Scope Into the Music Industry (2019)
The music industry is a general term for all the parties involved in the creation, performance, recording, promotion, and managing of the effective business of music. The music industry consists of companies and individuals earning money through creating new songs, selling live concerts, compositions, as well as the organizations and various associations that are able to represent these creators. Among the many individuals and associations that operate in the industry, there are also the songwriters and composers who are in charge of creating new songs for the artists, the artists or conductors who perform the music, and the professionals who record the music; these being, music producers, recording studios, engineers, record labels and those who help organize the live performances. The music industry is one of the biggest entertainment industries, falling under the entertainment category being followed by the film industry.
As of now, the music industry has never been more competitive. The industry keeps on growing as a whole and it is said that this growth will continue. The music business posted its fastest growth since Boyz II Men and Hotie & the Blowfish (known music groups) topped the charts 23 years ago, meaning that for these past 20 years or so, the music industry has been selling more and becoming more challenging as the days go by. With this said, many companies have been entering this industry. Subscription services such as Spotify and Apple Music led the charge, with sales from paid streaming going up by about 63% which equals an amount of $4.09 billion. Streaming services have been helping the industry grow since this is how people around the world purchase or listen to their music. CDs are not really being bought anymore, so streaming platforms entered the industry and since then the U.S recorded music sales climbed 17% which equals about $8.7 billion last year, making it the second straight gain in domestic revenue. However, this is not a matter that will soon come to an end. The sales of streaming services will keep on growing and reaching high sales numbers, overcoming more industries within the entertainment industry. Some other companies like Amazon.com Inc., Pandora Media Inc., and YouTube are all entering the market with paid services.
With all of these companies entering the industry and helping the economy bloom with their streaming services, the industry will keep on thriving. Looking at the industry on the side of where it will be in 3-6 months compared to where it will be in 1-5 years, some things do change in a drastic way, however, some will remain almost the same. Since the music industry is one of the few industries inside the entertainment that keeps on expanding as it goes, in a few months (3-6) I am sure that will almost have the same effect as it would in a few years (1-5). To put it this way, what’s in stock for the music industry in the near future, are many, different, big, and exciting changes. The industry is always trying to come up with new things and even to recruit more platforms that know how to captivate their audience. Soon, record labels will not be a huge thing, and everything will be passed onto an online service or platform. The music industry adapts as society evolves. It is the only way for these types of businesses/industries to succeed. In addition, various trends have been happening within this industry especially in 2018. Trends such as The Digital Innovation in Music Summit, where featured speakers from all over the music industry come in and discuss the future of the music world. Another trend, as mentioned before us the movement from record labels to more independent formats (streaming platforms such as SoundCloud) as well as a new music format.
Overall, the music industry will always keep on having changes that will benefit society and make this industry keep on growing alongside its audience and the people who work right along with it; including artists.
Alongside carrying such a vast, and competitive industry such as the music industry there are various Economic Indicators one should be aware of since this might affect how the whole business will be running throughout the years. There are Macroeconomic factors that might affect not only the economy itself but also the businesses and individuals who contribute to the industry. For example Unemployment, inflation, economic output, and interest rates. With that said, the music industry is made up of different sectors when it comes to looking at employment and unemployment rates. Looking at the statistics in the music industry from 2009-2016 unemployment in the integrated record production/distribution has gone up from 7,500 employees to 12,500. This has been the sector with more unemployment in the industry. With the others being music publishers, sound recording studios, and record productions they have all maintained a balance with the unemployment rate being 2,500 employees to 5,000. Inflation plays an important part in the Industry. The music business had its second year in a row of big-time growth, with the help of all the streaming platforms that have been able to a partnership with the industry. The United States music sales were up 14% when adjusted for inflation, to $8.7 billion last year, according to the label’s trade group. Meaning that the industry has seen a significant leap in revenue. However, since now a day’s music is played on platforms and the physical copies of the CD’s have been declining, inflation has contributed in a positive way for the music industry. All of these factors have an effect on how the industry performs. It does not necessarily mean it is either in a positive or negative way, but these factors are ones to consider for someone who might work in any type of industry or market.
An industry might be doing well if all of these factors are somewhat balanced and not overtaking the business itself. The music industry is not necessarily affected by the cyclical nature of the economy. However, revenues sometimes tend to be higher not around periods of economic prosperity, but more around the artist. When it comes to the employees, each working for a different thing within the industry, meaning that they have different paychecks, and the implementation of employee layoffs and cuts to compensate during bad times and vice versa do not occur most of the time. This is why it is not necessarily affected by the clinical nature of the economy. With that being said, not every type of industry/market will be the same when it comes to overlooking these factors.
