The Evolution of the Music Industry

Music Industry



Written by Kerry Monaghan

The music industry has always been an evolving machine. A constant cog that changes how music is heard transitioning through different types of media, new inventions and other advances that force it to adapt and change long established business models.

The music industry has always been an evolving machine. A constant cog that changes how music is heard transitioning through different types of media, new inventions and other advances that force it to adapt and change long established business models.

By the end of 2018, Global recorded music revenue had grown by 9.7% with streaming services making up half of revenue, driven by paid streaming services by 32%. Overall, that had seen a 34% growth in streaming services globally and a 46% increase of streaming share global revenue. In New Zealand alone, recorded music streaming makes up 70% whereas in New Zealand recently we have struggled from the adaptation of physical products, CD’s, DVD’s & Vinyl to digital downloads. Then, downloads changed to streaming due to how fast the media evolved. We had all of this change happening together. Combine that chaos with digital piracy that was occurring in the early 2000’s there were big challenges for the music industry and questions pertaining to the evolution of the industry that needed answers, as the streaming sites hadn’t yet reached our shores.

However, even in 2019 with streaming services as the number one choice for music consumption, offering great convenience for fans, what about the artists themselves?

With music award shows like The Grammys and the New Zealand Vodafone Music awards that feature stars like Lady Gaga, Bruno Mars, Six60 and Marlon Williams, respectively, what should be “Music’s biggest night” globally and for New Zealand only serves to remind viewers just how difficult it is for less popular artists to make a living in our digital age.

At a time when the New Zealand music industry as a whole is going strong with Recorded Music Revenue reaching US$98.8 million in 2017, up 15% from the previous year, to over US$100 million revenue total for 2018, built on the back of revenue from streaming music providers like Spotify, the reality is most Kiwi musicians will still never be able to give up their day job. While the biggest popular streaming platforms like Apple Music has the biggest pay out per stream for artists, even then, at 1.2million streams will only earn the artist around US$13,500. Then there is other big players like Amazon Prime Music and Spotify who hold the torch of the most popular music streaming platforms and are so big, they pay around half of Apple Music’s fees, however musicians still aren’t getting a fair deal from them either with Spotify paying (pre-tax) US$0.006 to $0.0084 per stream to the holder of music rights, and as the ‘holder’ well, that can be split between numerous parties such as the record label, producers, songwriters and then the artists themselves. So, in short, streaming is all about the volume game in order to earn any real monetary value for musicians.

Although there seems to be a major disconnect in this streaming economic model there is a glimmer of hope that may help kickstart a change of perception. Recently, Spotify’s Head of Advertising, Brian Benedik has announced he will step down in September after six years with the streaming service. The executive joined the company as Vice President of the North American sales in 2013 and promoted to Global Head of Advertising in 2015. The announcement came days after Spotify issued letters demanding royalty refunds from artists after mistakenly overpaying, further exacerbating already frayed relationships with record labels.

In New Zealand, one of our biggest bands, Six60 has always gone against the grain of our music industry and as a result, learned to conduct their business their own way. Starting out as a covers band in Dunedin, 2008, they learned how to connect with their audiences through playing parties and 21sts. While finishing up at University, they decided to record an EP as a memento and booked some recording studio time, resolving to write some originals in that period. Lacking any formal connection to the music industry, they walked into their local branch of The Rock Shop and asked a guy behind the counter if they knew of any producers to which the same guy behind the counter ended up producing their self -titled debut EP. On the back of their first EP, they sought professional management and gained support from Music Promotor and then Chief Executive of the Recording Industry Association of New Zealand, Campbell Smith, and as a result secured a production and distribution deal on an album by album basis with major label, Universal, with the band retaining rights to its music through their own record label, Massive Entertainment formed that same year. Six60 has proved that to monetize your music as an artist, there are ways of thinking outside the box. Consider that Six60’s top ten songs on Spotify have accumulated a whopping 102,209,158 of streams (at the time of writing) they have cut out the middle man doing things their way and are now selling out stadiums, including becoming the first band to headline a sold out show at Western Springs in February 2019.

However, Six60 like some other unique artists are rare exceptions and cutting out the middle man is no guarantee that artists can easily monetise their music in the same way. Other factors contribute largely to this kind of model including touring revenue. So far in the first half of 2019, the highest grossing touring artist is Elton John, currently on his Farewell tour and is generating US$82.6 million in revenue across the fifty-six shows. Those figures are followed by other big touring names, with P!nk at No.2 at US$81.2 million, Justin Timberlake at No.3, US$75.5 million, Metallica, No.4 at US$69.7 million and Fleetwood Mac, No.5 at US$67.7 million.

So while an artist creates the product, providing the content for platforms like Spotify and Youtube, who then provide distribution, everyone else wins, except the artist which is a sad reality, however, there can still be real money made for the artist in live music ticket sales. This highlights an interesting idea that the music industry has evolved quite a bit in the last one hundred years. Before then music was a service, as there was no way to record and therefore no recorded product. You only lived well as a musician if you were good enough to be sought after to play live shows as popularity spread by word of mouth. Music was then turned into a product when recording finally came along, and we were all consumers that had the power to recreate that live music feeling at home, in our living rooms with our home stereo.

That idea that it is changing back as we can all receive that live experience straight from the recording artist using whatever platform you wish and streamed down to the mini-computer in your back pocket and played through the latest Bluetooth connected speakers or headphones. All free for the most part or only US$9.99 per month (for Spotify Premium) or NZ$14.99. So, for the artist stuck at the receiving end of this new model, they might have to reinvest in the idea that music is back to being a service first and foremost and a product second, and to truly bring in the big bucks you better be good enough to hold the audience in the palm of your hand.