During the process of the Spotify case study, the class examined the rising trend of global music artists resisting the platform, alongside the prevailing sentiment that Spotify offers insufficient compensation to music creators. According to Business Insider, artists on Spotify earn between $0.003 and $0.005 per stream, which translates to needing 2 million streams to generate a mere $10,000. This data, at first glance, appears to substantiate the criticism directed at Spotify.
However, I question whether Spotify should be held primarily accountable for the increasing challenges musicians face in monetizing their work. When Spotify appeared, the substitution of pirated copies in the consumer market and the supply surge in the legitimate market have brought tremendous changes the music market. It is possible that the changes happened in the macro environment have already brought inevitable disruption in music industry.
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Accessibility and Devaluation of Music
One of the primary reasons musicians earn less today is that music is more accessible than ever before, and this accessibility has led to a devaluation of the product itself. The emergence and widespread availability of pirated music platforms, such as The Pirate Bay, fundamentally shifted how consumers accessed music. With piracy, music became virtually free for anyone with internet access, pressuring the entire industry to lower its prices. Even legitimate streaming services like Spotify offer millions of tracks at an affordable monthly subscription, making individual tracks or albums far less valuable. The consumer’s willingness to pay for music has decreased, pushing down overall industry earnings despite increased access.
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Over-supply of musical works
The barrier to entry in the music industry has been lowered significantly due to advances in technology. Musicians can now create, produce, and distribute their music with relative ease, using tools like digital audio workstations (DAWs) and platforms such as SoundCloud and Bandcamp.
In 1970, the global music catalog was estimated to comprise approximately 2 million songs. Over the subsequent 30 years, the number of tracks increased by a factor of 2.5, resulting in around 5 million officially released songs by the year 2000. However, it was in the following 20 years that the catalog experienced explosive growth, with the total number of songs skyrocketing eightfold to reach an astonishing 40 million by 2020.
While this democratization of music creation is positive in some respects, it has led to market oversaturation. The saturation of music available in the digital age has led to a significant decline in the perceived value of individual tracks and artists. This phenomenon is exacerbated by the increased interchangeability of songs, as consumers can easily access a vast library of alternatives at their fingertips. This commodification has made it more challenging for musicians to command higher prices for their work.
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Redistribution of the Industry’s Value Chain
The music industry has become more commercialized and monetized at every stage—from production to distribution to marketing. Previously, many stages, such as distribution through physical stores or marketing through word-of-mouth, were relatively inexpensive. Now, digital distribution platforms, marketing campaigns, and streaming services all take significant portions of revenue.
BTS exemplifies the economic dynamics of the modern music industry, particularly the disparity between artist income and total revenue. Despite the group’s global success, BTS members’ earnings represent only a fraction of their total generated revenue. HYBE, BTS’s management company, earned over $1.37 billion in 2022, with a significant portion from album sales and concert revenues. However, the group members, while well-compensated, earned around ₩21.0 billion KRW each for renewing their contracts in 2023. To make the math clear, that was $15.8 million USD per member, and it was only about 1% of what the company is making in 2022. This figure underscores the significant role HYBE plays in BTS’s financial success, given its investment in the members’ extensive training, marketing, and production. For instance, BTS members like RM and J-Hope trained for approximately six years before their debut.
This example reflects how modern musicians receive a smaller share of industry profits as the value chain includes more stakeholders, such as streaming platforms and production companies, even though the industry continues to grow.
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Competition with Other Forms of Entertainment
Music is no longer the dominant form of entertainment it once was. In the 1950s and 1960s, music held a larger share of the entertainment industry, with a high cultural impact. However, in today’s media landscape, music must compete with a variety of entertainment formats, including social media, streaming video, and short-form content like TikTok.
In 2000, the global entertainment industry was estimated to generate revenue of approximately $1.2 trillion, with the music industry specifically accounting for around $30 billion, representing a share of approximately 2.5%. However, by 2023, the global entertainment industry experienced significant growth, reaching a valuation of $2.8 trillion. In contrast, the music industry generated $28.6 billion, resulting in a decline in its share to roughly 1%. This stark decrease underscores the diminishing proportion of the music industry’s revenue within the broader entertainment landscape.
Short-form content provides a large amount of entertainment value for free, reducing the relative appeal and value of music. Consumers can spend hours on platforms like YouTube or TikTok, consuming free content that directly competes for the time and attention that might have been previously devoted to music.
Conclusion
In conclusion, the financial challenges faced by musicians today can be traced to several interconnected factors: the increased accessibility of music, the simplification of music production and distribution, the redistribution of value within the music industry’s supply chain, and the intensified competition from other entertainment sectors. In light of these factors, while Spotify’s market pricing may not be entirely equitable, it nonetheless aligns more closely with contemporary market demands and conditions than traditional music industry business models and pricing strategies.
To address these issues, we must delve deeper into how to establish a more equitable value distribution system. Given the growing prevalence of intermediaries and the rising proportion of revenue shared among them, it may be worthwhile to explore the potential of technologies such as blockchain to eliminate intermediaries, thereby enabling music creators to receive compensation in a more direct manner. Such innovations could pave the way for a more sustainable and fair economic framework for artists in the evolving music landscape.
References
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