Synthesis Research on the Music Industry

The economic principle I researched was “because of scarcity, people choose.” My overall research question was “How does spotify change the way we consume music?” Overall, I found that consuming and distributing music is now easier than ever with new streaming services.

First of all, a new musical renaissance has come out from music streaming. Steams have been steadily increasing as much as 42.6% in one year. However, a corresponding drop in physical musical sales has also been seen. So, what does this mean? More people are moving towards steaming as well as some people are changing medium to streaming. It makes sense: you can sample music to see if you like it and when you find what you really like you can buy it somewhere else.

 Secondly, the music industry itself has some beef with music streaming. Apparently, there have been some rumors about certain artists signing direct deals with Spotify. What this means if it is true, is that music labels will become obsolete in the coming years. Also this can lead to platforms preferring certain artists over others. This isn’t the only problem the music industry has with these new services. Some platforms, like Spotify, have adopted a censorship policy of sorts. This caused some songs to be removed or blacklisted from the recommendations.

To the Music Industry Quantity is Better than Quality

Source: Amtrak Downeaster

The economic principle I’m exploring is “Because of scarcity, people choose.”

My research question to help me study the economic principle is “How does simply knowing about an artist make you more predisposed to listening to them.”

 The article published in Billboard titled “Maximum Exposure” demonstrates this economic principle by showing that simply being seen can largely affect how well an artist does.

First, famous events can be a powerful catalyst for growth. One of the most well recorded examples was with the band Mumford & Sons.They performed during the 53rd annual Grammy Awards with great success: “The impact on viewers was immediate: U.S. sales of Mumford & Sons' debut album, Sigh No More (Glassnote Entertainment), surged 99% to 49,000 during the sales week that ended later that evening, according to Nielsen SoundScan, lifting it nine notches to No. 2 on the Billboard 200.” This perfectly explains why so many companies can push for exposure: the quality on the music didn’t change, but more people heard it allowing them to decide whether they liked it or not. If 100 new people listen to a song, the worst that can happen is that zero of those people will want to buy it. The worst case is status quo.

As a real life example, I recently learned of a new band named Casiopea. It was recommended to me by Youtube and I was immediately hooked and I bought two albums. Just because I knew about them, we both profited: I was able to buy a product I wanted and they sold another unit.

Modern payola could be a massive problem

Source: Shutterstock

The economic principle I’m exploring is “because of scarcity, people choose.”

My research question to help me study the economic principle is “How important is getting heard compared to making better musicianship?” 

 The article published in The Balance Careers titled “Payola: Influencing the Charts” demonstrates this economic principle by showing how the desire to get music out there can trump personal interests in the music industry.

 First, what is payola? Heather McDonald describes this as when “record label or other interested party [pays] a radio station to play a certain artist.” This effectively roots out what artists succeed and who fails, as exposure is everything. Listening to a song makes you decide whether you would want to buy it or not and continued listens might make you move more toward buying it. Paying radio stations basically means more profit, regardless of the artist.

 Then, how does this relate to music streaming services? This brings up the question on how prevalent this is in music streaming. For example, do you get recommended songs for popular artists even though you haven’t even listened to in a genre that you don’t even like? I’m not saying that Spotify is exactly being paid to recommend you artists but that could happen in the near future. A rich music label could slide Spotify a huge payment so their algorithm would prefer them over their competitors. It would be borderline propaganda if Cardi B was on every other song in your recommended regardless of how much you love her.

In my next blog post I will research the question: How do music award ceremonies and other exposure events affect sales of artists?

Shady Spotify Schemes

Source: 123RF.com

The economic principle I’m exploring is “Because of scarcity, people choose.”

 My research question to help me study the economic principle is “What legal percussions do streaming services have to face when dealing with the music industry?”
 The article published in Billboard titled “Spotify's Delicate Balancing Act” demonstrates this economic principle by showing that artists are choosing services like Spotify because they provide greater revenue but streaming services are facing a backlash from major labels due to their market power and possible censorship. 