The music industry has always been blooming all over the world. Almost every country consists of its own record labels, artists, and even different contract rules. There are different foreign markets, with the same business evaluation and long-run goal. The music industry is the same in the United States and in China. However, the only thing that changes is the number of listeners, platforms, and artists. American Music (or music in English) is more famous all over the world than Chinese music is for Americans. This does not only happen with China but with places like Mexico as well. However, going into the year 2019, Latin music has significantly grown; it is reaching more listeners than ever before. One of the most important narratives in contemporary pop has been the emergence of Latin music. “Between 2016 and 2017, the number of Spanish-language entries on the Hot 100 jumped from a mere four to 19. So far this year, there have been at least 16 more charting singles” (Leigh). Since Latin music has been having its “blooming times” I began to wonder how many non-Spanish speakers currently listen to Latin music on a daily basis. According to the survey “7 out of 10 people have more than 4 Latin artists on their music playlists as of right now” (Survey, Gutierrez). With that being said, let us focus on the industry as a whole (not focusing on specific music genres).
The music industry will always be stronger domestically than overseas. Although this does not mean that it will tend to be weak overseas. This leads us to the next thing: Are tariffs affected overseas than domestically? Well, tariffs only come with how much a song is worth. Depending on how much the (value) coin of the place where the song is being sold is compared to the dollar, then that might affect the prices of the song in different parts of the world. However, if a song is being streamed globally, the prices change in each place because It comes with having different rules and monetary values. So, where exactly is all of this money coming from? The music industry has had a gloomy outlook for more than a decade. Years ago, iTunes and other MP3 plays, completely destroyed the sales of traditional, physical album copies. The music industry mainly gets its money from the multiple streams the population is doing.
As said before, all of these platforms have been making the industry grow. Notably, streaming, in particular, is one of the rises according to “Music Industry Revenue Today”, now making up 43% of digital revenue, with downloads at 45%. More people than ever are opting to stream music on their computers, tablets, or phones rather than buying a physical copy. And this is where most revenue for the music industry is being made. “While streaming has rattled traditional record sales, it still generates revenue through per-stream royalties. Although we are talking fractions of pennies per stream, with the increased use of such services the revenue from streaming can at the very least displace lost payments from say, the decline of individual song downloads” (2018 Careerinmusic). There are many factors that bring money to the music industry itself, however, this is where most of the money is generated.
Like many big industries, competition is a big factor. Not only the industry vs the outside world but mostly within the industry. It is a very competitive market since it falls under the “entertainment” category. For example, if the record companies act as a cartel, they can use the resulting monopoly power to dictate the design of any of its services or products, regardless preferences of the consumers. Record company’s competition is one of the biggest. With the music industry having many labels, big and small and especially many genres, some of them are seen as exclusive, which really only account for a small piece of the overall market. With this comes the market structure. The market structure of the music industry is in an oligopoly (the market is shared by a small number of producers or sellers). “This market is dominated by a small number of firms (major record labels), which own more than 40% of the industry’s market share” (Market 29). With the market being an oligopoly, the major record labels set prices, cause the barriers to enter the industry tend to be high and the products they sell are the same. Due to many problems with the sale of recorded music declining, the four major companies have been having a rough time. These four major players in the industry have been reducing the number of releases they put out each year, and have already started to alternate revenue streams, and cutting all costs possible. These are the four major players: Vivendi (Universal Music Group), Warner Music Group, Sony Music Entertainment, and EMI. Let’s take a deeper look into these four major players. Universal Music Group captures around 31% of the industry’s market share and it is the largest music company in the world. The company owns approximately 14 major record labels, and a few years ago in 2008, the company generated $7.5 billion in revenues. The group captures around 27% of the industry’s market share and is the second-largest music company in the United States. Third, we have Sony Music Entertainment which currently captures around 14% of the industry’s market share. Sony Music Entertainment entered into a joint venture (2004) with Bertelsmann and merged to form Sony/BMG Entertainment, which later went back to just Sony buying back their 50% streak in the company. Last, we have EMI. This company is based out of the UK and currently has the smallest market share (5%) out of the major four record labels.
