Synthesizing Research on The Business Behind the Music Industry

SOURCE: Ultimate Guitar

The economic principle I researched was “people usually respond to incentives in predictable ways.” My overall research question was how does the music industry incentivize artists to create popular music? Overall, I found that more than ever before, artists are encouraged to conform to mainstream music trends in order to be successful in the current music industry that is rapidly changing the way music is made, distributed, and listened to. 

First, the way artists are making money today is rapidly changing because of the growing popularity of digital music. In years before the recent digital boom, the main way artists would make money would be through the sale of physical albums. Now, however, because most music is streamed digitally, artists have to rely on touring and selling merchandise to make the bulk of their money. Of course, artists also can make money from selling royalties of songs to other artists or labels. The way that music is distributed today, also contributes to the way that artists make money, and how music is heard. In days of music past, artists would have to go through a distributor before getting their music heard by their fans. Today, artists and labels can upload their own music directly to streaming services like Spotify and Apple Music. This has definitely had a huge effect on the music industry as it is music easier today to have you music heard by an audience- and essentially, just about anyone can create a band.

Next, record labels have a huge impact on how artists make music. Traditionally, the common belief has been that in order to find success, an artist needs to be connected to a label. In many ways this still holds true as labels help artists with funding, booking tour dates, and provide a huge financial advantage over artists that are not signed to labels. On the other hand however, a lot of mega-music labels have only one goal in mind- making more money. Because of this, I would argue that some of the benefits of being an independent artist, or signing to an indie label, would be that you have more freedom over the music you create. Finally, the streaming services of today have shifted the way that artists create music, and has possibly even worsened the quality of music that is created. An example of this, as I mentioned in my fifth blog post is how artists have jumped into the new digital format by making albums with much more songs than in previous years. This shows how these artists are incentivized to make money rather than make quality music because they understand that the more songs they release at once, the more listens they will get. And as I found in my third blog post, artists make money for every time their song is played (or streamed) on one of the many digital streaming services today.

To conclude, I think that like other businesses, the music industry is ultimately run by money. Money is what causes record labels to sign new artists, and it’s what inspires artists to write hit songs. In the end, like any other business, the music industry needs money to keep going, and as long as our favorite bands and artists continue to create music we love, the music industry won’t be changing anytime soon.

Have Streaming Services Worsened the Quality of Music Today?

SOURCE: Slate

The economic principle I’m exploring is “People generally respond to incentives in predictable ways.” My research question to help me study the economic principle is “How does the music industry incentive artists to make popular music?” The article published in Slate titled “The Spotify Effect” demonstrates this economic principle by showing how the streaming age has affected the way artists are paid for their music, and arguing that streaming services have depreciated the value of some music. 

First, in the current age of digital and streaming music, artists have been making changes to “how they make songs and assemble albums to optimize streaming.” As I studied in my previous blog posts, streaming services like Spotify and Apple Music have completely taken over the music industry- and this has had both its positive and negative effects. Although streaming services have revolutionized the way we listen to music today, it is clear to see that there are still some considerable negative impacts to constantly having any music right at your fingertips. Artists today have to be “more reliant on touring and selling merchandise” to make money as streaming services often make getting paid dicey for artists and labels.

Next, when examining how streaming services actually pay artists, it is clear to see how the value of music can depreciate due to these services. With streaming services like Apple Music and Spotify, members have to pay a $10-$15 subscription fee every month. What I find interesting is that only about 30% of the subscription fee goes to the actual streaming company. The other 70% of that is “directed toward the music labels.” Once that money is given to the labels, it is still divided further before anyone gets paid. An artist signed to a major record label will probably only get about “12 to 15 percent” of that for every stream. Something else that I find interesting is that “ a platform like Apple Music… right now pays $0.0007 per individual stream” to the actual artists. Knowing these facts, it is easy to see why so many artists rely on touring and selling merchandise to make most of their money. It is also easy to further note that the way these artists are paid can have a drastic effect on the music they create.

