The Evolution of the Music Industry
The music industry is a compelling, ever-changing industry with a rich history. This position paper will explore the effective funding and support for the music industry as a sector in response to the effects of Covid-19. The music industry has been around for hundreds of years (Allinson, 2022). The industry has evolved from small recording studios to a major global player in recent decades (Allinson, 2022). The way in which music is created as well as distributed has seen some dramatic variations. The global consumption of music and the globalization of the diverse types of music has been further boosted due to the rise of internet in the late 1990s (Wikström 2020). This has further set up a butterfly effect that affects artists and musicians inadvertently on how they are paid or compensated (Daniel 2019). Earlier record labels were predominantly relied upon by the music industry and the music preferences of the population were mostly influenced by the music that was being circulated through the records at that time (Wikström 2020). However, the early 2000s saw a boost in the power dynamics of the music industry and mobile phones came up to be quite popular. This resulted in the rise of music streaming which increased the supply pool and gave power to the fans and listeners to judge what they liked or disliked, as opposed to record labels which dominated the market and limited choices (Wikström 2020). The evolution of the music industry did not stop there as the entry of social media has been considered to be revolutionary for the music promotion sector as well (Iatropoulou 2021). Thus, more features were included in order to keep the audiences and listeners entertained. The industry is now increasingly vulnerable to advances in new technologies and changing consumer preferences (Allinson, 2022). To grow and compete effectively, the industry must continue to develop and refine new processes. This position paper will look at the effects Covid-19 has had on musicians by focusing on streaming, sales, and advertising. The paper will also illustrate on the streaming sector within the broader music industry. It also addresses the long-term private-public supporting mechanisms questioning what can be the gains from the long-term.
Culture & creativity are important in their own right because they offer opportunities to do things differently and bring something fresh to society (Khlystova, Kalyuzhnova, and Belitski 2022). They also spur innovation and provide more opportunities across the economy. Every culture is different and their behavior and mode of listening to music are also different. This means that music is treated differently in different cultures. This includes helping to create and diversify jobs that involve music, increasing economic efficiency, powering entrepreneurship in music industries, and benefiting society in numerous ways (Tulalian 2021). Music is a powerful force in one’s culture and it has been around for centuries. It inspires creativity, helps to make tough decisions, and it even motivates to complete tasks. Music can be used as a tool for learning as well as for healing (Parc and Kim 2020). With the emergence of mobile phones and streaming music has become more easily accessible for everyone who wants to listen but were unable to purchase records due to its high prices (Seetharaman 2020). As this paper mainly focuses on the streaming sector within the broader music industry it is necessary to highlight its significance by illustrating its contents and what comprises the sector. This segment will also state the funding elements of this sector. The streaming sector consists of music streaming services or platforms that enable their users to access and listen to podcasts, and music, and also watch music videos (Parc and Kim 2020). The features that are used by these services and platforms include automatic personalization of playlists, song recommendations based on choices, and connectivity over browsers and applications that is purely hassle-free. As of 2021, the global market size of music streaming was valued at US $29.45 billion and it is also expected to grow at a fast rate (Jeannotte 2021). This market expansion is due to the increased usage of smartphones and devices as well as the penetration of digital and music streaming platforms. The Covid-19 pandemic only sealed the destiny of streaming platforms as it saw a huge boost (Sim et al. 2022). The highest average times for streaming are led by the Gen Z but almost 68% of the adult population is also into music streaming services (Sim et al. 2022). The majority of the streaming services use advertising or paid subscriptions to generate revenue and fund the platforms. A well-known example of this is Spotify which is considered to be the global leader in music streaming (Taylor, Raine and Hamilton 2021).
