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How the Internet Changed the Business of Music

Updated: Jul 31, 2022

How the Internet Changed the Business of Music


Kelly Brennan

November 2021

 

“Information, knowledge, and culture are central to human freedom and human development. How they are produced and exchanged in our society critically affects the way we see the state of the world as it is and might be” (Benkler 1). It’s simple: the Internet has transformed the economics and value of music. With the introduction of streaming services, the way that the monetization of intellectual property works has completely changed. This paper will not only discuss this, but also the way that the marketing of music has been revolutionized and the ways in which a young artist should be preparing in this landscape.


What is a streaming service in regards to music? A streaming service delivers data to a user in small amounts so that the user gets pre-buffered music therefore giving them an uninterrupted listening experience with no download of the files required. As Smith and Telang write in their book Streaming, Sharing, Stealing:

For the creative industries—music, film, and publishing—these are the best of times and the worst of times. New technologies have provided self-published authors, independent musicians, and other previously disenfranchised creators with powerful new ways of doing their work and reaching their audiences, and have provided consumers with a wealth of new entertainment options. Together these changes have produced a new golden age of creativity. But the same technologies also have changed the competitive landscape, weakened the control that established players can exert over both content and consumers, and forced business leaders to make difficult tradeoffs between old business models and new business opportunities.” (3)


Along with this new landscape of streaming and “wealth of new entertainment options”, comes the “long tail” theory that “suggests that, as the Internet makes distribution easier — and uses state-of-the-art recommendation systems that allows consumers to become aware of more obscure products — demand will shift from the most popular products at the “head” of a demand curve [...] to the aggregate power of a long “tail” made up of demand for many different niche products” (Wharton at University of Pennsylvania).

This new “long tail” theory adapts to the streaming world by creating algorithms for each individual consumer to find what is best for them. For example, Spotify playlists are divided into several categories such as algorithmic (where the artificial intelligence in the program creates your “Discover Weekly” playlists for you), editorial (Spotify staff members create these general playlists such as “Classic Rock”), major label, and non editorial (where there are independent playlist curators). This theory allows users to find their niche of music listening whether that be a broad popular genre such as punk or a subgenre such as pop punk.

In addition to this theory, the marketing of music has changed dramatically in the age of the internet. Due to memes, social apps, and streaming services, it’s easier than ever to discover new music. “Overall there are many more individual artists or bands which are either independent or signed to professional producers after the success of their memetic or memed songs. Internet-memes have generated many original songs,singers, remixes and compositions thanks to the increasing digitalization of the music industry” (Benaim). For example, Audio Socket explains that the platform “Tik Tok” “is interesting because whilst it does heighten the impact of new releases from big artists, more often, unknown artists are being brought into the spotlight. The use of music on the app has also helped to bring older music to new audiences. An example is Fleetwood Mac’s 1977 album Rumours. The album placed back in the charts after a video of a user skateboarding and listening to the track ‘Dreams’ went viral.”


These new landscapes and models of the streaming world where everything is at the tip of the user’s fingers brings up the issue of creativity as consumption. “Creative consumption means taking time, slowing down, and accepting that it is impossible to read and digest all of the information in the world” (The Carletonian). With so much being thrown at the user at all times of the day, it’s easy to say that you’ll never be able to see every meme on Tik Tok or listen to every song on Spotify.


As Eben Moglen put it, “if you wrap the Internet around every person on the planet and spin the planet, software flows in the network. It’s an emergent property of connected human minds that they create things for one another’s pleasure and to conquer their uneasy sense of being too alone” (Benkler 55). Before the internet, entertainers had to hope that they would be signed by a major label, but with the introduction of the internet, it became accessible for amateurs to easily share their work online to a wide audience. People could freely produce and publish their own work online. Because of these changes, products consumers purchased began to change due to new products being released so quickly. This rapid release of new products and amateur musicians occurred on sites such as Napster, MP3.com, Internet Underground Music Archive, and Rhapsody.


