The Music Industry. Patrik Wikström
Since these early days of the digital music economy, a brief phase has both come and gone when music listeners acquired, stored and listened to their favourite songs as MP3s on their local devices. Today, recorded music is primarily stored on the aforementioned server farms and only has a transient existence on the music listeners’ devices as songs are streamed from servers to clients for the music listeners’ enjoyment. Music is no longer something that mainstream audiences own or collect – music is in the Cloud.
The purpose of this book is to explore the transformation of the music industry that mainly has taken place during the first two decades of this millennium. Of course, it is not the first time the music industry has been transformed by changes in the media environment. Changes in broadcast radio programming during the 1950s, the compact cassette during the 1970s and the deregulation of media ownership during the 1990s all had a tremendous impact on the structure and logic of the industry. However, the transformation that took place during the first decades of the twenty-first century is even more dramatic than the previous ones. Certainly, as I will stress in this book, there are many aspects of the twentieth-century music industry that remain unchanged today, regardless of whether the music is on the Disc or in the Cloud. The disruption has, however, been of such magnitude that it has been relevant to talk about a ‘new’ music industry dynamic or a ‘new music economy’ (D’Arcangelo 2007; Denis 2008; Goodman 2008). ‘Newness’ is by definition a transitory quality, so while we wait for the ‘new music economy’ to become just the ‘music economy’, it is relevant to explore its basic characteristics. Three tensions or dimensions are fundamental in order to understand the new music economy. I choose to refer to these as ‘connectivity vs. control’, ‘service vs. product’ and ‘amateur vs. professional’.
Connectivity vs. control
The twentieth-century music economy was essentially about control – a music firm’s top priority was to maximize the revenues from each individual piece of intellectual property and to minimize unauthorized use. In the new music economy, it is more or less impossible to regulate the flow of information and police how fans use intellectual property. I borrow a term from network theory – connectivity – to explain the new situation. Connectivity is a measure of how well the members of a network are connected. A network is considered to have a high level of connectivity if most of its members are connected to each other, and vice versa. In Figure 0.2, the network to the left has lower connectivity than the network to the right. In a network with high connectivity, information, money, fads, norms, etc. easily flow between the members (see, e.g., Watts 2003).
In the twentieth-century music economy, the network constituted by music companies and audiences had a relatively low level of connectivity. Basically, there were strong connections running between the music firms and the audience, but only weak connections between individual members of the audience (illustrated by the left network in Figure 0.2). Consequently, the music firms could control the flow of music with relative ease, since there was nothing to link the different elements that made up the audience.
In the new music economy, the importance of physical music distribution and mass media has been radically reduced, while the importance of Internet media has exploded. These network-based communication technologies have an entirely different structure from the previous hierarchical media. The technologies lower the barriers, which had previously restricted the capability to distribute information to the network, i.e. the capability to upload information to the Cloud. Now, the capability to upload is theoretically accessible to everyone connected to the network. As a consequence, the connectivity of the ‘audience–music firm’ network has increased, which in turn has resulted in the music firms losing their ability to regulate – to control – the flow of information. In a nutshell, the new music industry dynamics is characterized by high connectivity and little control.
Figure 0.2 Increased connectivity causes the music firms to lose their ability to control the flow of information
It is important to note that ‘control’ in this context is to be understood as the music firms’ ability to limit, direct or constrain the flow of information. ‘Loss of control’ should not be understood as losing the ability to monitor, observe or detect the flow of information. Rather, digital information and communication technologies have increased music firms’ ability to monitor and follow fans’ online behaviour, how they use information and communicate with each other.
Service vs. product
In the twentieth-century music economy, the content (music) and the medium (disc) were inseparable, and the music industry clearly was an industry made up of physical goods. In the new music economy, characterized by high connectivity and little control, it becomes increasingly difficult to charge a premium for discrete chunks of information. As soon as some kind of information is uploaded to the Cloud, it is instantly universally accessible to everyone connected to the Cloud. In such a ‘friction-free network’,3 the economic value of providing basic access to an individual track is infinitesimally close to zero.
But there are other things that remain chargeable. In a world where information is abundant, people may not be willing to pay a premium for basic access to that information, but they are most probably willing to pay for services which help them navigate through the vast amounts of information. If music is thought of as a service, it is possible to fathom consumer propositions that are both valuable to the audience and respectful to the work of the creative artists.
Amateur vs. professional
The role of the creative artist is the most respected and admired in the music industrial ecosystem. Lady Gaga, Adele, Ed Sheeran, Beyoncé Knowles, Kendrick Lamar: all are powerful brands that appeal to millions of fans all over the world. I praise these extraordinarily talented individuals and recognize their work as the music industry’s centre of gravity. However, in the new music economy, the relationship between these brands, their art and the audience has changed. The increased connectivity of the audience network combined with various kinds of music production tools enable ‘non-professionals’ to create, remix and publish content online. This does not necessarily imply that, in the new music economy, every music listener is also an amateur musician, but nevertheless a considerable share of the audience does create and upload content to the Cloud. Research on user behaviours in other cultural sectors shows for instance that approximately five per cent of all fan fiction users create and upload content, 12 per cent comment on that content and 24 per cent actively read the content and the comments (Olin-Scheller and Wikström 2009). Studies of users of online discussion boards confirm these findings and show similar ratios between different types of user behaviours (Horowitz 2006). It is not entirely unrealistic to assume that those fans who engage with their idols; and create, remix and upload content are also the most dedicated and loyal. It is also quite likely that they are the ones who spend the most on concerts, merchandise, etc. Based on those two assumptions, it makes sense for music firms to secure a good relationship with this section of the audience, encourage their creative desires and do their best not to push them away.
To sum up: the new music industry dynamics is characterized by high connectivity and little control; music provided as a service; and increased amateur creativity. The driver of all these changes is primarily the development of digital information and communication technologies. The music industry started its journey into the ‘digital age’ a long time ago, during the 1970s, when digital technologies were introduced in the areas of music production and recording. During the 1980s, primarily due to the introduction of the compact disc, the use of these technologies expanded to music distribution. Lastly, during the late 1990s and into the 2000s and 2010s, Internet technologies became the most important drivers of change, and ultimately brought every remaining part of the music business, including promotion and talent development,