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Speaker Notes: Technology and the Music Industry

November 26, 2019 · Posted in Research

My name is Zach and today I will be talking about how technology has changed the music industry. In particular, I will be talking about the growth of music streaming, the controversy surrounding it and how it has changed the way that music is created and released. But first, I need to go over some of the major milestones in the history of digital distribution that led to the creation and eventual growth of these services.

The first digital music service was the Internet Underground Music Archive, also known simply as IUMA. It was launched in 1993 as a platform for unsigned artists to share their music directly with the public for free. Users were able to download songs, artist biographies and artwork and were also given the ability to interact directly with the artists themselves. Founders Rob Lord, Jeff Patterson and Jon Luini received national acclaim for the platform, which was predicted by many to “defin[e] the music distribution industry for the next century”.

Six years later, Sean Parker and Shawn Fanning founded Napster, a peer-to-peer file-sharing service that allowed users to distribute and download audio files for free. According to Andrew Nusca, the service “took the homegrown piracy that has always been part of the music industry and put it on steroids”. The company was sued by Metallica after an unfinished version of their song “I Disappear” from the Mission: Impossible 2 soundtrack appeared on the platform in April 2000. Napster was eventually shut down in July 2001 after the company went bankrupt.

In April 2003, Apple launched the iTunes Store to sell digital music for the iPod. It allows consumers to pick and choose which songs they want to buy instead of forcing them to purchase the entire album. At the time of its inception, annual music industry revenues were down by roughly four billion dollars. The store, which has been credited with “legitimizing the practice of accessing music from an online platform”, became the largest music vendor in the United States by April 2008 and by February 2010, it became the biggest music vendor in the world. For the first time in history, digital music sales were larger than physical music sales.

In July 2005, Pandora was launched as an Internet radio service. It features algorithm-based playlists and a freemium business model, which gives its users the option to listen to ad-supported music or uninterrupted music with a monthly subscription. This model has become the standard for most music streaming services today.

In October 2008, Spotify was launched in several European countries. Founded by Daniel Ek and Martin Lorentzon, the service was pitched to record companies as a solution to piracy, as music sales were down by another one billion dollars. Rather than paying artists a fixed price per song or album, like the iTunes Store, Spotify pays royalties based on the number of streams.

The United States was initially hesitant to adapt to music streaming services, but after becoming “alarmed by the sudden erosion of their business”, every major record label signed a licensing deal with Spotify in 2011. By the end of 2012, the service reported having a total of 20 million active users, including five million paying customers globally and one million in the United States. User growth has continued to rise, eventually reaching 248 million active users in October 2019, including over 113 million paying subscribers.

The success of Spotify has led to the creation of other music streaming services. These services include, but are not limited to, Amazon Prime Music, Apple Music, Google Play Music, Tidal and YouTube Music. Spotify remains the top music streaming service worldwide, followed by Apple Music. Apple Music, which does not offer a free version, has 60 million paid subscribers as of June 2019, while Tidal has only three million subscribers as of 2016, although this figure has been largely disputed, and is estimated to be closer to one million as of July 2019.

In 2016, music streaming services become the music industry’s biggest source of income in the United States, overtaking digital and physical music sales for the first time. Music streaming accounted for 51 percent of the music industry’s $7.7 billion dollar revenue, an 11 percent increase from the previous year. And while this marked its largest increase since 1998, it was still only half of the music industry’s $15 billion dollar peak in 1999. The market has continued to grow, with music streaming accounting for 75 percent of the music industry’s $9.8 billion dollar revenue in 2018. And while CD sales saw a 34 percent decrease from the previous year, vinyl sales saw an increase of eight percent, which gave the format its highest income since 1988. According to industry leaders, the rise of music streaming services is “enabling the market to reach new regions of the world while helping weaning a generation of music fans away from free or pirated music”.

While music streaming has clearly given the music industry a much needed boost after years of decline, these services do not come without their pitfalls. The largest criticism facing music services today is the amount of compensation that artists, writers and producers are receiving for their work. Taylor Swift notoriously pulled her entire discography from Spotify in November 2014 for this reason, further elaborating that she does not agree with the “perception that music has no value and should be free”. According to the head of the singer’s record label, they had only received a little less than 500 thousand dollars in revenue from Spotify during the previous year. Swift continued her fight against unfair compensation when she threatened to withhold her album 1989 from Apple Music upon its launch in June 2015, after discovering that the service would not be paying artists during its free trial period. The company changed its policy shortly thereafter. The singer’s ability to use her influence to help artists receive more compensation is the reason why I am using her as an example, but it is important to note that there are many other artists who share similar viewpoints.

Music streaming has changed more than just the way that people consume music; it has also changed the way that artists release music. With music streaming, artists are now able to put their music online as soon as it is created. It also gives the artists the ability to test out songs or even adjust albums after they have already been released. This differs greatly from the traditional album cycle, which had been the industry standard for decades. Artists would write and record songs over the course of several months or years and then have to wait for their record labels to approve of the material and come up with a release strategy for it. According to Dani Deahl, this “worked great before streaming when people had to buy physical albums […] But now, few artists have the luxury of being forgotten for two years and then coming back to try to make a media splash. Everything is available at our fingertips, and fans are hungry for content all the time”.

But music streaming has not just changed the way that music is released; it has also changed the way that songs are written. Due to the high amount of songs that are uploaded to music streaming services each day and the fact that a song needs to be listened to for at least 30 seconds to trigger a payout, songs are becoming shorter and artists are also “front-loading all the catchy bits [to the beginning] to keep a song’s skip rate as low as possible”. According to Charli XCX, a singer who has also written songs for other artists such as Selena Gomez and Shawn Mendes, the formula used to just be about making the “most pop hit song” possible. But due to the dominance of music streaming services, they now have to ask themselves several other questions in the recording studio, such as “did you grab them in that first five seconds?” and “did they add it to their playlist?”.

With more and more singles being released, many people have argued that music streaming has killed the album. But Zane Lowe, the host of Apple Music’s Beats 1 radio station, disagrees. He sees it as more of an evolution of the album, where artists are now given “the freedom to experiment in ways that were never possible before”. The popularity of music streaming essentially means that there is no longer a “right way” to release music and that it is entirely up to the listeners to choose who they think is worth listening to.

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