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The Impact of Digital Platform and Technology on Music Industry

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We cannot stress enough the importance of music in our daily life. The language of music is one of the most important platforms that allow us to speak a common language which acts as a social narrative. It helps to bridge gaps and unite people. It ignites subconscious emotions that we are unaware of. There have been massive changes over the years in how we listen to music from using records to now streaming. Streaming platforms have irreversibly changed the music distribution landscape, now accounting for the largest growth segment in the recorded music industry. The emergence of technological improvement and the internet has been the cornerstone of all these. In this essay, we will speak about the different interest groups and stakeholders, thereby connecting the creators and consumers of music. We will also discuss the contemporary shifts and the repercussions of growing digitization on the economies of music.

The rise of streaming music rose to prominence exponentially with 24/7 internet accessibility. Not only did it make listening to a song easier, but it also gave entrepreneurs and developers the opportunity to broaden their horizons. The possibility of listening to and discovering new music without having to actually download files or purchase songs made such platforms very alluring. Companies such as Spotify, Apple Music, Deezer, and even YouTube changed the way we engage with music tremendously. Providing millions of songs all under a huge network library at a reasonable price made things easier for the consumers.

Furthermore, digitization made the exchange of royalties and enforcing stringent copyright acts easier. Royalty is the amount paid to the owner due to copyright issues. Streaming platforms such as Spotify are commercial thus it provides music content from a range of major and independent record labels and also allows artists to promote their future tours, event or music album launch. YouTube provides a similar platform for artists and allows them to advertise their product to a wider audience on a subscription basis and earn money through YouTube Partners Program (YPP). Apart from being a stage for up-and-coming artists YouTube also promotes the chance of live streaming music festivals. Despite all its positives streaming platforms has its fair share of negatives which will be discussed later.

There are mainly two distinct music industries which are live music and record music industry. In such industries, music publishers and recording music play a huge role. In both cases, the goal is simple, to attract more audiences as such that both the creators and consumers are benefited. Music publishers nurture and develop songwriters and composers and take care of the business aspects of their career. Music publishing is really all about songwriters and copyrights. In the modern time of digital music conservation of one’s right to music is extremely important. Under The Copyright Act, owners are entitled to benefit from their products used publicly. When it comes to how artists and songwriters are paid from digital music consumption (streaming and downloading), music publishing concerns the various kinds of songwriter royalties a composition earns. While streaming revenue and download sales can be collected by your digital distributor, the songwriter royalties associated with each stream and download must be collected and administered by a publisher. According to recent reports from billboards, Spotify has offered advances to various managers and artists with motives of licensing their music directly to the streaming service. Companies such as Apple Music have followed suit. Such steps might bring about catastrophic impacts on actual publishers as streaming firms will steer them away from their job.

The Recording Industry is a bit different from the publishing industry. It concentrates mainly on the copyright in sound recordings. Unlike the publishing company, the record company acquires the cost of producing music as well as holding the rights of the artists. Recording Industry has a strong connection to the Economics of Scarcity. In simpler terms, it is when high demand is backed up with limited resources. Previously the cost of recording was extremely high which meant a handful few artists were actually able to record their songs. These changed massively after the digitization of music. One such notable platform is YouTube which opened scope for many future record artists. Moreover, digital sales reduced marginal costs (cost added by producing one additional unit of product). It also meant the products were nonperishable which means sales for such services continued until the demand for it fell through. This massively improved the supply of new artists cutting down the middlemen or gatekeepers thus creating Economics of Abundance. There were a few issues due to these. Copyright was disrupted and piracy increased. Companies such as Napster, Pirate Bay disrupted the legal way of exploring music. There was massive copyright infringement surrounding Napster and the dispute caused further problems. People were reproducing sound recordings without the permission of the copyright owners. This finally led to the discontinuation of Napster.

