Remember when iTunes first came out? Back when cars were still manufactured to include CD players (even cassette players, in some)? The idea of storing music on a computer, much less paying $0.99 to have it instantly downloaded, was absolutely mind-boggling. I still remember the first song I bought: Hollaback Girl, by Gwen Stefani (the clean version, of course—I was only 8 years old and my parents hadn’t yet given up hopes of keeping my innocence intact). Then came YouTube in 2005; now, you could not just download music, but you couldstream music videostoo, and it was all for free. The rise of technology and the digital age blessed our world with a cornucopia of information at our fingertips, and we ate it up. However, as with any modern technology, every new invention opens a door for unforeseen and unintended consequences. And that’s exactly what happened with the music industry: digital downloading revolutionized our concept of music access, but it also revolutionized our concept of music piracy. People stopped paying for music and started illegally downloading it, which hit the industry (and all the artists struggling to succeed within it) hard. Ever since then, it has had to slowly build itself back up, all the while adapting and re-adapting to new technologies and forms of music consumption—most notably digital streaming, which, though it, too, comes with its own share of unintended consequences, has skyrocketed to make up more than 62% of industry revenues as of mid-2017 (Friedlander 2017 Mid-Year RIAA). Although many argue that streaming services like Spotify have caused an industry upheaval and a decrease in revenues, the benefits of music streaming will far outweigh the costs with time, and it will ultimately lead to greater democratization within the music industry.
To fully understand the controversy behind music streaming, one must necessarily understand its history first. The funny thing about it all, though, is that music streaming actually goes back much farther than you’d expect—all the way back to 1993, with the founding of the Internet Underground Music Archive. Better known as IUMA, it was a web-based platform specifically used by independent and unsigned musicians to share their music, with the end goal being more centered around exposure rather than profit. However, the platform was pretty limited; upload and download times were slow, and IUMA soon faded away with the rise of the controversial Napster in the 2000s—incredibly convenient, but also incredibly in conflict with copyright laws, which have remained a source of tension within the streaming industry to this day (Maidment). Then came Pandora in 2005; an effort to utilize algorithms to make personalized radio stations, it was one of the earliest “freemium” models—users could listen for free with ads, or pay a monthly subscription fee for uninterrupted streaming.
Meanwhile, growing criticism towards the music industry and the overarching control of record labels over artists led to the creation of sites like Soundcloud and Bandcamp, where artists could release their own music available for streaming independent of a label. By the time Spotify came around, rates of illegal music downloading had increased drastically; Spotify was, in fact, originally an attempt to discourage piracy by providing free or minimally-priced access to music that was actually legal. At first it was only available overseas, but after a few years of international licensing struggles, Spotify launched in the U.S. in 2011—and it was wildlypopular. A considerable update from Pandora (which was limited to radio stations), Spotify had a massive catalog of individual songs for on-demand streaming, and it attracted users by the millions (Gil).
However, as streaming subscriptions grew, so did discontent among artists; soon, big names like Taylor Swift began boycotting Spotify on the grounds that it was decreasing revenues from album sales: “Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically,” she wrote in her infamous Wall Street Journal article of 2014 (Swift).
Despite the fact that Swift herself was still making millions, her opinion spread like wildfire. All the smaller artists trying to make a living off of their music were being hit hard, and the public saw her move to take her music off Spotify as a declaration of her support for those artists—the underdogs and the everymen—who generally don’t have as much of a voice within the industry. When a celebrity with as much social influence as Taylor Swift speaks out like that, it has the power to turn a lot of people against the streaming industry. However, her rejection of streaming services didn’t account for two things: the exposure and other benefits that streaming offers smaller artists, and the adjustment period that is generally necessary for new business models to flourish.
Though many are under the impression that streaming doesn’t generate as much revenue for artists themselves, research by economists Joel Waldfogel and Luis Aguiar suggest that even though streaming may be disrupting traditional music sales, it doesn’t necessarily mean that it’s decreasing artist paychecks. Consider: a digital download from iTunes requires a one-time payment, and Apple takes a substantial cut from every one of those payments. Streaming services, on the other hand, pay the artist every timea track is streamed. Waldfogel and Aguiar’s calculations provide a kind of currency exchange rate, showing that if a track gets enough plays on a streaming service, the artist will, in fact, make just as much money as they would have made through a subsequent number of digital downloads (Aguiar).
