TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture
ZacharyJ.Colello
Rutgers,TheStateUniversityofNewJersey

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture
TheubiquitousnessnatureoftheInternetandnewtechnologyhascausedundeniable
shiftsinnearlyeveryindustry.AsconsumersadaptedtheInternetandsocialmediaintotheir
everydaylives,mostindustriesneededtoadapttothischangeintheirconsumersorrisk
becomingoutoftouchandunabletomeettheirconsumersneeds.Oneindustrythathasfelta
massiveimpactduetoInternettechnologyisthemusicindustry.Thecaseofhowthemusic
industryfirstfoughtagainstthechangesinhowconsumersandmusiciansbeganusingthe
Internettomeettheirmusicrelatedneedsandtheeventualadoptionoftherequisitetechnology
bythoseleadingtheindustryhasgivenrisetomanyfascinatingstudiesanddevelopments.
Inthefalloutofthestruggletomaintaintraditionalbusinessmodelsandtheinevitable
modernizationoftheindustry,manynewbusinessmodelshavebeenutilizedthatcangrant
successtomusiciansbothindependentandthoseinvolvedwiththerecordingindustry.Whilethe
changesintheindustryareindisputablydrastic,somequestionsstillremain:arethesenew
modelsmoreorlessbeneficialformajorrecordlabels,independentmusicians,andmusic
consumers,andwithsuchrevolutionarydevelopmentstakingplacerecently,whatwillbenext
fortheindustry?
WhiletheInternethasgivenrisetounavoidabledevelopmentsinmanyindustries,the
musicindustryinparticularencounteredaninitialcatalystthatcausedittochangerather
substantially:Onlinemusicpiracy.Betweenthepeakyearsofonlinepiracyin2004to2010,
Piracywasresponsiblefora31%decreaseinthevalueofthemusicindustryglobally(Weijters,
Goedertier,&Verstreken,2013).Intheearlyyearsofonlinepiracy,freemusicwassynonymous
withillegalmusicastherewerenotyetstreamingservicesoradvertisementbasedplatformsfor
musiclistening.Theperceivedharmthatthemusicindustrywasfacingduetoonlinepiracywas

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

metwithgreatpushbackmanifestedinlawsuitsandstrictbanningofpeertopeerservices.
Regardingthepopularityoffilesharingonthenowextinctmusicfocusedpeertopeerfile
sharingserviceNapster,itisnotclearwhatlevelofmaterialharmtheindustrysuffersfrom
theseactivities.AsurveybyJupiterCommunicationsfoundthatNapsterusersare45%more
likelytoincreasetheirpurchasesofprerecordedmusicthanthosewhodonotusetheservice
(Alexander,PeertoPeerFileSharing,155).Whiletheactualdamagecausedbyonlinepiracyis
debatable,itwasclearthatthemusicindustrydidnothavethepowertopreventmanyusersfrom
accessingmusicforfree,andthattheleadersintheindustrymustintroducealternativebusiness
modelsthatconformtolistenersdemandforfreemusic.
ManyleadersintheindustryincorporatedapopularversionofanInternetfocused
businessmodelthatallowedforbenefitsofthetraditionalbusinessmodelwhileincorporating
digitalmediaproductionaswell.Thetraditionalstructureofactivitiesforthemusicindustrywas
serialindependent:Composition,A&R,Recording,Packaging,Marketing,Distribution,
Retailinginasequentialorderbeforereachingconsumers.Withanupdatedandmorenetworked
structurethatincorporatestheInternet,onlinerevenuecouldbegeneratedalongsidetraditional
revenue.Activitiesinvolvinganonlinemodelaswellasthetraditionalofflinemodelcanoccur
concurrently,suchasonlinedistributionoverlappingwithofflineretailing(Graham,2004,4).
WhileitwasnecessarythattherecordingindustryadaptedtheirmodelwithInternettechnology
tocontinuegeneratingprofit,thisshiftallowedforadditionalplatformstogeneraterevenuefor
boththelabelandtheartist.
Thisoverlappingofonlineandofflineactivitiesinnewbusinessmodelswaschosen
becausetraditionalactivitiesappearstogeneratedtraditionalprofit,whereasonlinemodels