As for the monetization of music, copyrighting and payouts used to be as follows: synchronization licenses, master-use licenses, performance licenses, and mechanical licenses. Although a lot of these concepts are still used in the streaming world, things have changed. For example, a performance license before streaming was for a “public performance [which] is one that occurs ‘in a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.’ A public performance also occurs when the performance is transmitted by means of any device or process (for example, via broadcast, telephone wire, or other means) to the public” (Baskerville, Gordon). A mechanical license grants the rights to reproduce and distribute copyrighted musical compositions (songs) on CDs, records, tapes, ringtones, permanent digital downloads, interactive streams and other digital configurations supporting various business models, including locker-based music services and bundled music offerings” (Baskerville, Gordon).


Now, in the streaming age, payouts are made through mechanical royalties, performance royalties, and as payouts to the sound recording owners. Mechanical royalties in today’s age are “paid to the songwriters for the right to reproduce the recording every time the user chooses to play a song. That means that non-interactive plays on DSP, like ad-supported radio-stream of Pandora, don't generate that type of royalties” (Neill). Along with this, performance royalties in the streaming age are “paid to the songwriters for the right to publicly perform their music. Since the streaming distribution model implies that the consumer doesn't own any of the songs, every stream is rendered as a streaming service publicly performing a song to the user — even if it is enjoyed in the privacy of one's headphones” (Neill).


In the previous era of the recording contract business model, the model was “driven by high volume consumer sales of ‘sound carriers’ (LPs, cassettes, CDs), [and] the recording sector became a hub around which revolved publishing, live performance, studio production, artistic management, radio promotion, the marketing of star imagery, and sales of merchandise” (Negus 2). In today’s music landscape of the streaming world, Negus goes further to say, “recordings continue to be made. But the period of dominance sustained by the recording sector is over. The most significant catalyst of the post-record music industry has been the introduction and rapid adoption of internet circulation and digital technology as a means of creating and curating, sharing and selling, bundling and licensing access to recorded music” (3).


As discussed in the article Strembait Pop:

Musical trends produced in the streaming era are inherently connected to attention, whether it’s hard-and-fast attention-grabbing hooks, pop drops and chorus-loops engineered for the pleasure centers of our brains, or music that strategically requires no attention at all—the background music, the emotional wallpaper, the chill-pop-sad-vibe playlist fodder. These sounds and strategies all have streambait tricks embedded within them, whether they aim to wedge bits of a song into our skulls or just angle toward the inoffensive and mood-specific-enough to prevent users from clicking away. All of this caters to an economy of clicks and completions, where the most precious commodity is polarized human attention—either amped up or zoned out—and where success is determined, almost in advance, by data. (Pelly)

For young artists looking to find success, they should be looking at basic trends such as the ones that Pelly points out above, as well as marketing opportunities on social platforms like Tik Tok and Instagram Reels. They should also be preparing to start out unsigned and get their name out there through personable videos and advertisements as well as pitching to streaming services like Spotify.

“The change brought about by the networked information environment is deep. It is structural. It goes to the very foundations of how liberal markets and liberal democracies have coevolved for almost two centuries. A series of changes in the technologies, economic organization, and social practices of production in this environment has created new opportunities for how we make and exchange information, knowledge, and culture” (Benkler 1). The networked information environment has changed the way we know the entertainment industry. Overall, the way that monetization of music has changed and the way that marketing of music has changed has a direct correlation to the introduction of the Internet. Without the Internet, where would the entertainment industry be today?


 

Sources


Graphic courtesy of https://www.wired.com/2004/10/tail/





Wharton “Rethinking the Long Tail Theory: How to Define ‘Hits’ and ‘Niches’” https://knowledge.wharton.upenn.edu/article/rethinking-the-long-tail-theory-how-to-define-hits-and-niches/



Audio Socket “How TikTok Is Changing The Music Industry”


The Carletonian “Creative Consumption” https://thecarletonian.com/2012/10/05/creative-consumption/




Negus “From creator to data: the post-record music industry and the digital conglomerates” http://journals.sagepub.com/doi/abs/10.1177/0163443718799395





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