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Essay: Record Labels in Music Industry: Will They Survive the Next 5 Years?

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  • Published: 1 April 2019*
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  • Words: 1,366 (approx)
  • Number of pages: 6 (approx)

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Introduction

Since the launch of Napster in May of 1999, the music industry was transformed and will continue to transform.

Prior to this time, it was easy for the industry and artists to keep control of their intellectual property. Song were made and distributed easily and a share of the sales was collected as royalties. Radio stations were monitored so that royalties were collected whenever a particular record was played on air.

But as technology evolved, a lot of legal questions have been raised as to how to enforce copyright law.

Napster allowed files sharing amongst its users, so any one that had a particular song in mp3 and wanted another song also in mp3. The person could easily get it from another user on Napster that had the song, rather than purchase it. People then realised that they didn’t really need to buy records when they could get it on Napster for free, and this caused the sales of records to plummet as a lot of people where no longer buying records.

   “What started off as a simple compressed audio file type has turned into an Internet phenomenon” (Grant, 2000)

As of today the success of Record labels in the music industry has been a topic of great discussion for the last few years, especially following the establishment of streaming services such as Spotify and Pandora.

A lot of music industry professionals have different views on whether or not record labels will survive the changes that have struck the business.

The current business model of most labels now is not centred on CD sales, rather it is focused around streaming revenue, advertising, branding and sponsorship and live performances.

In this essay I give my views on how successful I believe Record Labels will be in the next five years.

With significant evaluations, explanation and graphically illustrations all in relation to Artist Management, Branding, Sponsorships, Song Royalties, Streaming, Publishing. Digital Distribution, Live Events and Revenue.

The New Business Model

   With the decline of record sales, Record Labels had to invent new ways of generating money from the acts they had signed. And this brought to life the 360 degrees deal.

The 360 degrees deal also referred to as “Multiple Rights Deal”, with such a deal in place it meant that record labels could get a percentage of revenue that they didn’t use to get money from such as:

• Music Sales

• Video and Audio Streaming Revenue

• Live Events Revenue

• Film and TV Sync

• Branding and Sponsorship Deals

• Sampling Clearances

• Merchandise Sales

• Song Writing and Publishing Revenue

And this new sources of revenue have proven to be lucrative as music now plays a large part in the entertainment industry, with more demand of music for adverts, movies and businesses.

Music Sales

With digital music mediums such as itunes, spotify, amazon music etc  

Digital Music sales have progressively surpassed physical music sales. And with the new business model of 360 deals in place, labels are now generating a significant amount in revenue from digital record sales compared to physical record sales, which have decline significantly.

According to the IFPI global music report in April 2016:

Global music revenues increase 3.2% as digital revenues overtake physical for the first time

Digital sales contribute 45 per cent of industry revenues; overtake physical’s 39 per cent share

The Chart above shows the change of record sales between 2014 and 2015 for music sales in the U.S.

Labels are now selling records through digital mediums now and are still generating revenue.

In my opinion physical records such as Vinyl and CD, would see a further decline within the next five years as digital record sales and streaming will only continue to rise, and only a small amount of records would be available in physical forms. Because it would cost record labels too much resources to keep printing records that were not in demand in physical form.

Video and Audio Streaming Revenue

With some much illegal downloading of music and file sharing due to the iintroduction of napster.The Music industry’s music sales took a further dip when Pandora was launched in September of 2005,for a small fee of $10 per month a Pandora user could listene to uninterrupted streamed music.

This was worsened with the establishment of Soundcloud and Spotify in 2007 and 2008 respectively. And by 2010 streaming was new way of listening to music,users of thses mediums didnnt see the need of buys records when they could stream it whenever the wanted and pay less money.

The Tech Times believes :

“Music is the soundtrack of our lives. And with the explosion of music-streaming services over the last decade, we’ve got a big playlist to choose from.

Streaming services have taken over the music industry. There was some doubt in the wake of music piracy platforms like Napster, but users are now willing to pay subscription fees for access to libraries of music. “(Keating, 2015)

And with these streaming subcriptions in place, Record Labels negotiated that the Streaming services paid the artists per song streamed.

According to a 2015 infographic by Information is Beautiful;

Signed artists make .007 cents per stream on Tidal, .0011 cents per stream on Spotify, .0019 cents per stream on Pandora and Rhapsody, and a low .0003 per play on YouTube. That means a signed artist would need 1,117,021 plays on Spotify or only 180,000 plays on Tidal to make the monthly minimum wage in the U.S. of $1,260 (2013 federal baseline of $7.25 an hour)”

“While these rates seem low, these artists presumably have thousands, and in some cases millions, of fans – and that adds up. “ (Keating, 2015)

The Image above shows the comparison between digital music revenue between 2008 and 2014. Subscription streaming is increasing and in my opinion will overshadow permanent downloads within the next five years.

Streaming will increase in revenue, as most people will switch to streaming rather than downloading records. It requires less memory and it more convenient for the avid on the go listener.

Live Events Revenue  

What began in the 1950s with Rock and Roll concerts has grown into a spectacular experience; in the 1960s American promoter Bill Graham develops a format for pop music concerts. And from the 1960s to now, Live events and concerts have become better with louder sound systems, new visual technology and online ticket purchasing.

But as the Live Music sector got better over the years, the music sales plummeted.

Record Labels and artist currently make the most of their earnings from live events and touring.

“In a way, this chart tells the story of the music industry over the last three and a half decades on its own. Album revenue is plummeting while tours are steadily bringing more. However, those rising tour revenues don’t even come close to compensating for what’s been lost in album sales.” (Powell-Morse, 2015)

The chart above provides information on the live music industry revenue in the United States from 2011 to 2014 as well as a forecast for 2015 to 2020.

According to PwC, the revenue will grow from 9.3 billion U.S. dollars in 2015 to 11.69 billion in 2020.

Film and TV sync

With the expansion of terrestrial and satellite channels, there is a growing demand for music for TV and film-although satellite channels do not pay as well terrestrial. (Davis & Laing, 2006, p. 328)

Music creates emotions when in sync with a moving image or a film.

A lot of movie producers and TV producers now look out for and create loads of music for various movie scenes.

And this new income stream is known as film and TV sync, record labels now make profits from the film and tv industry.

Whenever a film producer or TV producer decide to use an artist’s song for a film,tv show or tv advert then they must make deals with a number of entities.

For example for every song going into a film, there are always deals to be made with a least three,and often up to eight, entities:

1. The performer (singer/instrumentalist)

2. The record company to whom the performer is singed

3. The record producer

4. The songwriter

5. The publisher to whom th songwriter is signed

6. The owner of a master recording that’s sampled in the song.

7. The publisher who owns the song that has been sampled

8. The record company putting out the soundtrack albums.

    

    (Passman, 2006)

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