Introduction
In this blog I’ll discuss the upward and viabile trends that online platforms and streaming services have created, currently enjoy and the consequence of this on the consumer and compare this with the downward trend of income streams to both artists and record companies.
The rise of the digital age
“Worldwide, digital revenues – from subscriptions, downloads, and advertising revenue on sites such as YouTube – accounted for 45% of the total in 2015, compared with 39% for physical formats such as CDs and vinyl records” (Ellis-Petersen, 2016)
The graph above highlights the importance that digital, streaming and their advertising revenues have, as by 2015 they commanded the largest share of monies within the industry.
Napster
The viability of online streaming services was made abundantly clear for the first time in the early noughties when Napster made headline news in respect to its seizure and finally its closure in 2002. It was argued that a small Californian internet company which had allowed users to freely download its music file sharing software was infringing on the copyright of both artists and record labels. In court, the company would argue that their “millions of users were protected by ‘The Home Recording Act’” (New York Times, 2000) and even though they thought this ‘grey area’ in the law would protect them, it didn’t, and they were shut down.
The grey area (as to how the Internet and online streaming would affect the music industry) was exposed and by 2015 digital/streaming music was no grey area, it was in fact the largest generator of revenue in the music industry and was also responsible in helping the industry make year on year growth for the first time in 15 years.
The graph above shows the decline from approximately 2000 and the small upward trend from 2015 onwards. That decline year on year for over 15 years, was from around about the time when the Napster legal case was lost, and they were shut down.
The implications of this case have had an enormous effect on the industry and, if nothing else, highlighted how easy it was and still is, to distribute music to anyone in the world, without paying the appropriate monies for the copy. In fact, since then, there has been a rise in digital platforms like YouTube, Spotify, Pandora, etc. Which don’t give a decent return of monies to artists.
“The issue of the small income musician gets from streaming services such as Spotify - between $0.006 and $0.0084 each time someone listens to a song - is a source of contention for artists, including Taylor Swift, who refused to allow streaming of her songs.” (Ellis-Peterson, 2016).
“And despite Pharrell's ubiquity, ‘Happy’ made $2,700 in publisher and songwriter royalties from 43 million Pandora streams” (Kosoff, 2014)
How can this happen?
A well seasoned structure of online/streaming coupled with a massive rise in the amount of people who have gained access to digital platforms (most noticeably via mobile phones and an increase in computer and internet use since the late nineties and early noughties) has made it easier for everyone to access music digitally, and can file share, p2p and more importantly ‘stream rip’, while on the other hand artist have struggled to regain an appropriate return for the volume of ‘copies’ being downloaded, and as the same platforms generate huge revenues from advertisers, not giving the artist a decent return, adds salt to the already wide open wound.
Sadly, not all’s what it seems, as YouTube operates, other ‘stream ripping’ services appear all the time. The disparity between the revenue the music industry loses each year increases through this form of piracy.
These stream ripping platforms use software which allows YouTube users to download music without paying subscription, which has obvious consequence on revenues, the little royalties that may be accrued, aren’t.
“The scale of the litigation against stream-ripping can be enormous. The RIAA, representing US record companies recently won a case against YouTube rippers FLVTO.biz and 2conv.com legal action. Trade body receives $83 million in damages.” (Forde, 2022)
Additionally
Further reports made by the RIAA, British Parliamentary Committees and UNESCO show the full extent of the piracy, measured in billions of dollars, and each year it’s not slowing down anytime soon. Muso, an organization dedicated to tackling music piracy did, however,
“point to stream-ripping as a growing driver here of music piracy. These sites accounted for 39.2% of music piracy in 2021, up from 33.9% in 2020.” (Forde, 2022)
The 83-million-dollar lawsuit victory is a drop in the ocean to the:
“Consequence of global and U.S.-based piracy of sound recordings…the U.S. economy loses $12.5 billion in total output annually.” (Siwek, 2023)
“Furthermore, the U.S. economy also loses 71,060 jobs. Of this amount, 46,114 jobs are lost at the U.S. production level for sound recordings while 24,946 jobs are lost at the U.S. retail level” (Siwek, 2023)
“As a consequence of piracy in sound recordings, U.S. federal, state and local governments lose a minimum of $ 422 million in tax revenues annually.” (Siwek, 2023)
Conclusion
It would seem the music industry drowned in 2002 to a river of consumer led piracy and has struggled to resurface by any means, due to the same issues it faced all these years ago when digital and streaming services began. The consequence of this has led to an overall loss in revenue throughout the entire industry, not just for record companies but for artists too. One positive revival as of late has been vinyl, and for no more obvious a reason than accountability. Could it be that both the artist and record companies feel this format ensures a better return?
References:
'Streaming growth helps digital music revenues surpass physical copies.’
Hannah Ellis-Petersen 2016
'A Question on Music Piracy’
New York Times 2000
https://www.nytimes.com/2000/09/22/technology/a-question-on-music-piracy.html
‘Pharrell Williams made only $2700 in royalties…. from 43 million plays of “Happy”’
‘Music Business: Piracy still threatens the music industry.’
Eamon Forde 2022
‘The true cost of piracy to US economy’
Stephen E Siwek 2023
https://www.riaa.com/reports/the-true-cost-of-sound-recording-piracy-to-the-u-s-economy/ & https://www.riaa.com/wp-content/uploads/2015/09/20120515_SoundRecordingPiracy.pdf
Other Resources to Consider:
https://www.visualcapitalist.com/music-industry-sales/
https://committees.parliament.uk/publications/6739/documents/72525/default/ https://unesdoc.unesco.org/ark:/48223/pf0000139651