The way we perceive music changed tremendously after the commencement of streaming and digitization in general. Over the years, each new format bought about a boost in sales because the music buyer felt obliged to purchase the different formats of their favourite music. With the development of digitization and music streaming recording, reproduction and distribution became easier as the barriers to entry have been reduced.

Technology also made storing songs easier and greatly reduced storage issues. Streaming sites such as iTunes can store thousands of music of different genres under one library. This allowed consumers to surf a wide variety and range of music without the need of listening to a song they do not like. Instead, listen to recommended songs in accordance with their taste. Such platforms also made marketing accessible and enhance connectivity with consumers. Marketing of products and services changed in the modern era of digitization. Brand or company name is a great way of connecting with fans on an emotional level and social media plays a huge role in such motives. It usually captivates fans from all over the world and turns them into fanatics. Usually, agents and managers play an integral role in promoting artists. There are a few key differences between agents and managers. Agents are usually franchised and operated by the state and have no more than 10% commission based on their work. They are usually liable to provide jobs to their clients. On the contrary, managers can make their own terms and are not necessarily obligated to procure work for their clients and can hold up to 15 – 20% of the profit. They coordinate all the other service providers in the artist’s career and would want maximum right over the artists. One such success story of marketing, managers, and artist in the era of digitization may include the rise of Lady Gaga. Troy Carter of Coalition Media, Gaga’s manager back then, used the advancements of digitization and help of marketing company ThinkTank Digital to invest heavily in developing Lady Gaga’s global presence through social media. They encouraged Lady Gaga to use her Twitter account to enhance emotional connectivity with fans. They also set up an online exclusive interview to improve the reach. This showed how technology improved online marketing.

The Copyright Act is essential and a fundamental key pin that combines all the crucial concepts we have looked upon. Copyright mainly protects work which includes musical works and artistic works. Besides, it also protects subject matters apart from work i.e. sound recordings. Basically, the law provides an exclusive right to reproduce work and communicate with the public. Copyright is not only important in the commercial basis of both recording and publishing industries but it is also essential to all the contracts, disputes and evolutionary issues that those industries face. Whenever the copyright deal is made with the streaming sites and the songs are downloaded or streamed by consumers, a mechanical royalty is paid to the owner. The other form of Royalty is performance royalty which the owner earns whenever the song is played in public. Two main organizations that look after themechanical royalty are: Australasian Mechanical Copyright Owners Society (AMCOS) for music publishers and the Australian Recording Industry Association (ARIA) for the record companies. Both the organization came to an agreement on how the earning could be split amongst the record companies, publishers and of course the artists. `Purchase price dealer (PPD) is usually used to pay the royalty on the basis of revenue generated. Interactive Streaming networks such as YouTube, Apple Music, Spotify receive a mechanical royalty on the revenue collected. Digital downloads from iTunes, Amazon also contribute to the earnings.

As previously discussed, performance royalties are wide and varied. Australasian Performing Right Association (ARPA) protects the rights of such songwriters. ARPA issue a blanket license to any entity who wishes to use their songs. A blanket license grants the music user wishing to license music the right to use any song from the catalogue. ARPA then tracks the usage of the songs and pays through the royalties due to the performance of those songs. Once again Interactive streaming contributes to such royalties. Internet radios such as the BBC also helps generate royalties. The other license that is very important is the sync or synchronization license. This along with the master license allows the use of sound recordings in the motion pictures. In terms of YouTube, it is very important as it allows content creators to use their preferred songs as required for the video. Digital Aggregation Agreement is also significant. Streaming now accounts for more than half the recorded market in Australia. Digital music providers do not usually deal with individual artists, songwriters. Musicians generally need a digital music aggregator. Aggregators help in distributing music globally through digital stores and streaming platforms. They generate money by charging upfront fees or a percentage of revenue earned from the music streamed or downloaded. They also charge an ongoing yearly fee to keep their content online. A subscription model is also created on the basis of songs distributed.

