05 November 2017 • Victor Perez

NO MATTER THE INDUSTRY, technology has brought large changes to how things in our society function. The lightning fast pace of technology has hit the music industry in full force, and brought huge change with it. One of the biggest changes has been the introduction of web-based music streaming, where fans can access a huge and growing library of music for a small monthly fee, or even for free with advertisements. This is hugely different from how things worked in the past, where you would need to pay $10 per album in order to listen on demand. Now for around $10 a month, you can access a huge and ever-growing library of music. This is a huge boon for music enthusiasts and general consumers, but what about the artists? How do they make up for the lost revenue? Who eats the loss when it comes to the greatest deal in music? The answer is; eventually everyone. Music streaming services such as Spotify and Apple Music are a net negative on the music industry as a whole, and are not sustainable in the long term.

In order to understand what exactly the problem is with the music streaming service model, you have to understand how record labels and musicians have reacted to them. First, there has been a noticeable increase of live performances since music streaming has been brought to the mainstream (Naveed). Not only are artists touring more, their audiences have also been increasing due to the discovery aspects of music streaming. Merchandising is also something that has become a lot more prominent. Hip-hop artists in particular often tie in their own merchandise and branding. Vinyl, while still a pretty niche market, has also been on the rise the last few years. Lastly, branding deals have become huge in the hip hop subculture, and consumer fashion brands such as Adidas and even Nautica pay rappers large amounts of money to wear their clothing in the public eye. Streaming revue makes up a very small portion of the money artists earn for their work. But there is a caveat here; certain genres and artists cannot make use of some of these revenue streams. For genres of music that aren’t suitable for live performance, or artists that physically cannot perform due to medical or financial reasons, that revenue stream is completely unavailable. These factors have also contributed to hip hop being the dominant genre, since more revenue contributes to more competition and innovation.

Some may argue that there isn’t much wrong with this picture. After all, at any every point in popular music culture at least one genre has dominated and created disproportionate amounts of revenue compared to others. The difference between now and the past has been caused in the shift in how the importance of certain revenue streams has changed. With recorded music earning less and less revenue, more pressure has been put on the other (potentially inaccessible) sources. So how does the music industry make streaming a more viable revenue source for recorded artists? The obvious solution is to increase the per-play rate from $0.004611 to something more generous, but most music streaming sites like Spotify don’t even make money to begin with, and increasing the per-play rate could be catastrophic (Wlömert). The real solution lies in the strength of music streaming; discovery. As stated before, music streaming services such as Spotify have a little problem when it comes to revenue. Spotify only exists because investors still believe it has the potential for much greater things due to how widely used and recognized. If music streaming as a culture fails, the current industry will destabilize. In order to provide artists with more revenue, the issue needs to be tackled at two ends: the record label’s end and the music streaming side.

The first point to address is that money doesn’t come from nowhere. A customer listening to a song does not generate a significant amount of money. The real money comes from the customers and their listening habits. Spotify in particular has a big enough market share to make the data analytics they gain from customers valuable. Big and small record labels could both benefit greatly from this data. For larger labels, seeing what generates the most streaming revenue or what the habits of consumers who listen to bigger hits are can be used to create more revenue for the label in the long term. For smaller labels, being able to see the listening habits of niche audiences they are trying to target can make it easier for smaller artists to gain more fans and thus, generate more income for the labels from other revenue sources. How does this solve the issue for smaller recorded artists? First, music streaming sites such as Spotify are able to finally make a profit by selling the data to record labels. Record labels are able to use this data to gain more money from other potential revenue sources such as live touring and merchandising. This lets the more performance orientated artists subsidize smaller recording-orientated artists, and thus create a more healthy ecosystem that unfortunately depends more on labels and big corporations.

There isn’t an easy way to solve the current problem that the music industry has. There are way too many factors and moving parts, and not enough long term data on the actual impact streaming has had. For some artists and consumers, the current landscape of the music industry isn’t even a problem. The fact of the matter is that it only takes one major technological breakthrough to cause a giant storm in the music industry. What may be a solution one day could turn into a threat. After all, music streaming was created to solve online piracy.

Works Cited


Krukowski, Damon. “Making Cents.” Pitchfork, 14 Nov. 2012, pitchfork.com/features/article/8993-the-cloud/. Accessed 15 Sept. 2017.

Naveed, Kashif, et al. “Co-Evolution between streaming and live music leads a way to the sustainable growth of music industry – Lessons from the US experiences.” Technology in Society, vol. 50, 2017, pp. 1–19., doi:10.1016/j.techsoc.2017.03.005.

Wlömert, Nils, and Dominik Papies. “On-Demand streaming services and music industry revenues — Insights from Spotify’s market entry.” International Journal of Research in Marketing, vol. 33, no. 2, 2016, pp. 314–327., doi:10.1016/j.ijresmar.2015.11.002.