How The Music Industry Has Transitioned into a Digital Age

The music industry is far more complicated than any past decade could have ever predicted. In a time where all kinds of music is available at one’s fingertips for such a small fee (or even free), it’s hard to believe that music once meant a trip to a physical store to spend upwards of $15 on a record or CD. The younger generation, born in a digital age, might not understand the work from all parties that goes into producing an album. How did we get to this point? Some would say it’s the convenience and society would back this. Almost every industry has had to break into digital in some fashion. Local businesses now need websites and social media to advertise and drum up business. Even the government has spread to the internet, with most towns featuring access to forms that before one had to travel to the City Office to fill out. Digital is the way of the future and there’s no industry that feels that the most than the music industry.

The shift in music from physical to digital began with Apple’s release of the iTunes system and iPod. Pre-Apple, the device of choice was vinyl, CD-player, or Walkman. When the iPod dropped in 2001, it changed the game completely. Many consumers began to load their CDs onto their new devices instead of carrying a CD player or a Walkman. iTunes offered consumers a way to legally download music through the internet rather than go to a store and buy a physical copy. It also allowed the purchase of individual songs rather than an entire album. Apple continued to dominate the market with each new iPod release and eventual iPhone release, securing their place in the technological world. There were, and still are, many people that cling to their vinyl, however. Today’s hipster culture has praised the aesthetic benefits, among other aspects, of owning vinyl. This has caused the sale of vinyl to increase by 32% from 2014 to 2015 and increase through 2016 despite the drop amongst other downloading sources in the streaming age that comes next.

From the digital age of downloading came the era of streaming. Streaming is today’s biggest way to listen to music. Between 2014 and 2015, CD sales in the US have dropped by 17%, downloading albums by 5%, and downloading singles by 13%. However, the use of Ad-supported on-demand streams has increased by 31% and the use of subscription streaming has increased 25%. (Source: Recording Industry Association of America) All the heavy hitters of the downloading age had to adapt or risk being left behind. The first on the streaming scene was Rhapsody in 2001, as Listen.com. The company offered unlimited access to a vast music library and charged a monthly fee. They sourced their music from Naxos Records in addition to several smaller independent labels. By 2002, they had signed the five major labels (EMI, BMG, Warner Bros. Records, Sony, and Universal Records). Rhapsody has now been overtaken by many others: Google Play, Spotify, Tidal, Apple Music, and even YouTube. Each of these sources are trying their best to make up for the profit lost through CDs. Google Play costs $9.99/month for “All Access”, $14.99/month for “All Access” for up to 6 family members, and is free for “Standard”. Spotify costs $9.99/ moth for “Premium” and is currently the most popular streaming site, with 20 million paying subscribers and a total of 75 million active accounts. Tidal costs &9.99 for “Premium” and $19.99 for higher-quality and streaming. Apple Music costs $9.99/month or $14.99/month for the “Family Plan”. (O’Brien) Last year, YouTube, which charges $9.99 for its premium service, YouTube Red, generated almost $385 million in royalties, but paid the artists mere peanuts compared to that sum. Streaming music is free on YouTube, making it the most popular choice in listening to music. According to a source inside YouTube, about 50% of the money generated goes to the company, 35% goes to the owner of the master recording, and 15% goes to the publisher. (Byrne) The meager portion that ends up in the pocket of the artist has caused many to speak out against it. Notably, in 2015 Taylor Swift refused to let streaming sites, specifically Spotify and Apple play her music until they pay royalties to artists. When Apple Music was just being released, Apple offered a free 3 month trial during which they weren’t going to pay artists the royalties they were due. Apple soon retracted this policy. This all leads back to the major problem with streaming: where the money is going. In the physical era, the money went to the label and the creators. Today, the company takes a cut, pays the middle man, and gives whatever remains to the creators.

Where do we go from here? Research suggests that the 4 giants (Apple, Google, Microsoft, and Amazon) will have to compete along with independent companies like Spotify, Tidal, and the newly US-introduced Deezer will have to fight each other for the top spots. It wouldn’t be shocking to see a smaller service like SoundCloud be bought up by a bigger company. To make money, these companies must provide the latest and greatest but how is that possible in an industry where every company is running basically the same service? It is predicted that streaming subscriptions will rise exponentially over the next few years but it’s anyone’s guess as to who will come out on top.