New Revenue Streams in the Music Industry

As we all know in recent years it has become more and more easy to access music and for a much lower cost than what it used to be.  Rolling Stone says, “Over the past decade-plus, the old-fashioned way of making money in the music business – selling recorded albums – has dropped off a cliff, splintered into a zillion pieces and been run over by that methylene train from Breaking Bad.”  Up until about 10 years ago the main ways that artists made money was off of album and ticket sales.  With album sales decreasing because of streaming services like Spotify, Pandora, and Apple Music, and a number of different ways for users to pirate music, artists are forced to rely on other methods of making money.  These stats are a little outdated but, from 2004 to 2009 approximately 30 billion songs were illegally downloaded, say this was a time when songs on iTunes still cost 99 cents, that’s a loss of close to $30 billion.  With payments from streaming also being so low (between $0.0014 and $0.0084) on Spotify and Pandora it is no wonder artists are looking for new ways to create revenue streams or pulling their albums from streaming services all together.

One artist in particular that decided to pull her album from all streaming services was Taylor Swift, one of the highest grossing artists of 2015.  Swift spoke out against Apple Music for not paying artists during users 3-month free trial, standing up for all artists that were afraid to speak up.  Apple Music now pays artists during the trial period and Swift’s albums are only available on Apple Music or for purchase.

One of the biggest ways artists make money besides album sales are ticket sales.  In 2015 Taylor Swift’s “1989” topped the record for highest grossing tour in North America.  Swift’s tour grossed over $250 million worldwide from just 83 shows.  With such high figures from her tour it’s hard to believe that Taylor Swift was listed number 4 on the list of highest paid musicians. 

According to Rolling Stone some other potentially high earning revenue streams include merchandise sales, movie and TV licensing, fashion lines, perfumes, and YouTube.  For perfume alone an artist can earn between $3 and $5 million.  In 2014 Billboard estimated that Taylor Swift made $17 on merch per head.  Assuming all 2.3 million of Swifts fans that attended a show during the “1989” tour spent $17 on merch then Swift would have brought in $39.1 million just from merchandise. 

It’s hard for us to understand why artists need to come up with all these other revenue streams when it seems they are still making tons of money even with the dip in album sales.  Just looking at Taylor Swift’s 2015 you’ll see how much is actually taken from an artist.  Even though Swift’s “1989” tour grossed $250 million and we assume merchandise made close to $40 million among other things, Swift still came out at number 4, making only $80 million in 2015.  Leaving with not even half of what her tour grossed.  Only imagine what smaller lesser known artists are making, just one of the reasons Swift fought for Apple Music to pay artists during the trial period and another reason why artists must find so many other ways of making money. 

Works Cited:

"Music's Top 40 Money Makers 2014: The Rich List." Billboard. N.p., 10 Mar. 2014.

Web. 27 Mar. 2016.

"Why Does the RIAA Hate Torrent Sites so Much? - Music Business Worldwide." Music

Business Worldwide. N.p., 06 Dec. 2014. Web. 27 Mar. 2016.

Bereznak, Alyssa. "How Taylor Swift Convinced Apple to Pay Independent Artists."

How Taylor Swift Convinced Apple to Pay Independent Artists. Yahoo, 21 June 2015. Web. 27 Mar. 2016.

Caulfield, Keith. "Official: Taylor Swift's '1989' Debuts With 1.287 Million Sold In First

Week." Billboard. N.p., 4 Nov. 2014. Web. 27 Mar. 2016.

Kenneally, Tim. "Katy Perry Tops One Direction, Taylor Swift on Highest-Paid

Musicians List." The Wrap. N.p., 8 Dec. 2015. Web. 27 Mar. 2016.

Knopper, Steve. "T-Shirts and Merch - Nine Ways Musicians Actually Make Money

Today." Rolling Stone. N.p., 28 Aug. 2012. Web. 27 Mar. 2016.

Lewis, Randy. "Taylor Swift's '1989' Is 2015's Highest Grossing Concert Tour by Far."

Los Angeles Times. Los Angeles Times, 30 Dec. 2015. Web. 27 Mar. 2016.

Nath, Trevir. "How Pandora And Spotify Pay Artists | Investopedia." Investopedia. N.p.,

16 Dec. 2014. Web. 27 Mar. 2016.

Major Record Labels Are Majorly Falling Behind.

The music industry has been in a downward tailspin for the last 25 years. With the development of social media and online streaming services, traditional music marketing and sales techniques have plummeted. By this time, we all know just how much these streaming services have seeped through the industry causing havoc. But what many people don’t know is that for the first time in music history, independent music labels are doing better than major record labels. At this years Grammy’s “in indie publishing, Kobalt said its songwriters Max Martin, Shellback, Ryan Tedder worked on Swift's album of the year, also noting that another of Kobalt's songwriter/artists, Lionel Richie, was the recipient of a tribute, along with Skrillex taking Best Dance Recording, among other awards” (Christman.) This was a huge win for the independent label community because it finally symbolized how maybe artists can have it all.