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

generatesnewrevenuethatdoesnotnecessarilytakeawayfromthetraditionalmodel.
Specifically,wefindthattraditionalmedia(radioplay)hasapositiverelationshipwithboth
songandalbumsales.Interestingly,therelationshipbetweensocialmedia(blogbuzz)andalbum
salesislargelyinsignificant(Dewan,2014,102).Itbecameclearthatsocialmediapresence
wasnotaviablereplacementtoreplacingthefallingalbumsalesinthemusicindustry.However,
socialmediapresencewasfoundtohaveahighcorrelationwithdigitalstreamingpopularity.An
onlineandofflinefocusedbusinessmodelallowsthemusicindustrytoutilizesocialmediato
createnewmethodsofprofitgenerationthroughdigitalstreamingservicesandadrevenue,while
stillincorporatingtraditionalmethodssuchasradioairplaytogeneratetraditionalrevenuesuch
asalbumsales.Inadditionaltotheonlineandofflinemodelsgeneratingnewprofitforthemusic
industry,thesestrategiesalsoallowedforcheaperdigitaldeliveryofinventory(back
catalogues),greatermarket(ing)reach,decreasingcostsofdistribution,andproduct
customisation(Graham,2004,6).Duetoonlinedistributionbeingessentiallyfreerelativeto
physicaldistribution,theInternetprovidedrecordlabelswithcheapadditionalavenuestoprofit
generation,whileallowingconsumerstheconvenienceofanonlinefocusedbusinessmodelin
additiontothetraditionalmethodsofdistribution.
Onlinedownloading,whetherlegalorillegal,wasclearlythepreferredchoiceformany
individualstoaccesstheirmusic.Brokendownevenfurther,itwasfoundthatmanyyoung
individualsconsideritanadvantageiftheydonothavetodownloadasongontheircomputers
whenexploringnewmusic,throughtheuseofstreaming(mainlyonYouTube).Theydownload
onlyiftheyreallylikeasongorartist(Weijters,Goedertier,&Verstreken,2013,11).

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

Streamingbecameapopularalternativetoonlinepiracy,andbecameacorecomponent
ofnewlyestablishedbusinessmodelsofthemusicindustry.Manystreaminginspiredbusiness
modelscamefromtheincorporationoftheonlinebusinessmodel,suchasthe
freewithadvertisingmodel,freewithoutadvertisingmodel,aswellassubscriptionfeebased
services.Whilesubscriptionfeemodelswerenotfree,itallowedusersthesameconvenienceof
digitalpiracytostream/downloadmusicondemandbutwithasmallmonthlyfee.Thismodel
becamepopularwithconsumers,asithadsimilarconveniencetoonlinepiracyregardinginstant
accesstoanyartistorsongtheywantedtolistento,withouttheaddedguiltofstealingorlegal
repercussionsthatmanyconsumersfeared.
Auniquemodelthatincorporatesboththefreewithadvertisingmodelandthe
subscriptionfeebasedmodelisutilizedbymanynewdigitalmusicservicessuchasSpotify.
Theseplatformsutilizeamodelthatincorporatesasingleonlinestreamingservicewhich
intendstolaunchabusinesswhichisontheonehandfundedbyadvertisingandontheother
handbychargingitsusers(Thomes,2011,3).Companiesutilizingthismodelcangenerate
profitfromtheadvertisementfirmsthatappearonthefreeofchargeadvertisingfundedservice,
aswellastheflatfeegeneratedfromthesubscriptionbasedservicethatdoesnotcontainads.
Thismodelhavethecapabilityofutilizingtwoseparateservicesthatutilizethesametechnology,
thusbeingattractivetoawiderrangeofconsumers.Inadditiontotargetingawiderconsumer
audience,thesemodelsareaccessiblebybothrecordlabelsandindependentmusiciansfor
convenientandcheapmusicpromotionandrevenuegeneration.
Whilethisbusinessmodelisrelativelyprofitablecomparedtoastrictlytraditional
approachinanInternetfocusedsociety,stillstreamingservicesstilldonotearnenough