 First, it was reported that “Spotify had quietly been negotiating licensing deals directly with managers and independent artists.” What this really means is that artists are seeing that being exclusively partnered with Spotify may be a potentially lucrative deal for both: the artist gets a higher percentage of ad revenue and Spotify will get more traffic from dedicated fans. This raises the question of how much Spotify or similar sources could control licensed artists. Could they perhaps make a pay wall just to access the new album or single if you’re not already a premium member?

 Second, Billboard says that supposedly “[Spotify’s] relationships in the music industry, on the other hand, have soured. Missteps surrounding the company's hateful-conduct initiative in May raised concerns about censorship from artists and executives, for example, resulting in the policy being rescinded three weeks later.” What this shows is that even though Spotify may help the music industry overall, it is still treading a fine line of legal repercussions. In this example, artists with more risque material might have been blacklisted, effectively removing them from the platform.

 Third, an interview with a former major-label executive reveals how the industry really feels about Spotify: “Spotify is big enough now that artists, managers and labels will have to suck up to whoever is holding the key.” Spotify is no longer a small company with a few albums, they are a behemoth prized to win control over other music providers. Sure, Spotify might not have the power to become a label, but the are favored by the people which gives them huge leeway over the industry as a whole. The only reason they are putting up with each other is because of the law. Spotify can’t legally stop an unsultry artist from creating music but they can reject them from their platform if they see fit. But why would they? Money is money.

 In my next blog post I will research the question: How important is exposure of an artist compared to their actual musicianship? (Is getting heard better than making better music?)

How the music industry has handled music streaming

Soucre: Amazon

The economic principle I’m exploring is “ Because of scarcity, people choose. All choices have an opportunity cost.”

 My research question to help me study the economic principle is “How have music streaming services affected music consumption?”

 The article published in Billboard titled “2018 NIELSEN MUSIC REPORT: STREAMING KEEPS THE BIZ SOARING: A fourth straight year of growth means the industry renaissance continues” demonstrates this economic principle by showing that rising digital sales have outweighed falling physical CD sales resulting in a overall increase in the total music industry.

 First, as expected music streaming has become even more popular in 2018. It grew about "a whopping 42.6 percent increase from 631 billion streams in 2017." This means that more and more people are going from the more traditional forms like iTunes to the virtually free streaming platforms, like Spotify. People would rather save a few more bucks buying a premium membership each month than buy each individual single or album they want.

 Second, other forms of music have fell to compensate the massive growth of music streaming. Digital album sales have fell 20.7%, digital single sales have fell 27.2%, and CDs have fell 20.9%. However, vinyl sales rose 14.6%. I think this is because less people are buying music they want because they can get it with streaming services easier and at a net lower price.

 Third, despite these changes, the music industry has still grown as a whole. Even with the dramatic shift to music streaming services "Universal Music Group grew two percentage points to 38.66 percent in distributor market share to lead the industry." This shows that the music industry isn't just going downhill but is growing despite the drastic change to a different medium.

 In my next blog post I will research the question: What legal repercussions do streaming services have to face when dealing with the music industry?

Modern Music Industry in Review

Source: Spotify for Developers

1. Research topic: How do people choose what music to listen to? 
2. Key Economic Principle Addressing: Because of scarcity, people choose. All choices have an opportunity cost. 
3. Overall Research Question That Connects My Topic To The Economic Principle: How do current factors like technology and personal preferences affect the consumption of music? 
4. Sub Questions That Help Address The Overall Research Question 
1. How do radio stations affect public opinion of current songs? 
2. How do free music streaming services like Spotify and Soundcloud affect how people consume music? 
3. Does media coverage of artists (scandals, awards, etc.) change their sales?
5. Reliable Sources:
1. Gale Pop Culture Collection #1
2. Gale Pop Culture Collection #2
3. Billboard