The reason these independent labels are doing so well is because they now hold control over crucial rights that were previously monopolized by major record labels. But now, with the Internet and other streaming services artists are no longer in need of a corporations funding or network. Independent labels explain how “we used to be able to develop new talent without owning master rights, but these days, because Internet marketing and film, TV and advertising promotion is such an important part of development, we need to own or administer the masters as well in order to expand the development opportunities and ease the licensing issues,” (Kramer.) The music industry and artists are in constant struggle over publishing and master rights. Publishing rights are given to the person who owns the rights to the composition or the “author” of the music. The publisher must give consent for someone to own the actual music to distribute it, which is known as “right clearing.” Essentially they own the copyrights to the music and can license the master rights out.  Master rights are also known as recording rights. Whoever has these rights owns the actual recording of the song’s sound so they are entitled to royalties. These usually belong to whoever financed the recording and they also give permission for the recording to be used or performed. Publishing and master recording rights are where a majority of money is earned. Since record labels used to monopolize these rights, they were making 63% of the profit within the music industry.

                                                       

 Masnick, Mike. "RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales." Tech Dirt.Web. 13. Jul. 2010.  

 Originally major labels offered artists resources that they otherwise wouldn’t have had access to before. This included funding, studio time, equipment, networking, management, marketing and a plethora of other perks. More importantly it provided artists with a sense of stability within the industry. In return, the label would see profits from owning the master rights since they financed it’s creation and would have in house publishing deals that would rarely cut deals to artists. Labels would lock artists into contracts that would require artists produce a certain amount of albums, sell a certain amount of albums and if not you would be in breach of these contracts thus being in debt to your label. However now it is easier than ever with the Internet and streaming services for artists to do it all themselves, without the help of a label. When technology advanced, artists caught on to the fact that they could make more money by keeping the publishing rights and master rights to their songs by making everything themselves. Everything from production and marketing would now be 100% for the artists instead of having to split between the departments of a label. Now the four major record labels, Sony-BMG, Universal Music Group, Warner Music Group, and EMI are being forced to adjust.

Independent labels began to become a safe place for artists who now would be able to have creative control while also keeping their music rights. “The interesting thing about this trend is that ownership of a label grants a publisher exclusive rights to master recordings. This opens the floodgates for all sorts of new revenue streams and promotional opportunities” (Kramer.) Now artists can play their music when they want, how the want, and for how much they want.  Major artists such as Adele, Mackelmore & Ryan Lewis, Diplo are all products of independent marketing and label deals. With “major label companies are now in a transition period, and are struggling to come up with the end-all-be-all solution to all of their problems,” (Ostrow.) Now major labels have sought to buy parts of independent labels in hopes for trading percentages of publishing rights and other access to their artists. This can be seen with Adele who is also in partnership with Columbia Records and Universal Music Group. In return, these major labels offer promotional funding since a majority of artist’s money is made through touring.

With this flux within the music industry I believe that the independent label circuit will create finally for fair compensation to artists for their music. They will no longer be forced to churning out singles or albums in order to fulfill contract requirements and instead be able to bring actual musicianship back to the music industry.

Works Cited

Chirstman, Ed. “Grammy Scoreboard – Tallying the Major & Indie Label Wins.” Billboard. Web. 16. Feb. 2016. <http://www.billboard.com/articles/news/grammys/6875502/grammy-scoreboard-major-indie-label-wins-universal-warner-sony?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily&utm_term=daily_digest >

Kramer, Evan. “The Publisher as a Record Label.” Music Business Journal. Berklee

College of Music. Web. Oct. 2010. <http://www.thembj.org/2010/10/the-publisher-as-a-record-label/>

  

Masnick, Mike. "RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales." Tech Dirt. Web. 13. Jul.
<2010 https://www.techdirt.com/articles/20100712/23482610186.shtml>

Ostrow, Jonathan. “Indie vs. Major: Which Record Label Contract Is Right For You?”

Music Think Tank. Web. 10. May. 2015.  < http://www.musicthinktank.com/mtt-open/indie-vs-major-which-record-label-contract-is-right-for-you.html>

Media Clip: https://www.youtube.com/watch?v=ofn0b9OTyP4

“Artifact” (2012)

Start: 2:10

End: 4:30

Measuring 'Success' in the Music Industry: Analyzing the Impact of Streaming and Pirating

- Jared Demel - 

The music industry has changed vastly over the past several years – and its not slowing down. From streaming services to illegal downloads, we are quickly seeing the traditional structure of the music industry model go belly-up. Once upon a time, if you liked a particular artist or wished to hear a new album, you would go out to the store and make a purchase. Today however, the majority of music available is either streamed or downloaded online. Unfortunately for the industry and artists alike, most music available is also being downloaded illegally. According to an article from The Guardian, “An estimated 95% of music available online is being downloaded illegally.” (Swash 1).