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

revenuestocompensateartistssufficiently.Thetrendistowardsthatmusiciansareincreasingly
forcedtogainrevenuesfromcomplementaryproductsandservicestotheirmusic(Thomes,
2011,5).Streamingservicemodelsappeartohaveanaddedbenefittotheartist.Whilethe
artist/labelcangenerateprofitfrommediastreams,havingmoreconsumeraccessiblecontent
allowsforexpandedpopularityandthusagreaterdemandofcomplementaryproductssuchas
concertticketsandmerchandisethatwasthoughttoultimatelyreplacethetraditionalbusiness
modelofthemusicindustry.
Clearly,theboomofdigitalstreamingheavilyaffectedmusicians,andinmanycases
providedartistswithpowerfulalternativesforpromotionandrevenuegenerationoutsideofthe
realmoflargerecordlabels.Thetraditionalsystemofactorsinvolvedintheprocessofmusic
distributionwasaverticalarrayoflongtermrelationships:firsttheartistcreatesthecontent,then
utilizesarecordlabelwhichworkswithadistributor,whothenutilizesaretailertosellthe
product,andthenultimatelytheconsumerbuystheproduct.AnInternetfocusedbusinessmodel
foramusicianallowedthemtocompletelybypassthetraditionalrelationshipswitharecord
label,distributor,andretailer,andinsteadformshorttermrelationshipswithvarioustechnology
focusedservicecompaniestoreachtheirconsumers(Graham,2004,5).Thismodelallowed
artiststhepossibilityofusingservicessuchassocialmediaanddigitalstreamingplatformsfora
muchmoredynamicanddirectinvolvementwiththeirfans,whichprovedtobebeneficialfor
manyartists.
ManyindependentmusiciansutilizethesenewInternetfocusedmodelsforpromotion
anddistribution,andmanyoftheeffectsduetosocialmediapresencewerestudiedin
TechnologicalandSocialDriversofChangeintheOnlineMusicIndustry.Recordlabels

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

typicallyheldthemajorityofthepowerduetocontrollingthephysicaldistributionofmusicas
wellasbeingtheprimaryaccesstotheradioformusicians,bothofwhicharenolongerstaples
ofsuccessforanInternetfocusedbusinessmodel.Thecosttodistributemusiconlinecompared
totraditionaldistributionismuchcheaper,asthereislessfocusonaphysicalproduct.
Therefore,theloweredentrybarriersthatresultfromdownloadingontheInternetenable
artistsandintermediariestoundertakedistributionandmarketingactivitiesmorecheaply.
Indeed,akeyattractionoftheInternetisthatitenablespracticallyanyonetodistributemusic,
therebyunderminingthecontrolthatthemajorlabelshavehistoricallyhadonthismarketplace
(Fox,2005,DiscussionsandConclusions).Whileacheapermediumfordistributionisbeneficial
forboththeartistandtherecordlabel,forthefirsttimeinthehistoryofthemusicindustrythe
artistnowhastheabilitytotakecontrolofdistributionwithouttheneedforalabel.This
ultimatelyshiftsthepowerinfavorofthemusician.
Butdoesthisapparentshiftinpowertowardmusiciansderivegreaterprofittoward
musicianscomparedtothelargerecordlabels?Whilestreamingappearstobeamajorbenefitfor
individualmusicians,theactualityissomewhatlessidealistic.Recordlabelsreceive18%of
sharesintheonlinestreamingservice.It'sjustapitythatartistswon'tgettoseeanyofthis
(Lindvall,1).Onasurfacelevel,digitalstreamingservicesallowmusiciansgreatercontrolover
theirmusic,buttheplayingfieldbetweenrecordlabelandindependentartistisnotnecessarily
leveledintermsofwhoreceivesthemajorityoftheresultingprofit.Aslabelstakingequityin
newservicesbecomescommonplacetheissueofhowtocompensatetheartistisaproblemthat
won'tgoawayandneedstoberesolved(Lindvall,2009,1).Whilestreamingservicessuchas
Spotifymakeiteasierforindependentmusicianstohaveaccesstotheseservicesingeneral,the