The Significance of Culture and Creativity in the Music Industry
The music industry in the UK before the covid-19 pandemic was thriving and healthy. There were many artists, both famous and unknown, who thrived in this environment. It was a diverse, profitable market with a wide range of artists and genres. The industry was at its peak when covid-19 hit in 2019 (Hall, 2020). Because of its spreading nature, covid-19 affected many of the most successful artists, either economically which is the majority of the case, or terminally, leaving a gaping hole in the industry (Taylor, Raine, and Hamilton 2021). The music industry then became affected by the pandemic and the world’s culture changed drastically. This change was reflected in music as well. All the major pre-existing sectors within the music industry like the music licensing sector, recorded music sector, and live music (mostly) have suffered Covid-19 implications (Seetharaman 2020). This also simultaneously boosted the digital music industry. However, the effects of the pandemic on the digital music streaming platforms have been regarded as positive as the period witnessed a boost in usage of streaming applications and visitations by audiences (Davies 2021). Boosts in sale means they were able to gather more funds than anticipated.
The covid-19 pandemic has had a significant impact on the music industry in the UK. There is also a lack of support for new musicians as venues and bands are struggling to find work, although recently, the situation has become much better (Hall, 2020). A typical symptom of the pandemic is a sudden and dramatic loss in ticket sales for concerts, particularly for bands that have been successful for many years. The lack of audience has led to a decrease in revenue and an increase and some financial losses (Mastnak 2020). This can be detrimental to artists who are trying to cultivate new audiences while they are struggling with the loss of their old genre of music. The Covid-19 pandemic has had a huge impact on the music industry in the UK. The pandemic caused large numbers of deaths and a lot of people are still unable to work due to the virus (Spiro et. al., 2021). This has led to a decrease in live performances and gigs, which is damaging because these events are an important source of money for musicians. The market demand for music (concerts, CDs) has decreased due to the effect of the virus. The income and demand of the music industry have decreased, which has affected all musicians in one way or another. This decreases all musicians’ income, which has affected all musicians.
The cultural and creative sectors (CCS) have been a major driver of the ability to understand history and culture, create new ideas, and innovate. The CCS is also the largest employer in the UK, with 5.4 million jobs, and without them, one would be missing out on some of the most talented minds (Taylor, Raine, and Hamilton 2020). The CCS sectors, for instance, performing arts, cinema, museums, festivals, live music, and many more have suffered the most due to the pandemic which has made social distancing the norm. There was a sudden drop in the level of the income earned by these industries and as a result, there was financial instability which again resulted in the wage earnings of the workers to reduce further (Spiro et. al., 2021). As far as the CCS sectors are considered from an online perspective, those sectors viewed an upsurge of demand thereby leading to an increase in the rate of profit margin. This happened because, during the lockdown, people were unable to move outside their homes and viewed the cultural shows through online streaming.
The Significance of Streaming in the Broader Music Industry
Globally, the music industry is divided into three parts, namely – live music, which predominantly is obtained from the selling of tickets to shows where live performances were carried on, and recorded music, where the revenue generated comes from streaming, physical sales, digital downloads, and synchronization revenues such as licensing of music for games, advertising, TV, and movies, and lastly, the publishing (Wikström 2020). All these divisions of the music industry generate global revenue of $50 billion (Prey, Esteve Del Valle and Zwerwer 2022). The following diagram is depicted where the global music industry revenue for the years 2014-2023 is shown in billion dollars.
Source: (Brambilla Hall, 2020).
While the overall effects of the pandemic on the global music industry may seem bad but a huge advantage or positive side is the growth of the digital music streaming platforms and services such as Spotify, Apple music, and so on (Taylor, Raine and Hamilton 2021). The demand for such services and platforms has become global and also sets the future of the music streaming sector. As more individuals had to sit home and wait out the pandemic, they shifted to digital and internet related services which were easily accessible as well as easy to use (Sim et al. 2022). The greater number of users and high demand resulted in more advertisements and paid subscriptions as the free trial period are limited (Simon, J.P., 2019). More advertisements of other brands and companies make sure that those brands reach the population and simultaneously the platforms are able to make money. Thus, Covid-19 has increased the funding and financial support for the music streaming sector (Tulalian 2021). However, the covid-19 effects on the rest of the music industry are quite bad considering the damages and downfalls.
