The growth of the digital marketing industry indicates how much businesses value having a digital presence in today’s always-on world and competitive market. As…
There are few industries that have felt the move to digital and online more acutely and publicly than the music industry. The rise and fall of Napster, the move from CDs to mp3, viral sensations, piracy, the iPod, iTunes, Spotify. Many have fallen and floundered in the change, others have fed and flourished. As established ‘music industry’ revenues sit at record lows, Apple’s rise to one of the most successful companies in the world counts the success of the iPod as one of its primary turning points. While Lily Allen throws in the towel, claiming one cannot make money as an artist in the face of rampant piracy, Lady Gaga has earned over US$60-million in the last year, quickly becoming one of the world’s most successful ever artists.
There is a difference, however, between the music industry and music artists. While the music industry is clinging to the hope that Spotify may rescue its ailing business model, music artists are more numerous, varied and empowered then they have ever been before. At the same time, they have to compete with their primary ‘product’ being uncontrollably and freely replicable, through file-sharing. For better and for worse, being a music artist in the 21st century is a very different kettle of fish to the past.
Independent versus Major Label
For clarification: this is roughly how they music business has traditionally worked. The major labels (currently Universal, Sony, Warner and EMI) own 70 percent of the recorded music industry, through themselves and their subsidiary labels. They use scouts to find artists that they think have the potential to go big, or have already gone big. They approach them with a multiple album record deal and wow them with an impressive advance of cash.
Once signed, the label sets the artist up with the appropriate producers, engineers and specialists to groom them for mainstream success and put them into a recording studio to record their first major album. They license the album for whatever regions they wish to sell it in, promote it using their contacts and distribute it to the various music stores (now including online stores and streaming services.) The revenue brought in by the album first pays for all the label’s costs, and the artist’s advance.
After this, the artist gets a small percentage after the sales, usually about 3-15 percent of the retail price. The record label also usually owns the rights to the music licensing, collecting royalties “on behalf of the artist” and claiming a large cut of that too. Before music went digital, this was pretty much the only way to find international success as an artist. Of course, then there was Napster.
Napster showed the world that media distribution costs on the internet can be near neglible. With the rise of affordable (and piratable) music production software, production costs have plunged. Especially with electronic music, amateurs can create professional sounding tracks from their bedrooms.
With the proliferation of the social internet, a web of connections that forms the most effective media propagation tool in history, massive spends on promotion are no longer necessary to find audience outside of your hometown. Slowly, but surely, the label model is becoming less appealing to artists.
CD sales are in free fall, less then 40 percent of what they were about a decade ago. Digital singles sales through online stores are showing strong positive growth, but not nearly enough to make up for the drop in album sales. The slow dissolution of the album format cuts label margins dramatically.
They are now competing not only with a thoroughly established and well resourced culture of piracy (albeit one that’s focus has shifted from music to film and television) but also an ever-growing mass of independent music artists, with bands like Radiohead and Arcade Fire finding major label scale success independently.
The licensing and copyright model finds itself continuously at odds with a social and media rich internet. Regional licensing is not appropriate on a global internet, music cannot be commoditised when it is freely accessible and replicable, licensing costs are strangling music start-ups that might otherwise take a new and innovative approach, especially with regards to music sharing. The label response to tightening budgets is consolidating their capital into their “sure bet” artists, and focus their resources on fighting piracy.
Music artists now not only have a fairer financial choice between labels and independent success, but also have a plethora of choices on how to use the net to their advantage, a list so long that it cannot even fit here. Tunecore and other aggregators can put you into all the label spots (iTunes, Amazon, Spotify, Rhapsody, Pandora) or you can use indie storefronts like Bandcamp or CD Baby. Being on iTunes means having the largest potential reach for a music store ever. Rhapsody and Napster allow fans to stream your music on demand.
Pandora, Last.fm, Turntable.fm, 8tracks, playlist.com and numerous other music discovery sites help find you new fans. Spotify, Rdio and MOG allow listeners to stream your music on demand from their desktops or on mobile. Multiple Direct to Fan platforms like Reverb Nation, Topspin, VibeDeck, BandZoogle and Nimbit empower them to sell and engage directly with their fanbase.
The internet is packed to the brim with music services. Not to mention the social platforms like Facebook and Twitter that also work as fan communication platforms.
So the question is this: Why isn’t it the best time for music artists? Surely if artists are equipped with everything they need to make it themselves, then why are so many struggling? There are a number of points that contribute to the difficulty in music online:
- Region locking
- Too many choices
- Music selling/sharing
- Profit share
- The album model
The vast majority of major services are limited to North America and Europe, almost solely because of licensing issues. Even for artists from these locations, this severely limits your audience, artificially.
With single sales replacing album sales, music services inevitably face microtransactions. These are heavy on transaction fees (which can be over 30 percent on a US$1 transactions).
To succeed as an independent artist online, you not only need to be an expert at your craft, but also at choosing and managing your online presence. Knowing how to harness the digital music and social media landscape is itself a full time job. Specifically, you want to channel your fans to as small a selection of portals as possible, while still taking advantage of as many of the resources.
The act of selling music in a modern world is difficult, as songs are simultaneously your promotional tool and product. No-one buys your music until they have listened to it enough, and allowing them to freely listen to it doesn’t incentivise them to buy it. Try sell your music and you don’t gain support (or people will pirate), give it away for free and struggle to make money. Finally, no matter what you do, people can always download your music for free if they want to.
Streaming cloud based services like Spotify are all the rage these days. As a previous Memeburn article illustrates, however, these services provide minimal, and I mean minimal, revenue to artists, even unsigned artists. The prime reason behind this is the structure of these services tends to be overly customer-centric. Streaming is even more difficult to commoditise than downloads.
Albums used to make sense. They were guided by the physical limitations of the medium. With the move to digital, this has changed. Not only are there no such limitations, but music listening has changed. Songs are predominantly listened to on random, or in playlist format, rather than as a CD. Music needs to adapt appropriately.
The current landscape, however, is torn halfway between the single track and the album, with only a few truly incorporating this into their music creation.
There is little doubt that the tides are slowly shifting away from major label control, nevertheless, their influence still empowers the vast majority of mainstream music. Furthermore, the labels are now scrambling to find a solution for their dwindling profits. While Spotify might serve this purpose for them, it will not do so for individual artists who cannot subsidise their income with worldwide touring, merchandising and sponsorship.
The modern online landscape allows independent artists to find success comparable to major labels. It is clear, though, that it requires far more than musical talent to do so. An understanding of how to harness the marketing potential of music is more useful to gaining online traction, even if the expertise itself is outsourced. Even then, to replace a regular salary with income from online music sales and subscription services is still very difficult.