With this issue stems an even larger problem that may essentially transform the entire way music is both tracked and rated. Presently, the RIAA (Recording Industry Association of America), maintains the ‘standard’ for ratings within the music industry by allocating various certifications depending on the amount of sales / streams (e.g., Gold, Platinum). While their model for ratings has proved to be quite sound (pun intended), the advent of illegal downloads, streaming, and a number of other industry ‘loopholes’ has crippled their potential for credible and valid classifications.

One such ‘loophole’ includes the recent release of the album, “Anti” by Rihanna. After going platinum immediately after release, a number of flags were raised, mainly dealing with the fact that “Anti” had sold hardly any copies. As stated by the New York Times in regards to the streaming service, Tidal, the actual number of copies sold may have been even less than initially purported by Nielsen. “Nielsen reported that the album sold fewer than 1,000 copies in the United States; a subscriber to its service who declined to be identified because the data is private, said that the number of albums sold was 460.” (Sisario 4). Being that the RIAA’s criteria for going platinum include selling over 1,000,000 copies, a “pre-purchase” contract deal made between Rihanna’s label, Def Jam, and Samsung should satisfy any stipulation… A bit shady, don’t you think?

In attempting to keep up with the vastly growing market of streaming, the RIAA has also incorporated a new system for analyzing data. As noted on their website: 

“After a comprehensive analysis of a variety of factors – including streaming and download consumption patterns and historical impact on the program – and also consultation with a myriad of industry colleagues, the RIAA set the new Album Award formula of 1,500 on-demand audio and/or video song streams = 10 track sales = 1 album sale. RIAA’s digital Single Award ratio will be updated from 100 on-demand streams = 1 download to 1500 on-demand streams = 1 download.” (RIAA)

As both an avid listener and creator of music, not only do these figures seem just plain outrageous, but it also seems as though the line between consumer demand and actual consumption is becoming incredibly blurred.

As evidenced by the growth of streaming services, it’s clear that the way society consumes music is shifting. “The rise in popularity of streaming music has prompted some prominent names to enter the competition. The Jay Z venture Tidal, Google Play and, most recently, Apple Music are the latest paid services for streaming songs” (Alexander, 1). Still the main problem with streaming services lies in the simple fact that it is a ‘service’, which generally requires you to pay. The other (larger) culprit affecting the tracking of ‘success’ for records is none other than pirating (essentially free). I think the notion of ‘pay for play’ is being phased out by the entitlement, which people feel towards music. Without getting into the surrounding legality issues pertaining to piracy, one thing is certain; pirating is occurring each and every day, at astounding rates.

One notable example to help illustrate how pirating affects the tracking of success for music is the latest release of Kanye West’s project, The Life of Pablo. After a number of discrepancies and some delays, West decided that he was exclusively releasing the album through the streaming service Tidal. However, as noted by an article from Billboard, the public’s demand was substantial: “Still, demand for Pablo was high, as evidenced by the 500,000 downloads (estimated by Torrent Freak) in its first 24 hours).” (Rys 5). Interestingly enough, five hundred thousand ‘sales’ as noted by the RIAA would have deemed The Life of Pablo with a ‘Gold’ certification. However, unfortunately for West, these downloads were entirely 'illegal' and the RIAA nor Nielsen considers pirated downloads to be of any credibility. 

If it were RIAA’s goal to maintain a standard in ratings for music consumption, wouldn’t you think pirated products should still possess some form of measurable validity? If companies such as Nielsen / Billboard, and the RIAA continue to neglect such trends as valid forms of ‘consumption’, I think it’s safe to say that the integrity of any form of music ratings system is simply void and baseless.  My question for you is whether or not you agree with my sentiment, and if you think such a question should extend into other industries where pirating is prevalent (e.g., film, television, video games)?

Works Cited

Alexander, Madi. “Apple Music, Spotify and a Guide to Music Streaming Services.” The New York Times. The New York Times, 29 June 2015. Web. 20 Mar. 2016.

Rhys, Dan. “The Future of Pablo: What’s Next for Kanye West’s Not-Really-Released Album?” Billboard. Billboard, 19 Feb. 2016. Web. 26 Mar. 2016.

“RIAA DEBUTS ALBUM AWARD WITH STREAMS  - RIAA.” RIAA. 01 Feb. 2016. Web. 22 Mar. 2016.

Sisario, Ben. “Rihana’s ‘Anti’ Sells Fewer Than 1,000 Copies in U.S., but Some Call It a Hit. “ The New York Times. The New York Times, 01 Feb. 2016. Web. 25 Mar. 2016