As of now, there are no current regulatory issues that might affect the music industry, however, there are legal issues/rights involved in the music industry every day. First, there are music copyrights. A copyright is a form of legal protection given to many kinds of created works such as musical compositions/songs, lyrics, records, poems, books, etc. For any work of this kind to be under legal copyright, it needs to be “original” which means that it was not copied from any other source. Once an original work is fixed in a tangible medium, the creator has copyright protection automatically. There are rights that go specifically to the Copyright Owner: Reproduce the work, distribute copies of the work, perform works publicly, make derivative works, perform copyrighted sound recordings, and display the work. All of those things only the copyright owner is able to do, and just that person. With copyright comes: sampling, music publishing, record agreements, and trademarks. Sampling occurs when a portion of a prior recording is incorporated into a new recording. When an existing recording is sampled without permission, copyright infringement occurs ($750-$150,000 fee). Music Publishing is simply the business of exploiting a song- that is finding uses for the song and collecting the money it is able to generate. With this comes royalties, which are just the fees being paid to everyone who worked on the song. “Record labels and recording agreements are the main function of a record label” (McDonald). These record labels are there to manufacture, distribute, market, and promote the artist’s music. The artist and the record label enter into a written “recording agreement” which governs the relationship and basically sets some rules of what is allowed and what is not. The royalties that the artist gets are also set under this contract. Last but not least, there are trademarks. A trademark is a word, name, symbol, or device used by a business in commerce to identify its goods and services and distinguish them from other companies. This works so that the brand can still be “original” and not be used by any other person. Artist representation in the music industry is big.
There are four different kinds of representatives that many represent recording artists, performers, and songwriters in the music industry. These are Personal managers, Agents, Business Managers, and lawyers. All of these four carry out different roles within the artist’s life. They all deal with different roles and receive different compensation. All four of these roles are crucial and as important for the record label as well as the artist itself.
As said before, there are no current regulatory issues that might affect the music industry, however, all of these roles and services are crucial to make the industry work in a safe and legal way.
The music industry is an industry that will always keep changing throughout the years. A society evolves, the industry will be growing right alongside its public. Technology, being one of our main factors for changes, has shaped and will continue to shape this competitive and massive industry. Overall, this is how the music industry works. Every little detail is important and carries certain measures. With it being very competitive, the music industry has to always be finding ways to make everything easier for the public/audience (its consumers) as well as the artists and the people who are working for it. As products come out, the music industry will always find partnerships as long as it is a valuable project in the long run. Like any big industry, they will always benefit from others who might be favorable for them in the future and make them progress and grow as an industry. Finally, there have been many big changes ever since the music industry became one of the biggest entertainment industries and not everything is the same as how it was years ago. Our society, the world is growing, and this is an industry that will not be left behind. The music industry has always been so magnificent and rapidly changing with our society. Many changes in consequence to technology and how music genres have been evolving, this business will never come to an end. A thousand years from now it may be very different from what it is now. However, there is no way music will come to an end. And even if it does (which I do not believe so), the legacy will remain with us. Yes, every song from every artist will go to a “public library for music” per se, and the rights will be available to everyone. But, this will only happen 70 years after the artist has passed. According to Forbes, “Because of these industry growing pains, musicians have had to adjust. Some began to focus their efforts on brand building, using their music, in effect, as a form of advertising to hock products and services for companies”. Artists like: Beyonce, Lady Gaga, and Michael Jackson, have always done this, pushing everything from soft drinks to clothing and fragrances. More and more musicians are trying to adjust to these sudden changes. That is the reason why branding has become one of the most important parts of the life of a “celebrity”. There will be multiple generations who will be taking over the industry. Bringing new and fresh material, adapting to new audiences and new consumers (as well as many music genres that are booming and were just created). However, as said before, music and this industry will never die. After all, the consumers will always keep on winning and generating revenue for as long as they are able to keep their music and or “brand” adapting to new generations. “Consider that the revenue streams created by record sales and concerts once formed an informal infrastructure that continually bred artists. Without such revenues and streams in place, or something similar to replace them, the time will come when musicians will have no practical way to stay afloat, forcing them to give up and many would-be ones to never try at all” (Forbes Magazine 2017). Basically meaning that the music business may not be finished at all. Again, there will be more ways and new musicians will be able to stay up to date and bring new material. Remember, this industry will always find ways of generating revenue and keep its audience hooked. Because, after all this is pure entertainment and I believe that people love to be entertained. Because seriously, who doesn’t? The Music Industry will be able to adapt to any changes there are to come in the near future. Because, at the end of it all, this is how an industry grows.
Citations:
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