In 2020, it was reported that the physical sales component, or the supply of the final product of music like CDs to the consumers of the music industry has reduced by one-third of the total music revenue due to the upsurge of the covid-19 pandemic (Hall 2020). It has been observed that after the onset of the pandemic, the way of listening to music has changed in many areas. For instance, in China, Tencent Music Entertainment (TME) announced that the behavior pattern of the listeners had entirely changed during the lockdown (Hall 2020). The change of the consumers was inclined toward the usage of home applications like TV and smart devices. According to the Group Vice President of the TME Content Corporation Department, Tsai Chun Pan, the social entertainment services were indeed impacted largely due to the pandemic, although the first quarter of 2020 did witness a moderate recovery in the revenue of the music industry by 70% year-over-year (Sim et. al., 2022). The users who paid online to listen to music reached a peak of 42.7 million which was approximately a 50.4% increase year-over-year (Sim et. al., 2022). This shows that although physical was down, the online streaming of music had remained an important part of the human lives and continued to touch their hearts just like the physical concerts did.
The Impact of Covid-19 on the Music Industry
A popular music app, Spotify, which now had much more subscribers than before, had also witnessed a change in the routine of daily consumers for the taste of relaxing genres (Yeung 2020). There was concern about the amount of music that was consumed, however, the data shows that initially, there was indeed a fall in the streaming of 7-9%, this reduction was recovered at a later stage (Sim et. al., 2020). Along with this, the demand for music videos has also increased due to the change in behaviors of the consumers during the pandemic where the focus has shifted to more newsfeed media like the TV and the listening to music during gym hours has also shifted due to the closure of the gyms (Galea, Merchant and Lurie 2020).
Globally, the amount that is spent on advertising for the music industry has also reduced to a large extent. During the first quarter of 2020, it was observed from a survey that was conducted by the Interactive Advertising Bureau, 2022, that advertising was paused by a quarter of the buyers and brands of music media. It was also calculated that a further 46% had lessened their amount of spending (Wikström 2020). The digital ad spending had also lessened by one-third amount and this would affect the music channels which support the ads. As a result, the revenue generated by the entire music industry and the individual income of the music artists will also be affected. Spotify said that its quarterly ad targets were missed because of a change to the timeline when companies are spending.
When it comes to the topic of distribution, it is observed that many music artists are postponing their releases of music to the latter half of the year because they are unable to utilize the tours to popularize or advertise their new albums. Many new concerts and live shows have been canceled due to the prevalence of the covid-19 pandemic leading to zero revenue generation for live concerts (Yeung, 2020). Since the music industry is divided into three halves, one part (live music) of the industry earns zero revenue, then automatically, the revenue of the entire industry is cut into one-third. If the ticket and merchandise sales are kept aside, if there is a complete shutdown for 6 months, then there will be a monetary loss of $10 billion in sponsorships (Yeung, 2020). Moreover, the post-pandemic change in the future is uncertain. Building back the customer base will be a real challenge. According to a recent survey (Hall, 2020), it was concluded that, if there is no proven vaccine then less than half of the US customers are planning to go to concerts, movies, amusement parks, and live shows. The music artists and the bands will be affected by this to a large extent since most of them are earning 75% of their total income from live shows (Hennessy et. al., 2021). According to the empirical data, it was observed that the revenue that is generated from conducting live shows is received by the top 1% of the performers (in 2019 it was 60% and in 1982 it was 26%) (Habe, Biasutti and Kajtna, 2021). There are several different ways the industry is addressing to nullify the impacts of the covid-19 pandemic.
Lack of Support for New Musicians
There have been several fundraising campaigns for the industry from around the world that are made available to the common public and whose revenue has been largely affected by the pandemic. These communities include donations and grants from the Universal Music Group (UMG), Live Nation Entertainment along with other streaming giants, for instance, Amazon Music, YouTube Music, Spotify, TIDAL, and much more (Deng, Lyu, and Xu 2021). Tencent Music Entertainment is China’s largest music platform has been joining efforts via its parent company. There have been instances where a large number of providers have set up mechanisms where the consumers can directly donate to the funds which they would like to donate. There have been other instances that include hardship funding plans for cash flow shortfalls stemming from disruptions in content production. Responses have been generated from the public sector too. Globally, there have been instances where the governments have responded by developing aid packages. These packages have been developed especially for the industry and the workers who have been badly affected by the catastrophe. This amount approximately added up to trillions of dollars. These contributions have not only been specific to the music industry but the entire genre of art and culture.
