NDM independent case study: research

NDM independent case study: research

Number 122 - The Changing Face of the Music Industry

• 'The music industry is a complex industry which is made up of conglomerates [...] others which are considered to be 'indie' (independent) labels such as Rounder Records and Concord Records who make music for niche audiences.'
• 'Most indie labels have had to develop affiliations with major companies so that they can effectively distribute their music. Examples include Def Jam (Universal), Aftermath (Interscope/Universal)...

Even the so-called independent labels will find themselves relying on the power of the majors to be totally successful in the industry.

• 'The music industry wants to protect their position of dominance. The five major record labels; Sony, Universal, BMG, EMI and Time Warner monopolize the market when it comes to sales of music, leaving less than 20% for the hundreds of independent record labels or indie labels. Furthermore when the independents get too big or an artist or group starts to garner more of a fan following these major companies usually pick up the artist or group or buy the record label, this is called Horizontal Integration.'

Here, it's represented that what major record labels will often do to prevent their sales from lessening too significantly is buy out budding artists and indies. This merger eliminates the threat that was posed to them at one point, helping them maintain the monopoly power that they possess.

• 'According to www.songrights.com music companies give between 9% and 12% to the artist and the rest is profit for their company.'

This statistic here is representative of the fact that at least in the traditional business model, almost 100% of the time, when it comes to record labels and artists, the record labels will be the main beneficiaries from a monetary standpoint.

• 'However, this traditional model is changing. Developments in technology and the emergence of the Internet mean that artists have the potential to reach audiences without the need for a major company and where once recording equipment was expensive it was out of reach for the average person; it is now widely available at a low cost. You can purchase sophisticated music production software for a few pounds on your mobile device or tablet.'

Increased availability and accessibility of music recording equipment to the 'average person' takes away some of the reliance on record labels that once used to exist. People can establish their own successful music careers so long as they know how to use things like production software.

EXP: 'Damon Albarn, for example, recently produced a Gorillaz album in its entirety using software for a few pounds on the iPad.'

• 'In many cases artists are able to promote and distribute music digitally without the assistance of a record label. Unsigned artists can sell their music on iTunes, have it streamed on Spotify or Soundcloud and produce their own videos for YouTube.'

This section here is representative of the impact that new and digital media is having on the music industry. As said above, it's now easier for people to launch their own careers without the help of a label through digital services such as Spotify and Soundcloud. Independence is actually something that can be upheld.

• In an era of fragmented platforms, file sharing, and non-traditional routes to market, the music industry is facing various challenges. It has had to react to change: new formats, new technology and new business models mean an industry in a constant state of transformation. This has been particularly obvious in the way that audiences are dictating how they want to consume their music...'

This is representative of how new and digital media is not only affecting the music industry from the standpoint of the record labels, but also audiences. They are granted more options in how they would like to listen to music whether it be through mobile phone, tablet or laptop.

• 'How audiences are purchasing and consuming music has changed dramatically with the emergence of digital technology and the music industry has struggled to keep up at times and this is especially true when it comes to changing audience behaviours. One of the most problematic issues that the industry is facing is the ‘culture of free’. In recent years consumers are less willing to pay for their music and as a consequence piracy and file-sharing have seen the industry lose billions over the last decade. 
• According to the Institute for Policy Innovation global music piracy causes $12.5 billion of economic losses every year

We're seeing a negative of the impact of new and digital media on the music industry here as it led to a development of a culture where people don't deem it fit to pay for content. This has meant that huge losses have been incurred by record labels.

• 'In order to combat this music streaming services such as Spotify have worked in conjunction with the industry to try offer audiences the opportunity to listen to music but not actually download it, which means it is not being shared YouTube has also placed ID content censorship on videos to stop music being downloaded.'

Temporary measures have had to be imposed by some of the digital services to help prevent the illegal downloading going on. This is representative of the sheer magnitude that the downloading takes place at.