There has been a major change in the economics of the music industry. Due to advancements in technology and the rise of streaming services, the way artists promote their songs and the consumers connect changed immensely. Due to the rapid growth of digital channels, new revenue streams allowed artists to expand their capacity to earn more. Apart from that, platforms such as YouTube laid the way for promising artists from all over the world to display their work and interact with their listeners almost instantaneously. As mentioned, marketing became easier and allowed musicians to channel information to the targeted audiences in a much more efficient way. Distribution became easier, the possibility of accessing songs and storing them changed significantly too. The average revenue collected from downloads was $60/year whereas for a subscription it was $ 120/year. People started paying more than they ever have for music, within the age cohort of 18 to 24. Moreover, in 2012, companies such as Spotify contributed greatly to revenue collected through digital sales accounting to as much as 0.3% of $16.5 billion which was the highest since 1999. As explored previously they changed the market from the economics of scarcity to abundance. This led to ‘long tail’. According to Chris Anderson due to reduced distribution cost and diminishing storage issues, it created a favourable business environment where selling products to a wide range of audiences with vast taste became profitable. This meant consumers did not remain localized to only mainstream music even though it contributes to a higher number of hits but also explored the less popular ones. It meant that it gave the opportunity to specialized products to be personalized and saved as per the liking of the audience. Streaming sites profited from it by expanding their reach for consumers with varied tastes in music. 

The streaming sites and advancement in technologies played a vital role in the music industry moving forward. Companies such as Spotify showed great ability in capturing audiences from the younger generations. Streaming services overhauled the traditional ways of experiencing music and cultivated tremendous success and growth. After the Napster debacle, people started driving away from such platforms but soon the revival of new streaming services made life easier. Not did it only enhance the accessibility of music but also allowed musicians to monetize free listening – a privilege we previously did not have.

References

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  • Barnett, Harold J, and Chandler Morse. 2013. Scarcity And Growth. Baltimore: Taylor and Francis.
  • Corey Field*, ‘THE RECORDING ACADEMY (R) ENTERTAINMENT LAW INITIATIVE 2000 LEGAL WRITING CONTEST WINNERS:New Uses And New Percentages: Music Contracts, Royalties, And Distribution Models In The Digital Millennium,’ UCLA Entertainment Law Review, 7, 289
  • Frith, Simon. 1988. ‘Copyright And The Music Business’. Popular Music 7 (1): 57-75.
  • Gaffney, Michael, and Pauline Rafferty. 2009. ‘Making The Long Tail Visible: Social Networking Sites And Independent Music Discovery’. Program 43 (4): 375-391.
  • ‘GUIDE TO MUSIC COPYRIGHT FOR AUSTRALIAN EDUCATORS’. 2019. Http://Apraamcos.Com.Au.http://apraamcos.com.au/media/6289/ampal-guide-to-print-music_final.pdf.
  • Hiller, R. Scott, and Jason M. Walter. 2017. ‘The Rise Of Streaming Music And Implications For Music Production’. Review Of Network Economics 16 (4): 351-385.
  • Kupp, Martin, Jamie Anderson, and Joerg Reckhenrich. 2011. ‘Case Study: Making Money From Music Financial Times’.
  • Leyshon, Andrew. 2001. ‘Time–Space (And Digital) Compression: Software Formats, Musical Networks, And The Reorganisation Of The Music Industry’. Environment And Planning A: Economy And Space 33 (1): 49-77.
  • Piolatto, Amedeo, and Florian Schuett. 2012. Music Piracy: A Case Of “The Rich Get Richer And The Poor Get Poorer”. Information Economics And Policy 24 (1): 30-39.
  • Pras, Amandine, Catherine Guastavino, and Maryse Lavoie. 2013. ‘The Impact Of Technological Advances On Recording Studio Practices’. Journal Of The American Society For Information Science And Technology 64 (3): 612-626.
  • Sheehan, Brendan. 2010. The Economics Of Abundance. Cheltenham, UK: Edward Elgar.

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