There are major three record labels via which professional music artists usually release their music or album. These three record labels are UMG, Sony Music, and Warner Music. There are alternative options of publishing through an independent publisher too. This model represents 97% of all recorded music by market share and may experience fluctuations but disruption is unlikely (Tschmuck 2017). Moreover, the amalgamation and role of composers, songwriters, and post-production engineers in the evolution of music are anticipated to change, although the onset of the pandemic has normalized remote working. The work is equally distributed as the streaming platforms are closely linked with the artists and labels while the distribution of music will be dealt with by the event promoters and the venue operators. The trends which generally underlie the music industry are enhanced by the crisis. This enhancement depends upon the importance of streaming to the music industry which has increased from 9% to 47% of the total revenues within just six years as depicted in the diagram (Hall, 2020).
Source: (Brambilla Hall, 2020).
As mentioned earlier, the pandemic has changed the patterns of consumption along with the spending patterns of the consumers. There have been instances where the consumers have taken on an added subscription since they are sitting at home while there have been cases where the customers have opted out of the subscription charges since they are undergoing a financial crisis during the pandemic (Fink et. al., 2021). The services which were pre-equipped with the dual business model had survived such a crisis and they retained their customer relationship. It’s important to maintain an adaptable monetization strategy since that will open up new ventures for the music industry to work hand in hand with other industries shortly. For instance, the amalgamation of songs, musical scores, and compositions into gaming and TV. However, the revenue generation through this synchronization process comprises only 2% of the total revenue generated through recorded music (Fink et. al., 2021). In China, during the pandemic, the platforms which streamed music had introduced a new way of generating revenue which accrued to the tipping of the music artists.
The entire world is going digital. The music industry is no exception. Therefore, the distribution of music will be shaped by third-party platforms like discovery and consumer behavior. For example, during the covid-19 pandemic, a live rap concert was hosted by Fortnite that allured over 30 million live viewers online and also promoted the music artists in a brand new way (Sim et. al., 2022). This serves as a suggestion in itself that the music industry is trying to implement this shortly without having to rely upon streaming and physical performances. To reach out to music lovers, streaming is the best possible way but it makes the consumers more reliant on third-party platforms. Usually, a portion of the revenue generated from the streaming of the music videos is paid to the rights holders by the platforms, for example, Spotify pays around 65%, and the more the number of streams, the more is the compensation (Sim et. al., 2022). This has two direct implications for the music industry. Firstly, it encourages the streaming services to move the flux of the consumption drive toward the audio forms which are non-licensed. It has been observed that this shift had already started way back in 2014. Music listening, in general, has decreased by 5%, but there’s been an increase in spoken words across all age groups (Sim et. al., 2022). Secondly, it has been observed that during and after the pandemic, the newly made songs have become shorter and snappier. This has been predominantly due to the reason that the number of individual plays needs to be boosted. According to Tsai Chun Pan, these short videos on music have become the new trend that is in vogue. These short videos have been helpful for the artists to generate new opportunities as well as generate new content promotion and also distribution channels. For instance, TikTok has already evolved the way their consumer’s stream music and is also developing new strategies for this streaming and this is anticipated to contribute to these developing dynamics.
It is quite clear from above that the overall traditional music industry has suffered a lot just like any other business industry due to the restrictions and other problems caused by the Covid-19 pandemic (Sim et al. 2022). However, the introduction and rise of digital music and streaming services and platforms have provided the industry with a clear way to move forward. The future of the music industry has already been reserved for streaming and digital services. The uncertainties and critical times like Covid-19 will no doubt be difficult but only the tough and innovative will survive as rapid innovations are required for any business or industry during such ambiguous times (Taylor, Raine and Hamilton 2021). The service has also become more customer-centric than before which is why there will be both challenges as well as lucrative opportunities (Taylor, Raine and Hamilton 2021). Some observations and possible recommendations for faster growth of the music industry specifically the digital or music streaming sector will include;
- More personalizations: Incorporating various technology as well as automated processes that can completely read and identify the listening habits of the users and tailors the music recommendations accordingly so as to make it more attractive for them.