• 'One way it is doing this is through saturating the market with what Mulligan calls ‘The Superstar Economy.’
• 'The Internet was meant to weaken the dominance of superstar artists in the music industry and enrich the smaller, niche music creators. But new research suggests that this “long tail” theory is wrong: superstars are capturing the vast majority of music revenues and their share is increasing – not decreasing – because of the rise of digital services like iTunes and Spotify.'
• 'The top 1 per cent of artists the likes of Rihanna and Adele accounted for 77 per cent of recorded music income in 2013'
• 'Most digital music services have catalogues of more than 20m tracks are not listened to.'

This 'Superstar Economy' represents the fact that while we may be aware of the fact that we have more choice as to what music we can listen to on streaming services, deep down we still collectively end up listening to the same 'superstar artists' that we used to. This can be seen with how they account for the lion share of recorded music income in 2013. It could be said that a situation like this could be likened to that of Pareto's Law when talking about traditional news institutions. What we see is a 'minority of musicians always serving a majority of listeners.'

• ‘The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.’

The Long Tail theory serves as a representation of what we can see now within the music industry. There are a variety of products from a variety of different producers that satisfy, a variety of different wants. 'One-size-fits-all' doesn't apply to products to the extent that it once used to before developments in new and digital media. Rather we see a more narrow targeting of certain types of music to those people that it appeals to.

• 'The marketplace has shown us that humans are just as much wandering sheep in need of herding online as offline.' (Mark Mulligan)

This statement by Mark Mulligan is representative of this sheep before that still exists even online within the music industry. Rather than people embrace what appeals directly to them as individual people, they end up 'following one another' in admiration of superstar artists that thousands if not millions of other people around the world also enjoy.

• ‘Don’t make people pay for music, let them.’ - Amanda Palmer
• Artists like Amanda Palmer are trying to circumvent the big labels and do things differently by using the idea of crowdsourcing. This is where an artist asks their fans or anyone who may be interested to fund their project and be given something special in return. In Palmer’s case it was a mixture of invitations to her live performance art events and the album in its many forms.

In the absence of a record label, crowdsourcing is another measure which artists can use to help fund their careers. Kickstarter is one of these crowdfunding platforms and they can be viewed as being particularly beneficial for both consumers and artists with the former being in the sense that in exchange for money you can get things like tracks from artists and the latter in that they can actually receive money from consumers to fund their careers.

• 'Palmer’s route into this way of making money form music came from her acrimonious split with the record company. She was originally signed to Road Runner records. However when the company said they wanted her to remove her non-airbrushed stomach from an album cover as well have her do more ‘mainstream’ music she left. Her first release with the label sold 25,000 copies but they considered it a failure. She decided that she could no longer work in an industry that didn’t allow the artist total control.'

Palmer's route could help show the fact that developments in new and digital media in the music industry have allowed for more autonomy for artists in their careers that a record label obviously wouldn't allow for. 



MM34 - December 2010: The Change Issue

Changes in the Music Industry: From Labels to Laptops

• 'The conventional industry models have been challenged, largely due to the emergence of new technologies and new ways for music lovers to listen, and own, the music they love.'
• 'In the old days, working musicians would hope (ultimately) to be signed to a record label.'
• 'The record company would pay the artist a sum of money as an ‘advance’, to record some material, and specify how much the artist would have to sell before that advance would be paid off – then the artist would start to get a cut of the profits (usually about 15%). The label would have the records and CDs physically manufactured, and use its distribution and marketing network to get the product into record shops, and to get promotion via radio, TV, magazines and so on. In the meantime, the label would arrange tours, with all the accompanying merchandising, as another revenue stream, and the publishing arm of the label (or an independent publisher) would collect royalties from all the airplay and other usage of the artist’s materials, taking a cut themselves.'

This 'complex, old-fashioned model' displays a lot of the reliance that's placed on record labels by artists, handling essentially everything that the artist doesn't such as recording facilities and distribution networks.

