Technology Evolves Faster Than Business Models: Part 1 of the Music Streaming Debate

June 29, 2016

In the music industry, there’s not a more contentious issue than the fairness or viability of music streaming as the economic driver for musicians. One side of the debate says that streaming has driven down the potential revenue for artists by putting a higher value on technologists and technology investors than on composers and performers; undercutting the creators of the art and usurping control and profit. The other side of the debate says that the way people engage with recorded music has changed because of shifts in technology and social patterns and that the streaming model is a fair and scalable reaction to get the music industry back into a healthy financial state. In this series, I explore the amorphous ground beneath the debate in an attempt to help us find more clarity in the possibilities moving forward. 

 

While we frequently perceive that physical recording sales are over, we are still part of a glacial shift within the music industry. Physical sales still account for 29% of overall music recording revenue in the U.S. That number has been declining year after year, but for some sectors, it’s been holding on more than you might suspect. New revenue streams like the resurgence of vinyl, ringtones (remember those?), a boom in synchronization licenses, VIP bundles, crowdfunded pre-orders, and other direct-to-fan trends have distracted us along the slow downward path of physical sales. Regardless, there is no doubt that the balance from physical to some form of digital consumption is irreversible. 

 

 

 

It started with peer-to-peer download systems that did not account for payment to rights holders. Overnight a leading edge of music fans with tech savvy began downloading hard drives full of music whose creators did not get compensated for the use of their music. A lot of this music wasn’t even played by an individual user more than a few times. They had far more music to play than they had attention. But over time this group of fans grew and, for many former-paying customers, unpaid downloads replaced the need to buy recordings. 

 

Even many of those who never got involved in unpaid, peer-to-peer downloads felt a shift in their minds that buying music was “a waste of money.” “Why should I pay for music when everyone else is downloading it for free?” Or: “Why should I buy music that I might not be able to play the next time the format shifts?” Not that they planned to re-sell their recordings; not that they wanted to cross the ethical threshold of enjoying music for which they had not paid, for which an artist was not compensated. But would compact discs last? Would they still be able to play CDs in a few years? Would all the music in which they invested so much of their identity and money be useless? 

 

The technology shifted before the recorded music business model did. 

 

Music consumers felt this technological shift happen and they lost clarity on what was right and what was possible. Some fans did a grab for cheap used CDs. Others moved their music money over to live music. And so forth.  

 

Continued in Part 2: New Technology Players Emerged and Kept a Greater Share

 

 

Dmitri Vietze is the founder and CEO of rock paper scissors, a music and tech public relations firm.

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The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. The podcast includes news roundups, interviews, and more. Our host is Dmitri Vietze, CEO of PR firm rock paper scissors.

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