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

majorlabelsthatownequityintheseplatformslegallypaytheirmusiciansasmallfractionofthe
resultingprofit,andindependentmusicianslikelywillnotbefeaturedontheplatformsasoften
asartiststhatbelongtomajorrecordlabels.Thishasgivenrisetoastrongmovementof
musiciansarguingagainstthecurrentmodelsanddistributionofprofitfromonlinestreaming
servicesanddemandingfairrevenue.
Whilethebenefitsofstreamingservicesforindependentmusiciansversusmajorrecord
labelscanbedebated,thereisnodenyingthatdigitalstreamingservicesandthesenewbusiness
modelsareadisruptiveinnovationinthemusicindustryintermsofprovidingoptionsformusic
consumers.Thecreationofdifferentbusinessmodelsforrevenuegenerationinthemusic
industrybasedonstreamingleadtomanynewstreamingplatformsbecomingpopularand
competingwithoneanother.Throughoutthehistoryofthemusicindustry,itisapparentthat
newscalereducingtechnologieshaveinducedentryintothemusicrecordingindustry.Thenew
firmswereoftenproductinnovators,andtheirproductsbecamepopularwithconsumers
(Alexander,NewTechnology,2).Spanningfromthe1910'stomoderntimes,emerging
technologyhascontinuouslychangedthemusicindustry.Digitaldistributionhasbeenshownto
allowformorecompetitioninthemusicindustryasmoreindividualshaveaccesstoit,which
willallowformorediversityandvarietyinthedigitalstreamingerathatstronglybenefitthe
consumer(musiclisteners).
ItisclearthatthemusicindustryhasnotbeenimmunetothedisruptionthattheInternet
hascausedinnearlyeveryindustry,andhastakentheinitiativetoworkwithconsumersneeds
whilestillgeneratingprofit.Whilesuchacomplexdevelopmentintheindustryisdifficultto
summarize,itisclearthattheconsumersarethegreatestbeneficiariesoftheInternetagemusic

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture
industry.Theabilitytopurchasephysicalalbumsisstillavailabletoconsumersasitalwayshas
been,butnowconsumersaregiventheaddedconvenienceofthenewbusinessmodelsallowing
thechoiceofeitherdigitallypurchasinganddownloadingmusicorselectingfromseveral
streamingplatformsthatbestfittheirneeds(e.g.advertisementbasedfreeservicesor
subscriptionbasedstreamingservices).
However,drawingasimilarconclusionregardingwhetherthelargerecordlabelsor
independentmusiciansbenefit(orsuffer)mostduetoarisingInternetcultureinthemusic
industryismuchmorecomplexanissue.Whileindependentmusicianshavemorefreedomthan
everintermsofonlinepromotionanddistribution,therecordingindustrystillmaintainsastrong
holdonmuchoftherevenuegeneratedfromthepopularstreamingplatforms.Whiletheirrolein
thesuccessofmusiciansislesscriticalthanpreviousyears,recordlabelscontinuetodominate
thevastmajorityoftheprofitmadeinthemusicindustry.Basedoncurrenttrendsandtherising
popularityofdigitalstreaminginyoungergenerations,itisapparentthattheonlinebusiness
modelwillcontinuetogenerateprofitanddevelopalongsidetheInternetrelatedtechnologythat
perpetuatetheseInternetrelatedbusinessstrategiesinthemusicindustry.
Ifthepastseveraldecadesofadevelopingpresenceoftechnologyinthemusicindustry
isanyindicator,theresourcestherecordingindustryisabletooffermusiciansbecomesless
valuableastechnologicalmediumsprovidemoreoptionsforindependentmusicians,suchas
onlinedistributionandameanstotaketheircareerintotheirownhands.Withcontinuously
disruptivetechnologybecomingincorporatedinthemusicindustry,fansandindependent
musicianshavebeengivenanincreasinglylargeamountofresourcestogeneraterevenuewhile
thegripthatthelargerecordlabelsholdonpowerwithintheindustryweakens.Whilethe

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture
strugglebetweentherecordingindustryandindependentmusiciansrageson,onethingisclear:
thefutureofthemusicindustryisnowinthehandsoftheconsumersandtheeverexpanding
Internetculture.

TrebleintheMusicIndustry:AMajorReverberationofInternetCulture

10

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