• 'With the emergence of Napster and other file-sharing sites more than ten years ago, it became obvious that the internet offers a perfect way for artists to distribute music. While Napster made it easy for users to share other people’s music, it wasn’t a massive leap to imagine that artists could use the same technology to promote and distribute their own music, thus cutting out two of the important functions of a record company. In this new world, there would be no place for physical records; instead music would live as data on people’s computers.'

This here shows how even in its early days, new and digital media was having a massive impact on the (traditional) music industry. The role of the record label was becoming increasingly minimised with its expansion and this is something that would only become more of the case in later years.

• 'The music rights organisation PRS for Music reported this year that CD and DVD revenues fell by £8.7 million in 2009, but digital revenues grew by £12.8 million.'

This statistic serves as proof for the contraction of the usefulness of record labels. As digital became more and more of the 'in thing' across time, the more traditional forms of media started to go out of fashion being bought by less consumers.

• The ubiquitous MySpace emerged as (among other things) a platform for artists to host, promote and distribute music. The site has famously launched careers, including that of Lily Allen. Allen was actually signed to a record label at the time her massive popularity on MySpace broke. However, as the first high-profile artist successfully to promote themselves via the site, she highlighted the importance of the medium. Allen’s story is a good example of how early-adopters can use the free technology available at their fingertips.

Lilly Allen's success story is representative of how the e-media platform acts as a perfect avenue for those who don't have access to something like a record label to get their music out there. Even though this was prior to the popularity of services like Spotify it's representative of how the e-media platform has allowed for more entrants in the music industry. 

• Sites like Spotify satiate music lovers who want to listen to, then purchase, music – their 4 million song database is available to any listener who doesn’t mind putting up with occasional adverts, and it’s this advertising revenue that funds the venture. However, it doesn’t necessarily offer an avenue for new music to be heard.

We're seeing here the alternative that Spotify provides in being able to listen to a wide range of music free of cost with just adverts here and there which of course funds the service. However it's also said that it doesn't necessarily give us the change to hear new music and really it's just what tends to be in the mainstream. It does have to be noted though that this magazine was released in December 2010, so it will more likely than not be the case that it has actually from how it once was.

MM53 - September 2015

• As of December 2014, 75% of Spotify's 60 million users worldwide (up 20 million in a month!) were using the free tier, with just 25% paying the subscription of £9.99 per month. Spotify's user base has doubled since 2013 but the proportion of users on the paid tier - 25% - looks to have stayed roughly the sane

So looking at this, it can be told that Spotify actually mainly serves people looking for free music. This 100% reflects the attitudes of consumers today which differs hugely from what was the case say 20 years ago where music had to be listened to through physical means e.g. CDs, vinyls etc.

• As Spotify explains, the free tier that 75% of users are experiencing contains adverts, all of which advertisers have paid to place there. This revenue all goes into Spotify’s coffers, as do the subscription fees for the paid tier, and it pays 70% of the overall revenue they collect to rights holders – in other words, to the artists

This statistic here displays the workings of Spotify. While it does offer a free tier to consumers which most tend to take up, the ads that get placed within it are how it obtains revenue if you ignore the paid tier. 70% of the overall revenue is what the actual artists end up receiving so it does seem like quite a good cut for them.

• According to its figures, the amount of royalties that Spotify pays to artists doubled from 2013 to 2014, from half a billion to a cool billion US dollars.

It's made clear from this statistic here that Spotify does pay quite a considerably large amount of the revenue that it gains from subscriptions and adverts to artists.

• It’s not as simple as that though. As reported by The Trichordist’s blog (‘Artists For An Ethical and Sustainable Internet’), 80% of the revenue Spotify pays out comes from the 40% of streams made via the paid tier. In terms of collecting royalties for artists, the free tier is still very much the ‘gateway drug’ of the whole platform.

This statistic here shows that what really happens is that the most of the money that Spotify ends up paying out is revenue obtained from adverts rather than paid subscriptions. This is particularly interesting as it displays the attitude that it is thought to be widespread today of people not wanting to have to pay for the content that they're accessing. 

