenue musicians earn from download services, such as iTunes. The enhanced availability of an artist’s music, for people to stumble upon and discover via the streaming service, is negated by the fact that the streaming services have such a vast choice from all eras, of varying qualities and the fact that there are a significant number of tracks available on streaming services that have never actually been streamed by any audience member whatsoever (zero plays). Attention is limited and supply is effectively infinite, so being noticed and discovered on a streaming service is exceedingly unlikely. Musicians no longer compete with their contemporaries; they must compete with every artist that ever recorded. This cupboard is bare.
Proposition 10: Google and YouTube will make money for recording artists and build their audiences
As altruistic as YouTube and Google like to portray themselves, they are in it for the long haul and will make money using your content, one day, somehow. Their interests lie in exploiting musicians’ content for the least amount of money. That fact isn’t going to change. They want to saturate their audience with cheap content, while musicians want to maximise revenue for their content, even if that means turning away some of the audience. Google is controlling the technology. Individual content creators have little leverage against such a huge content aggregator. Independent musicians are divided and so, ruled.
Proposition 11: If Pandora could stream at lower royalty rates, they could thrive and thus help artists
Pandora wants to make their business viable by asking artists to agree to rate cuts for playing their music on Internet radio. Their mission is to lower the performance and publishing royalties paid to recording artists and songwriters to the extent that they can then make a lot of money playing that music to Internet radio audiences. They’re spending a lot of money on lawyers, in the courts and through political lobbying, to achieve this. In the past, radio play was valuable, because audiences were large and the pay off was a potential sale of an album, carrying more songs than were played as radio singles. That doesn’t happen, on Internet radio. Audiences are small and fragmented. Album sales are not achieved on the back of Internet radio exposure.
Proposition 12: Artists will make their money from merchandise
It was thought that even if music was given away for free, musicians would build fan bases that would shell out for merchandise like t-shirts, mugs, placemats and CDs. Unfortunately, there is little evidence that artists are making a significant income from sales of merchandise, either on tour at the merchandise stall, or online, via mini e-commerce sites. It’s hard to get noticed, hard to build a fan base and fans are being squeezed for disposable income. Selling t-shirts is a tough business to be in, whether or not you are a musician.
Proposition 13: Access to your music is the most important thing. Streaming services are the future
In the fullness of time, it is thought that all music will be streamed, with physical and downloaded formats going the way of the dinosaur. That being the case, all the money spent on music will come from streaming services, so you had better be on them. Unfortunately, the streaming services have offered subscriptions very cheaply, relative to the amount of music a single subscriber can consume. As a result, the streaming services are servicing a lot of debt and few (if any) are profitable. It is likely that many of the services will consolidate or disappear, leaving the remainder to act like monopolist gatekeepers of the audience and calling the shots over what musicians can and will be paid. If they become the only source of music for consumers and the only way of distributing music as an artist, it’s a fair bet that their priority will be to line their own pockets first and foremost.
There is a lot of money being made on the back of musicians’ content. It’s going somewhere. Where it isn’t going is into the pockets of the producers of that music. The goose that lays the golden eggs is being starved. Meanwhile, all the suggested alternative revenue streams that were supposed to compensate for the loss of traditional revenue streams have not come to fruition, the evidence now in proves. So how are professional musicians supposed to exist and make their product, if there is no way to pay for it? What do the remnants of the old music industry and the nascent digital music industry suggest is the way forward for individual artists? They operate as if there will always be high quality music made for them to exploit. That isn’t a certainty at all. In fact, there is evidence that high quality music made by professional musicians will be entirely displaced by thrown together amateur efforts and that the ranks of professional musicians will dwindle, while everybody supports themselves through day jobs. We’re heading toward a future where music will no longer be made professionally. Is that going to sustain the streaming services and the consumers?
Hard questions. Few answers.