- Live streaming: Through enhancing live streaming the communication and intimate connection between the audiences and the artists can be restored like the earlier and traditional times. This way will also enable the artists to perform their music more authentically.
- Original content: Streaming platforms need to invest in gathering original content. This is further enhanced due to the streaming services of YouTube and Netflix.
- Premium prices: The subscription rates of the streaming platforms will rise due to the upsurge in demand as well as the higher demand made by music labels and artists.
Based on the research and analysis conducted, the following things can be done to enhance the music industry and help musicians and artists address their individual issues of income and recognition. The recommendations are as follows;
- As streaming platforms and services are the new normal for the music industry, the sector can introduce ways in which artists are able to introduce themselves and their works through direct interaction with their audiences.
- Individual channels for musicians so that they are able to better promote their artworks and new albums directly to their fan following groups.
- Artists can also be used to create social and current environmental awareness which can help the music industry and individual sectors to contribute to corporate social responsibility, to enhance the overall image and engagement of the industry, sectors, and individual musicians.
- Ways to enhance earnings for the musicians by allowing them to raise funds for their channels and the excess amounts can be used for social welfare.
- Enhance the social media presence of artists and musicians by linking the channel platforms with their personal accounts.
- Creating chances for musicians to enhance their social image and existence by speaking on topics and issues that are taking place currently and enabling them to contribute in social development so as to enhance the image of the entire music industry.
Conclusion
The music industry is changing, and not for the better. Streaming services such as Spotify and Apple Music are becoming the new norm, which means less money for artists. The decline in CD sales has also impacted the industry severely. Even worse, the internet has made it easier than ever to illegally download music so there’s no way to know how many people are buying CDs. Spotify, a popular streaming service that pays royalties to artists, is on the rise. There are a few different ways for the company to generate revenue: users pay for the service and/or listen ad-free with advertisements or become premium members who don’t have to listen to ads. The simplest service to build with this type of revenue model is a streaming radio station that’s ad-free for members. With the rise of streaming services like Spotify and Apple Music, the music industry is in a state of flux. That said, there are many positives on the horizon for artists and labels alike. Streaming services have created a new economic model that is as profitable for artists as it is for labels. With this new model, artist royalties are now paid based on streams rather than album sales or downloads. This new model has made streaming services the main source of artists’ income and the most valuable partner for labels. Still, some musicians have struggled to find stability in this new digital world. For many musicians, a side hustle is an essential source of income. Many millennials are trying to be their boss through these alternative sources of income like freelance work. The music industry is changing and evolving rapidly. New artists are emerging every year, and with the emergence of streaming services like Spotify and Apple Music, it has become easier than ever for people to find new artists to listen to. Technology has also made it easier for some musicians to release their music independently, giving them more control over the content they create and how they want it heard. The music industry is changing after the pandemic. The number of musicians and audience members has decreased significantly. Concerts are becoming rare, and ticket prices are skyrocketing (Haynes and Marshall 2018). Younger generations are also likely to have less disposable income, because of the higher cost of living in general post-pandemic. To offset some of these issues, the music industry will need to adapt to survive. Artists must contend with the acquisition of their work by corporations who will strictly regulate what they do with it, and how much they get paid. In this time of rapid change, musicians should find new ways to reach their audiences without going through the middlemen. In the last decade, aspiring musicians have had new opportunities and ways to produce their work outside of straightforward commercial music production (Haynes and Marshall 2018). This has led to an era of independent music production that has no precedent in centuries. Artists should also find new ways to engage audiences, such as live performances, digital distribution platforms (such as Spotify), or crowdfunding services like Kickstarter.
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