Finally, the way that artists are paid through streaming services has a serious impact on the content they create. Because music lovers no longer have to buy an entire album just to listen to one of their favorite artists’ best song, artists now are putting more and more songs on their albums. What’s more is that artists have to consistently produce albums just to stay relevant in music. A prime example of both of these things is Drake, “one of the biggest pop artists in the world” who has to keep producing albums just to “remain in the conversation.” Drake’s most recent album, Scorpion had a total of 25 songs and was released just a year after his previous album. What we are seeing in music today reflects the choices Drake has made with his music and suggests an attitude of quantity over quality. This is the most obvious opportunity cost to artists and music in general as a result of streaming services today. What is important to remember however, is that “streaming is affecting different artists in different ways” and artists can still find success without conforming to the pressures of mainstream music today. 

In my next blog post I will research the question: This was my final research question.

How Much Do Record Labels Help Artists Find Success?

SOURCE: GQ

The economic principle I’m exploring is “People generally respond to incentives in predictable ways.”
My research question to help me study the economic principle is “How does the music industry incentive artists to make popular music?”
The article published in The Balance Careers titled “Understanding the Pros and Cons of Label Record Deals” demonstrates this economic principle by showing the advantages and disadvantages of signing to a successful record label as well as other methods that artists can use to find exposure or success.

First, to investigate how artists can find success, and if they need to conform to mainstream standards to do so, we need to acknowledge the primary goal of almost all young artists- getting signed to a record label. The main goal of most new artists is to find a record label that will sign them, meaning a label that will give them money to create and record their music, as well as help give them exposure to mass audiences. There are a lot of advantages of signing to a major record label such as Warner Music Group, EMI, and Sony Music Group. One of the biggest pros is that major labels have a “huge financial advantage” over lesser known labels or artists working on their own. This financial support is one of the key factors that determines an artists success because the more money a label has, the more money they can spend “promoting your record.” This is incredibly important because without exposure to mass groups of people, it makes no difference how good you music is because now one will be listening.

 Additionally, this considerable funding that comes from large record labels can also provide more opportunities for things like “tours” and “video shoots.” Again, these things are essential to the success of a new artist as they give artists more exposure to new audiences. Finally, a huge advantage to signing to a major label is being able to take advantage of “long established connections” in the music industry. These connections help artists find music video directors, to tour manager, and more. These things help new artists get a foot in the door in the industry and hopefully find success with their music.

Next, I believe it is also very important to recognize the downsides of signing to major record labels to understand why some artists may choose to sign to indie, or lesser known labels, or to just go unsigned. There is no doubt that compared to smaller labels, major record labels have a reputation of sacrificing creativity or originality for profit. This is a major downside to working with a major record label because it can cause artists to feel like they are just puppets for the record labels to make money off of. In fact, the high “staff turnover rates” as major labels can help to show how many people working on the business side of major labels are in it “strictly for the money.” This is upsetting to artists and music listeners alike because while most artists make music to send messages, share their emotions, or simply to entertain, the record labels that are backing them only care about one thing- money.

Also, a major downside to signing with a major record label is that these major labels often have several artists signed to them as one time. This means that new, less successful artists could be fighting harder for attention or funds than seasoned vets. This can be harmful because it could cause artists to make music that they believe will be profitable for their record label in order to get more attention from the people that are backing them rather than making music that they might want to make. Major record labels tend to “throw out a lot of music, just to see what will stick”, which is again very harmful for artists and music listeners. When it comes to major labels, their main concern with producing music is usually quantity, not quality. These disadvantages are really important for artists to consider when deciding to sign with a record label and is why many new artists are choosing not to sign to any record labels at all.

In conclusion, although unconventional, many new artists today have been finding success in their music without the help of any record label at all. Traditionally, artists needed the help of a record label to get money to pay for recording sessions on top of exposure such as record distribution and touring. Today, however thanks to the creation of services such as SoundCloud, artists can “get creative” and basically distribute their own music. Although it can be tough for most artists to really break through using services like these, some artists such as Chance the Rapper have found success without the help of any record label. In fact, in Chance the Rapper’s song “No Problem” he raps about how “if one more label [tries] to stop [him]” he will be pretty upset as many labels are eager to sign Chance because of his mega-star potential and previous success. I think it is inspiring to new, up-and-coming artists that you can find success in the music industry without the help of a record label. I think it is inspiring because while there are exceptions, I feel like most record labels only care about making more money, and don’t care so much about the music their artists are creating. With more artists becoming successful without the help of labels, it will allow music to remain a true form of expression and not simply another way for corporations to make an extra buck.

