By: James McNamara
Ever since the first record album ever sold in 1909 to Apple’s contemporary revolution iTunes, the music industry has evolved and innovated as fast as the music itself. Throughout this time, the life of a startup musician has not been an easy one; the struggles of becoming a ‘star’ are well known and have been extensively documented.
Artists’ economic welfare has historically been propped up by largely by record sales. But digital technologies have forced record labels to innovate and diversify their revenue operations to compete with superior market entrants. On-demand music streaming applications are the latest materialisation in a series of latter-day corporate attempts to capture this dynamic industry. The essence of these services is to generate large advertising revenues; the surplus of which then sanctions individuals to stream tracks for free (or by subscription).
However, amongst others, Radiohead’s Thom Yorke has publicly criticised the royalty policies of platforms (such as Spotify; a market leader) that allocate artists a thrifty fraction of a pence per play. He argues that these payments are constraining to fresh talent who would be unable to support themselves given their current listenership.
Certainly the business model has the potential for lavish success; Spotify’s chief Daniel Ek is being lauded as a 21st century digital messiah. However the raw data depicts his organisation to be little more than a start-up itself. Despite revenues more than doubling during 2012 (to a staggering €434.7m), net losses have also increased by 30%. With this in mind, clearly it is taking the path to a lucrative IPO, which greatly benefits shareholders and other executives, whilst cutting out the musicians.
The survival of music depends on the flow of new talent, which must be nurtured and sustained. Currently, the industry’s bargaining power is simply too strong, and profit-maximizing behaviors are destroying the sustainability of the music industry. Can this trend be reversed?