Full circle in the music industry
It’s a new month, and therefore a new theme for our articles over the next four weeks. This month we’re going to be looking at the future of the music industry. This week - the evolution of the way that the industry makes money.
In many ways, the progression of the music industry over the recent past has been a story of going back to the beginning. From starting as a purely live experience thousands of years ago, moving into a succession recorded formats that could be bought and played in the home, and then on the move, to online music streaming - it’s an industry that seems to periodically reinvent itself.
Live music has been around for centuries but it really came into the modern era in the early 1930s when the first electric amplifiers for instruments appeared. This allowed bands to start playing in front of much larger crowds. These conditions enabled rock n roll to take off in the 1950s.
However, live music didn’t make a major impact on popular culture until the later 1960s with large-scale amplification enabling the expansion of massive music festivals — the prime example being 1969’s Woodstock Festival, attended by over 400,000 people.
Big names such as the Rolling Stones and Led Zeppelin laid the pathway for financial success with epic live shows, sequenced into large global tours. These caught the attention of entrepreneurs and accordingly the recording industry evolved from simply manufacturing recordings to encompass the promotion and distribution of millions of items of merchandise, and the management of lucrative recording contracts with artists. By the mid-90s, CDs became the format of choice, reducing manufacturing costs and enabling the industry to reap unparalleled profits. In 1999 the music business recorded peak sales of $40 billion.
However, the development of digital file sharing in the early 2000s had a catastrophic impact: CD sales nearly halved between 2000 and 2007. MP3s and then streaming reshaped the industry - reducing the role for labels, slashing development budgets and industry largesse.
The artists responded by going back to basics. Those who had been content to retire from touring, and to rely purely on sales, had to get their performing shoes back on. Accordingly, live music developed, as did merchandising. In 2019, Ed Sheeran’s ‘Divide’ tour became the highest-grossing of all time, raking in a staggering $736.7 million.
Jay-Z has recently closed a $200 million touring deal with Live Nation, a production company who produce live gigs for famous artists. This demonstrates how far the pendulum has swung away from the old record labels. Nevertheless, they have fought back effectively from the brink by developing legal streaming models such as Spotify.
Why is this interesting to Kitchen8? This story seems to tell such a profound story about modern business. On the one hand, it’s a cautionary tale - a successful industry that failed to adapt itself to technology. But on the other hand, it’s a great example of resilience and adaptability - consumers have learned new ways to enjoy music, artists have responded to this change, and labels (and other businesses) have carved out a new role. Music will always exist - the question is what form (if any) the business of music will take.