MODERN MUSIC AND THE STREAMING SHOWDOWN

Meera Vinod
Sep 2, 2018 · 9 min read
Taylor swift, one of America’s most popular pop artists.

Hello reader :-))

I’m Meera Vinod, an aspiring product manager. Today,I decided to write an article about the Apple music vs. Spotify streaming war as a part of my PM learning activity. So I started digging up material online. After about 10 minutes of scouring the web, I realized that the music business and how it interlinks with the tech scene to sell music has a vast and complicated structure. So here is an attempt to break things down for simpletons like me. Hope you enjoy and do comment your thoughts, suggestions and corrections if any :-))

In the early days, we had vinyl records, cassettes and CDs to store and record our favorite music. And then the internet came bursting through the door, and soon we were uploading and downloading stuff like never before. I know it isn’t nice to illegally download music off the net because it’s unfair to the artists that created the music in the first place but hey, haven’t we all done it at least once in our lifetime?

Before writing this article I never knew there was a giant corporate machine operating behind the music artists to help them push out their work. Somehow I reckoned that the musicians got somebody to burn their music onto thousands of CDs or as the demand came and then shipped them to music shops or the iTunes store for a profit.

I couldn’t be more stupid than this. Turns out record labels and publishers exist for a reason. And the reason is to leave the artists to make music so that these folks can work alongside them to focus on milking profit out of their art.

SO THEN WHAT GOES INTO MAKING SERIOUS MUSIC??

I’m sure you’ve all heard of “Universal”, “Sony” and the “Warner” group. These folks, apart from being famous for whatever reason you think they’re famous for, are also major labels in the music industry. They’re more formally known as Universal Music Group, Sony Music Entertainment, and Warner Music Group respectively as recording labels. So how do they function?

First of all, they’re large organizations; like really giant, with lots of money, manpower and hierarchy within the variety of departments that constitute it. Their job is to help artists by providing them all conducive elements for producing good music. So what makes good music? I guess in the olden days, it just meant ‘good music’. However today, you’d need more than just good music to sell an album. You need a music video, access to excellent recording, editing and sound engineering facilities, cover art, marketing taglines, appreciable social media presence and what not. Let’s not even go into that part when you are finally done with all things, and now have to come up with ways to make people buy your stuff. All of this is just really tedious for a bunch of artists to handle. So the artists offload all of this work to the labels.

They have various departments like A&R (Artists and Repertoire), promotion, marketing, new media, sales, legal department, art department, artist development etc. The folks over at the A&R dept. discover talented musicians and get them into signing contracts with the recording label. The contract basically deals with how the label is going to help these artists produce their music with all the above mentioned facilities and finally get the finished product to reach the mass audience. What we commoners don’t realize is that the final product that we see is not actually just the effort of the artists but a result of collaboration between the artists and hundreds of people who work at the record label. They help with the graphic art, choreography, mixing, editing, artist promotion, and finally do marketing & sales.

Inside a Warner Bros. music production studio

Obviously all of this humongous effort results in huge cash burn for the record label. This is one main reason why independent labels operating at a small scale with say, a bunch of people working the whole system find it hard to break out in the music industry. So this leads us to a very obvious question which you all would’ve guessed by now…

SO HOW EXACTLY DOES MONETIZATION HAPPEN IN THIS PROCESS?

Well, turns out when artists sign contracts with a label, they’re not just agreeing to let the labels help them create music. They’re also agreeing to share the profits earned by the given piece of music with the label. The terms of the contract lay out the nitty-gritties of how this happens. After various levels of negotiations both parties come to an agreement and the deal is officially done. Do note, the fancy word for money earned by artists for their creative contributions towards an album is called ‘Royalty’.

Very often we come across headlines of artists locking heads with labels over their music collaboration. It seems one party is always discontent with their side of the deal. Most of the times it deals with artists being dissatisfied about the pay they receive from the sales. Taylor Swift was in the news some time ago when she questioned Apple’s decision to offer free music to their new subscribers for an initial period.

Taylor Swift’s open letter to Apple demanding to scrape off the free trial feature from Apple Music.

Up and coming artists always struggle the most since they don’t have anything to leverage against the strict rules a powerful label can enforce on them. Sometimes it’s the restricted creative freedom that comes with being associated with a label. Many-a-times, artists are forced to conform to producing a specific genre of music or not straying away too much from their established musical brand image.

Traditionally the status-quo relationship between the label and the musician has been one on the rocks for a long time for many musicians and then…. technology happened.

SO HOW HAS TECHNOLOGY CHANGED THE LANDSCAPE OF MUSIC PRODUCTION?

Anybody reading about the internet music piracy wars would know about Napster’s legacy xD

When I say technology, I mostly mean internet technology because to say that technology came into the music scene only recently would be grossly wrong, since music production has traditionally involved a lot of technology (be it analog or digital) for a long time now.