In my next blog post I will research the question: Is there an opportunity cost for artists when they are encouraged to create music based on how well it will sell? If so what is that opportunity cost and/or tradeoffs?

How is Popular Music Distributed Today?

SOURCE: LANDR

The economic principle I’m exploring is “People generally respond to incentives in predictable ways.” My research question to help me study the economic principle is “How does the music industry incentive artists to make popular music?”
The article published in LANDR titled “Everything Musicians Need to Know about Music Distribution” demonstrates this economic principle by explaining what music distribution really is, how music distribution has changed in recent years, and what the benefits are to digital distribution all in relation to how artists are incentivized to make the most money.

First, the article simply explains what music distribution really means. How music is distributed is essentially the link between a finished record and fans of the artist. In fact, even though many people don’t know the specifics of music distribution, it is a “crucial part of music promotion.” While it is easy to understand that music distribution is literally how music reaches the listener, what is interesting is just how much music distribution has changed over recent years, and how this affects the music industry.
Traditionally, finished music would have to go through a distributor who would have an agreement with the artist/ label on distributing physical copies of the music. In this system, the middleman, or the person in charge of distributing the music to record stores, would get a certain percentage of the profit made off of that album. This all changed dramatically with the introduction of digital music distribution in recent years.

Next, it is very interesting to see just how much the distribution of music has changed in recent years due to the rise of digital music consumption. In this new age of music distribution, a middleman that distributes the music is still present but the system is drastically different. To understand this shift, it is important to first understand how digital music distribution works in general. Artists first must try to get their music into digital music stores such as Spotify, iTunes, and Google Play. These digital streaming services serve as “digital record shops” as user pay a monthly fee in return for access to practically every song, artist, or album they can imagine. It is because of this popularity of digital music stores that the role of the middleman in music distribution has changed.
Now, digital music stores will make an agreement with the artist/ label whose music they want to play, and get a percentage of the revenue based on amount of plays on a certain song or album. There is no doubt that digital music distribution is at the top of its game, and still continues to rise, as “people spend more time online, and less money of physical music.” However, what we now must investigate is just how beneficial digital music distribution is to the music industry- and possible drawbacks.

Finally, digital music distribution doesn’t seem to be slowing down any time soon, so how does this system both help and hurt the music industry as we know it? One of the biggest benefits of this system is simply that “digital music sells the best.” This is glaringly evident when we see that 50% of the “global revenues of the [music] industry in 2016” came from digital revenues. Another substantial benefit to this system is that artists are more capable than ever of reaching new fans. Before music streaming services, when all music was sold and bought in physical copies, you wouldn’t have the chance to just give a new artist “a try”, because you likely weren’t buying a full album of an artist you had never listened to before.
Now, artists can release singles and EP’s easier than ever before, and this allows more people to listen samples of their music. One negative that could be related to this, however, is the increasing popularity of playlists. With streaming services, listeners can create their own playlists made up of songs from various albums and artists. Some could argue that this actually hurts the artists because with fewer plays on one specific album, they may not see as much of a profit. To conclude, one of the best parts about streaming services from an artist’s perspective is that many of these services, or stores, do not require “exclusivity deals” that confine the artist to that one store.

In my next blog post I will research the question: What are some ways artists can be successful without conforming to industry standards? Are there any? If not, how come?

How Do Musicians Actually Make Money?

SOURCE: Rolling Stone

The economic principle I’m exploring is “People generally respond to incentives in predictable ways”

My research question to help me study the economic principle is “How does the music industry incentive artists to make popular music?” The article published in Rolling Stone titled “How Do Artists Make Money- or Don’t at All- in 2018” demonstrates this economic principle by explaining what copyrights are and by showing the multiple ways that artists and record labels can make money. 