For smaller artists who haven’t yet reached the magnitude of streams necessary to even out their paychecks, streaming services make up for their shortcomings in immediate album sales by providing new artists with expedited exposure, which levels the industry playing field. For instance, Norwegian pop duo Nico & Vinz gained international fame through their summer song, “Am I Wrong”, thanks to streaming services that allowed it to reach an exponentially larger audience—it got over 200 million streams on Spotify alone. Because of the social sharing capabilities of streaming services like Spotify, music is able to travel much faster; now, users and subscribers are the ones who have the power to catapult a song to fame, not just hit radio stations (Sreenivasan). When every artist can be found on the same streaming platform, they all have the opportunity to reach the same audience numbers; therefore, smaller artists have a better chance of making it big. Industry professionals like Daniel Glass agree. As the founder of indie record label Glassnote Records, Glass maintains that streaming is crucial for his artists. Not only do streaming services provide exposure through social sharing, but they also provide instant publicity through highlighting, curating, and playlisting new songs. Take Robert DeLong; his song “Long Way Down” quadrupled in streams the minute Spotify added it to their big curated playlists (Sreenivasan).
In addition to boosting exposure, streaming sites also give smaller artists easy access to analytics information, which can be used to streamline tour planning and promotional strategies and potentially lead to higher revenues from live concerts. Spotify, Pandora, and YouTube have all had their own artist dashboards for upwards of 2 years now, and now Apple has thrown its hat in the ring as well. January 22nd marked the release of the company’s Apple Music for Artists dashboard, which provides artists with data such as number of plays, spins, and song and album purchases within customizable time periods—supposedly with a more in-depth and user-friendly platform than any artist analytics pages that have been released so far. This is incredibly helpful for evaluating listener data, which, with Apple Music for Artists, can now be broken down into plays in individual cities and even listener demographics within each city. This will be revolutionary for tour routing and concert planning; not only can artists decide strategically which cities to tour, but they could even potentially plan set lists based on their top tracks in a given town (Newman). Though Apple’s platform doesn’t include financials, it (along with most other streaming-based analytics platforms) is targeted towards independent artists who would have had limited access to this kind of information in the past—yet another testament to the democratic climate that streaming services are creating within the industry.
Interestingly enough, many of music’s rising names right now are, indeed, independent artists. For instance, Chance the Rapper, now a well-known figure in the music industry, started out by releasing mixtapes on Soundcloud and let his fans carry him from there. He has never signed a deal with a major label, yet he’s incredibly successful; his is a perfect example of utilizing exposure through streaming to fuel live concert sales. Daniel Caesar is another notable new artist who has recently risen to fame without the assistance of a major label. Though he was approached by labels when his name began to gain weight, he ultimately turned down any deals in favor of staying with his original team. While this prevented him from direct distribution, marketing, and promotion services, he made up for a lack of major label support through independent partnerships, TuneCore (a digital music distribution service like iTunes), and Twitter—proving that labels are becoming less and less vital to the success of an artist in the digital age, largely thanks to the services provided by digital music sites (Saponara).
As the digital age is facilitating such changes, it’s affecting the way major record labels work as well; more and more, major labels are shifting towards using strategies that independent labels have been using for years. Because of the overall decrease in industry revenues, it’s more critical than ever that labels share fair portions of profits with their artists—something that indie labels have done from the start, but that major labels are only just beginning to embrace. They are shifting towards multiple rights deals, also known as 360 deals, in which record labels get a percentage of all profits (including merchandise sales and endorsements) in exchange for actively developing those opportunities for their artists. The fact that major labels are re-branding towards fairer deals that are mutually beneficial once again goes to show how the industry is slowly but surely becoming more democratized, giving smaller artists more and more of the same opportunities as more prominent industry names (McDonald).
Thinking back to Taylor Swift’s Wall Street Journalarticle, if her argument that streaming services are hurting smaller artists doesn’t hold up, what about the argument that these services are cutting industry revenues? The flaw in this point is that the music industry isn’t actually losing that much money anymore. Although there has been a decrease in physicalalbum sales and MP3 downloads, there has also been a decrease in music piracy since the rise of legal streaming—more people are actually paying for their music. Additionally, according to recent reports from the Recording Industry Association of America, retail revenues from recorded music in the U.S. grew 11.4% in 2016—to $7.7 billion—which was mainly a result of a doubling of paid streaming subscriptions, leading to the American music business’s biggest gain since 1998 (Friedlander 2016 RIAA). Although overall revenues are still only around half of what they were in 1999, this could easily be attributed to an economic readjustment of the music industry to the digital era. Any readjustment of that magnitude takes time; 2016 marked the first year that streaming services generated the majority of American music industry revenues—a whopping 51% (as opposed to 9% in 2011) with the most notable growth in the paid subscription category, where revenues have more than doubled. In the meantime, sales of digital tracks and albums declined faster in 2016 than in any year to date, and physical shipments and digital downloads showed a steady decrease (Friedlander 2016 RIAA).