• However, there’s no denying that, after a long period in which the music industry seemed filled with inertia about how to combat piracy, Spotify has finally seized upon a working business model that does return some real money to artists and rights-holders. What Spotify has realised is that audiences in 2015 are less concerned with owning music than having access to it, and are willing to pay for that privilege. It presents a variety of figures on their website illustrating how all this translates into pay for artists, and it also claims to have turned many downloaders of pirated music into legal users of its free tier - no doubt as part of the shift away from owning, towards simply accessing media

This section does stand out as being quite true in terms of Spotify's business model. It acknowledges that we live in a time where free content is what most people are familiar with and utilises this while still actually paying artists for their content that's getting consumed. It is true that people who were frequent illegal downloaders past through a service like Spotify will more likely than not change their ways. It also has to be said that this insistence on accessing media as oppose to actually owning it might be why a service like Spotify is doing as well as it is today. Ownership was a thing more of the past and isn't valued as highly as it once was.

• It was reported by TechCrunch, however, back in 2009, that the major labels had received an 18% equity share in Spotify, and were receiving more favourable terms than indie labels. 
• In a complex unpicking of the way streaming services work, Talking Heads musician David Byrne asked in The Guardian: Are these services evil? Are they simply a legalised version of file-sharing sites such as Napster and Pirate Bay – with the difference being that with streaming services the big labels now get hefty advances? [...] What’s at stake is not so much the survival of artists like me, but that of emerging artists and those who have only a few records under their belts.

With this you begin to question the fairness of the system that Spotify has got in place. While artists do end up receiving 70% of the revenue obtained by the company, the issue is that the major record labels are who benefit from them the most because they have a share in Spotify. With this, upcoming artists face more of an uphill battle when trying to gain success.

• Might we end up looking back on the MySpace years as a golden age in which talent could – briefly – bypass the corporate world and come straight to us? Over the last few years, some artists have been less than enthusiastic about what they perceive as the restoration of the status quo.
• Radiohead’s Thom Yorke, for example, has described Spotify and its position as ‘gatekeeper’ in an interview with Sopitas.com as ‘like the last fart, the last desperate fart of a dying corpse’.

Just like the concept of the 'Superstar Economy' we could just be ending up in a position where the most popular artists are the ones that we end up listening too on services like Spotify rather than exploring. This description of it as a gatekeeper by Thom Yorke is quite interesting too as it suggests that it has a level of control in what we have access to and also what we don't.

• As artists, rather than resist them, I believe it is in our long-term interest to engage with the streaming services – which is what I am trying to do with my talking playlist. This approach has borne some fruit with Spotify – their royalty system is relatively transparent. They will let an artist see how many plays they have had and show them how much they have paid to their record company for those plays. The artist can then look at how much they have received from their label and do the math[s].

As said by singer-songwriter and social activist Billy Bragg, it appears that engagement with streaming services is the best thing that artists of today can do. Things like the transparency that it delivers in terms of the royalties that you get paid are things that would appeal particularly to artists themselves.

• Neilsen SoundScan’s global figures reveal that 70% of the music consumed in the first half of 2014 was streamed or downloaded – with streaming up a staggering 52% from the previous year
• With the news that 50 million songs 
• were streamed in January 2015 (double 
• the previous January’s), and that from 
• February 2015, the UK album chart (as 
• well as the singles chart) now factors 
• in streams, the business models of 
• platforms like Spotify, and indeed 
• YouTube, will be incredibly important – 
• and increasingly under scrutiny – as the 
• landscape changes permanently and 
• streaming becomes the norm. Whether 
• all artists and all labels – majors and 
• indies – get fairly recompensed is a 
• question that lingers.

This statistic just represents the widespread usage of streaming services today with the majority of songs in a whole year being consumed by streaming. Noting that this was 2014 if you fast forward to 2017 there's no doubt that it'll be an even higher statistic than this.