To begin, it is important to understand what copyrights are in the music industry. A copyright is any “ownership of songs and albums as creative works” and they are often much more complicated than the average music fan would think. Another important idea to understand that connects to copyright is what “royalties” are. In the music industry, “royalties are the sums paid to rights-holders when their creation is sold… or monetized in any other way.” At the most basic level, these copyrights and “royalties” are how artists and their record labels make money from the music they create. Before these copyrights can be distributed for artists to make money, songs are divided into two types of copyrights; composition copyrights and sound recording copyrights. The former refers to the actual composition of the song (who could have guessed that), so that entails the lyrics, melody, etc. The former, refers to the literal recording of the song.

What I found most interesting about this is that with many chart-topping songs today, the composition copyrights and sound recording copyrights go to two separate parties because the person performing the song did not necessarily write that song. An example of this would be when a newer band performs a cover of an older song. That new band still receives money from performing it, but the original writer also gets money, even if they had no part in the new recording of the song.

 Next, once artists have gotten their songs copyrighted, they need get that song played in order to actually make money. One of the most popular ways for artists to do this today is through digital music stores like iTunes and Google Play. When songs are sold on formats like these, both copyrights receive money, but the profit that each copyright receives is determined through the record label and “specific negotiations” between the artists. As for on-demand streaming services like Spotify, all parties involved in creating the song receive the same “dual-copyright payout” as with digital store purchases. One of the biggest ways artists make money from their songs today is synchronization, or when artists put “music in film and television and commercials.” What is unique about synchronization is that it serves as a “discovery platform” for up-and-coming artists that haven’t reached radio success because most filmmakers choose to put music in their films based off of it’s sound rather than its popularity. Another one of the biggest ways artists make money is through radio. With radio copyrights, radio services will “determine payment rates on mass scale” rather than at individual, artist-to-artist level. What I believe is most interesting about radio copyrights is that for some reason non-Internet radio services (AM/FM) actually only have to pay composition copyrights and do not have to play the recording artist at all when they play their song on their station. To conclude, there are actually several other ways that artists can make money that don’t necessitate copyrights at all. The most common way that we see today is live performances. Whether concerts or music festivals, live performances are “quickly shaping up to be the most lucrative space for musicians in the digital-music era.”

At first this may seem surprising, however when we look closely at how music is consumed today, it is clear that many listeners are becoming “inundated” with the constant access we have to music. Because of this never-ending access to practically every song ever made, it is clear to see why so many are choosing to spend their money on live performances of their favorite bands. Another way artists can make money without the use of copyrights is through advertising. This is something we see a lot today through partnerships between artists and specific brands like how Cardi B recently teamed up with Pepsi for their new ad campaign. These paid partnerships are very popular because they allow artists to have “access to an additional revenue stream.”

Finally, artists can make money through the merch and other non-music products they sell. Selling items like t-shirts, perfumes and other paraphernalia is an easy way for artists to make even more money and is something “artists have been taking advantage of for decades.” It is clear to see that today there are several ways for artists to make money with and without copyrights and “royalties.” It is also clear that these copyrights are much more complex than most people realize, and have a huge impact on how music is created and distributed.

 In my next blog post I will research the question: How is popular music distributed today?

The Business Behind the Music Industry

SOURCE: www.grammy.com

Research Topic: The business behind how the music industry and artists make money

Key Economic Principal: People generally respond to incentives in predictable ways

Overarching Question: How does the music industry incentivize artists to create popular music?

Sub questions:

• What is the opportunity cost of artists when they are encouraged to create music for mass consumption?
• Link to Hypebot Article that asks if artists are “more pressured to conform” to the industry standards of today
• What are ways artists can be successful without conforming to mainstream trends?
• Link to blog that describes a new “blockchain” business model that allows artists and producers to have aligning incentives
• Link to Billboard Article that further explains the “blockchain” system
• What are different ways for artists to make money?
• Link to Rolling Stone Article that explains “royalties” and copyright in the music industry
• Link to The New Economy Article that further describes how the music industry makes money
• How is “popular” music distributed among large groups of people?
• Link to article from Spinnup that goes through how music is distributed today

Next Question: What are the different ways artists and industry professionals can make money in the music industry?