But the internet changed things like never before. It made accessibility to art a million times easier and made it possible to connect the artist and the consumer on a personal level that was unfathomable even in the distant past.

Along with the good stuff, came the perils too. P2P(Peer-to-Peer) digital file sharing via internet gave rise to rampant piracy of copyrighted art. In 1999, two college dropouts, Shawn Fanning and Sean Parker came up with Napster, a P2P file transfer website that mainly enabled users to share music files in MP3 format. The website soared in popularity and at one point the heavy metal band, Metallica found their song, ‘I disappear’ floating around Napster, 3 months before its scheduled release. Many other hit artists like Madonna, Dr. Dre found themselves in a similar position with their unreleased art making way into Napster. Predictably lawsuit after lawsuit followed as Napster was sued by labels as well as artists for copyright infringement. The company was officially shut down in July 2001.

However, this ruckus did not really dampen people’s eagerness to use internet as a file sharing medium to distribute mass entertainment content. Artists and internet freedom fighters reached a moral settlement with the advent of streaming service. A more technical way of calling it is ‘Open Music Model’. Simply put, it serves as a legal way to access copyrighted art via the web.

Rhapsody, a startup from San Francisco was the first online streaming service that converted this idea into a business product. They provided people with access to a large music library from major labels in return for a flat monthly fee. Following its success many new start-ups as well as industry giants came up with their own versions of music streaming and sharing service. Apple’s iTunes store is a slightly different but popular platform where users can pay a fee and download the music, very much like buying a music CD or cassette.

THE LONG JOURNEY FROM VINYL TO STREAM:

Tech enthusiasts know this logo is synonymous with music streaming, can you guess it ?!

In the recent past, however music streaming has overtaken music purchase in popularity. The roaring success of the billion-dollar startup, Spotify (logo above)is a testament to this. As of 2018, they have 180 million active users with over 80 million of them being paid subscribers. Apple has very recently caught up with them with the release of Apple Music.

For every stream by a single user, the streaming service pays a certain amount to the various parties involved in the creation of music, like the label, producers, artists, songwriters etc.

What makes them very popular amongst users is their ‘Freemium’ business model. Users can quickly sign up to their service and access vast libraries of music at the cost of being targeted by advertisers. If one finds ads to be a nuisance, they can opt to be a paid user where they get access to premium content without the screaming presence of ads.

If you look closer into the business of streaming music, what you will find surprising is that, none of the streaming services have been able to turn around a substantial profit in their lifetimes. Even Spotify, currently the most popular music streaming service, despite their ginormous revenue, have not been able to turn around a profit ever since their inception. It seems like after covering all operational expenses and making licensing payments to all parties involved, there remains little to be saved for the future. This is probably where Apple Music scores ahead of the others, since being the cash-plum company they are, do not have to worry about burning out of cash any time soon.

THE STRUGGLING ARTIST AND THE STREAMING SHOWDOWN:

So ultimately where does all this influx of creativity and technological advancement leave the struggling artist? As of now, it doesn’t look like a rosy picture.

Earlier the monetary compensation of an artist depended mostly as a function of his/her relationship with their record label. Now that the streaming portal has also wedged its way into the equation, the poor artist has been pushed to the bottom of a trickling down system of payment. For example, according to Spotify, the per-stream payout to the artist is $0.0038 which is to say the least, dismal. Other platforms like Napster, Apple, Deezer fare better in this metric.

Then there are some star companies like Tidal (streaming venture by rapper Jay-Z and his singer-wife Beyonce) and Groove Music (Microsoft’s streaming service) which pay the highest dividends ($0.0128 and $0.027 respectively) to its artists amongst all streaming services.

Jay-Z (2nd from the right) and his army of pop-stalwarts at the Tidal launch event.

Unfortunately, being altruistic hasn’t helped them at all in boosting their business. It has only been a downward journey for both of them. Microsoft had announced in late 2017 that it was shutting down its streaming service. Tidal seems to be going down the same path. Many industry reports predict that, going by their unfeasible business strategies and over-benevolence towards artists, Tidal will not survive into the next year.

CONCLUSION:

So far we’ve looked into the journey of music industry from the early days of music production to the current fad of streaming. A lot of people don’t think it is a fad, and many say streaming is going to be the future of music. Looking at the present evidence, it’s easy to understand their logic. Streaming companies offer a great deal to the end-user who can now avail a gazillion list of songs for free or a paltry sum, while making sure the godly executives at the record labels don’t get mad, by paying the label a huge dividend from the stream revenue. The only stakeholders at a disadvantage here are the artists. If you make it to the ranks of Bieber and Swift, congratulations you’ve made it, hurray :-))! else better luck next time; until then it’s break your sweat and burn the midnight oil.

P.S : Image credits- Google Images

P.P.S : If you think my writing is of any good, you can always follow me :) It will be a huge motivation for me to work harder and write better on my P.M journey.

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