Sep28

Digital Darwinism: Is Our Music Industry Safe?

Posted by Kelly Kirkham

Video killed the radio star, and the internet almost eliminated the musician…

Streaming music has become a popular method for listening to old and new favorites. Companies like Pandora, Spotify and iHeartRadio offer instant gratification and never-ending variety, but at what cost? To fully understand the transformation that took place when the world switched to streaming, we must first look at the history of personal music and its effects on the music industry.

The transition from record to cassette was widely celebrated, as was the subsequent switch from cassette to compact disk. But the move from compact disk to streaming music has been a bumpy road that has forced us all to take a look at laws, regulations and social etiquette.  

While the internet has changed many of our lives for the better, it has spelled disaster for some recording companies and artists. Sometime around the 1990s, listeners discovered that they could listen to their favorite artists online for free. Although accessing this music was a major copyright violation, it quickly became widespread  and the owners of the music took major cuts.

Companies such as Kazaa and Napster created a peer-to-peer (P2P) file-sharing frenzy as the United States Department of Justice scurried to fine and imprison the copyright culprits. Arguments between publishers ensued where some claimed that P2P was destroying the music industry, and others were claiming that there was little to no effect.  

Billboard chimed in stating the following:

“The problem in believing piracy helps sales is deciding where to draw the line between legal and illegal […] without [major ecommerce retailers], file-shares would be just file sharers rather than purchasers. If you carry out the ‘file sharing should be legal’ argument to its logical conclusion, today’s retailers will be tomorrow’s file-sharing services that integrate with their respective cloud storage services.”

The United States Supreme Court later ruled in MGM v. Grokster that the creators of P2P networks can be held financially and criminally liable if their software assists others in copyright infringement. As the US Government prosecuted pirates the trend on ripping free, infringing music began to decline along with the music industry’s sales. Once listeners had access to free music they no longer wanted to fork over cash for listening.  

Following this legal crackdown, MusicNet became the music industry’s answer to Napster; listeners could pay a subscription fee in order to access millions of legally licenced songs without breaking any laws. Soon afterwards artists began to boycott the streaming service due to the small royalty checks. Record companies brought in 91% of the profits while artists earned a fraction of a penny per play.

In 2004 Pandora Radio was launched, providing a free-to-listen platform with ads and an optional paid subscription ad-free service. A slew of lawsuits ensued along with outcries from the music community as Pandora pushed for even lower royalty fees for artists, and the battle raged on…

In 2009 the music industry began to see sales figures taking a slow dive, dipping by 17% in just five years. As sales slipped the streaming industry boomed, amounting to $1.87 billion a year from 2011 to 2014. Royalties per play amounted to a meager $0.0023.

All may not be lost for our favorite artists, though… According to a report conducted by the Recording Industry Association of America (RIAA), streaming music is up as expected, but so is digital music revenue, recorded music revenue and paid subscriptions. The entire music industry is seeing a slight lift in sales.   

The RIAA issued this statement along with the news:

“The data continues to reflect the story of a business undergoing an enormous transition.  There are many positive signs: continuing the trend from 2014, wholesale revenues for the first half of 2015 increased. And revenues from streaming music services continue to grow at a healthy double digit rate. The product of music and the extraordinary roster of artists represented by today’s music labels remains in high demand.  That is the bedrock of a successful future.”

While this boost in sales does little to repair the damage, it does indicate that the music industry is evolving to battle Digital Darwinism, albeit a little slowly. Meanwhile the Department of Justice continues to wage war on pirates and copyright infringement across the country.

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