This shift in revenue sources within the music industry has made it apparent that change is necessary if we are to keep up with the changing practices and platforms of music consumption. Industry professionals have responded to this, and now, so is Congress: near the end of December, Representative Doug Collins brought sweeping reform to music licensing with the recent Music Modernization Act (MMA), and the Senate quickly followed suit with a similar reform on January 24th, known as the Music Bus Bill (Johnson). Representative Collins argues that the industry is limited because its current laws were made before streaming, so the copyright system is out of date. The MMA and the Music Bus Bill took the first steps toward reform after a long period of stagnancy in industry law, bringing music licensing its “first meaningful update in almost 20 years” (U.S. Rep. Collins Introduces Music Modernization Act). Collectively, these new bills will ensure proper and timely payment to songwriters and publishers for their work, force the Copyright Royalty Board (CRB) to take free-market conditions into account when determining payment rates, and allow federal rate courts to consider certain evidence when setting performance royalty rates that will facilitate fairer payments for public performances by songwriters and performers (U.S. Rep. Collins Introduces Music Modernization Act).
These reforms are a drastic departure from the protocols that have ruled the music industry for decades, and are a direct result of the changing technological and economic climates within the industry. As digital streaming is taking over as the dominant music consumption method, it has begun to democratize the music industry: it has given smaller artists greater opportunities for exposure and access to analytics, it has empowered independent artists through self-publication and promotion, it has standardized the way record labels handle deals, and it has led to revenue source changes that have prompted long-overdue updates in music law. Although it’s taken some time, the shift from physical albums and MP3 downloads to streaming in the digital age is finally beginning to manifest economically, showing slow but steady revenue increases that are reflective of the overall growth in the industry’s business model. Ultimately, these shifts and this new business model are creating a climate in which every artist, small and large, will be able to thrive.
Aguiar, Luis, and Joel Waldfogel. Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?. NBER, 2015, National Bureau of Economic Research.
Friedlander, Joshua P. News and Notes on 2017 Mid-Year RIAA Revenue Statistics. RIAA, 2017, Recording Industry Association of America, http://www.riaa.com/wp-content/uploads/2017/09/RIAA-Mid-Year-2017-News-and-Notes2.pdf.
Friedlander, Joshua P. News and Notes on 2016 RIAA Shipment and Revenue Statistics. RIAA, 2017, Recording Industry Association of America, www.riaa.com/wp-content/uploads/2017/03/RIAA-2016-Year-End-News-Notes.pdf.
Gil, Lauren. “History of Music Streaming.” Sutori, www.sutori.com/story/history-of-music-streaming.
Johnson, Ted. “Senators Seek to Streamline Music Licensing, Boost Payments to Songwriters.” Variety, Variety Media, 24 Jan. 2018, variety.com/2018/politics/news/music-licensing-songwriters-new-bill-1202675634/.
Maidment, Paul. “The Rise And Fall of Shawn Fanning’s Napster.” Forbes, Forbes Magazine, 6 June 2013, www.forbes.com/2003/05/27/cx_pm_0527bookreview.html.
McDonald, Heather. “Here Are 5 Important Lessons Big Labels Learned From Indie Imprints.” The Balance, 10 July 2017, www.thebalance.com/top-lessons-big-labels-learned-from-independents-2460789.
Newman, Melinda. “Apple Bows Apple Music For Artists to Provide Acts With Deep Analytics Dive: Exclusive.” Billboard, 22 Jan. 2018, www.billboard.com/articles/news/8095305/apple-music-for-artists-provide-acts-deep-analytics-dive.
Saponara, Michael. “Daniel Caesar Breaks Down the Keys to His Independent Success.” Billboard, 5 Jan. 2018, www.billboard.com/articles/columns/hip-hop/8092931/daniel-caesar-independent-success-rap-radar-manager-interview.
Sreenivasan, Hari. “Can the Music Industry Survive the Streaming Revolution?” PBS, Public Broadcasting Service, 4 Feb. 2015, www.pbs.org/newshour/show/streaming-music-changes-business-equation-artists.
Swift, Taylor. “For Taylor Swift, the Future of Music Is a Love Story.” The Wall Street Journal, Dow Jones & Company, 7 July 2014, www.wsj.com/articles/for-taylor-swift-the-future-of-music-is-a-love-story-1404763219.
“U.S. Rep. Collins Introduces Music Modernization Act To Reform Licensing Landscape.” ASCAP, ASCAP, 21 Dec. 2017, www.ascap.com/press/2017/12-21-music-modernization-act-colllins-release.
Via Savage is a senior studying psychology and songwriting at USC. Originally from North Carolina, she grew up with a music professor and an art professor for parents, who instilled in her from a young age a simultaneous passion for education and the arts. Via loves yoga, hiking, and discovering new music, and she plans to pursue a career in the music industry upon graduation.
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