Streaming Services: Killing the Industry or Making it Whole Again?

Before the days of music streaming services an independent artist, who has just finished producing a song would have a very difficult time distributing their music. This is where the role of a record label comes in. Record labels, which are inherently corporations,  sign artists and distribute their music amongst many different platforms including, “BigBox retailers, MP3 downloads at digital stores (iTunes) (Jacobson, 1, 2017). However, there is a “new wave” in the music industry, which indicates a large shift away from using these traditional large, capitalistic corporations to dictate music. This began with the emergence of music streaming services, such as Spotify, Soundcloud, and Apple Music. Music streaming services allow for artists themselves to reach the audience and their fans more directly. Music streaming is a “live” or “real time” version of the song being played, but not an actual download (“Admin”, 1, 2014). In the past, artists would seek getting “noticed” or picked up by big record labels (major and independent), and those labels would be the ones in charge of distributing their work. Record labels have a history of either underpaying clients or just simply neglecting them overall. These labels would own the rights to all their artists’ music, and would be the ones distributing CDs to stores and MP3s to online stores (like iTunes). In the past, music was purchased in the form of CD’s or mp3 downloads, but now there are streaming services like Spotify that acts as a universal jukebox for any fan of music to see all their favorite songs and artists. As internet connectivity speed and people’s access to the internet increases, then the number of fans of music using streaming as their source of music will also increase (“Admin”, 1, 2014). Spotify has begun new initiatives to allow artist to upload their work directly, as opposed to having a record label back an artist and distribute their music that way. As our world moves towards streaming services as the venue for acquiring music, in order for an artist to truly benefit, these services must act more like record labels cutting deals directly with artists and allow for musicians to receive proper income immediately for their work.

In the music industry, the record label as always been a source of revenue for artist, and a means of which to distribute their music, but in reality that is just a front for exploitation and manipulation. We live in a world based on capitalist tendencies, and with the rise of communism, we saw a whole mass of people rise up in response. The working class rose up in revolt due to the exploitation of the working class. The workers were making tons of products, working incredibly long hours, and being severely underpaid — and the larger business/entity that had capital already was profiting. Well, the music industry in America is not too different. Record labels sign artists, not solely based on the content of their art, but rather on who will sell. They are not interested in the well-being of the artist, nor do they want to help the artist succeed, but rather are trying to earn profits. The record label acts as the third-party, on behalf of the artist, distributing their recorded music physically (CDs, Vinyl), digitally (MP3 downloads, internet streams) (Jacobson, 4, 2017). Record labels are responsible for providing the music to platforms such as iTunes, Spotify, Pandora, Best Buy, and Target. The recording industry is more or less made up of three business conglomerates; Warner Music Group, Universal Music Group, and Sony Music Entertainment (Jacobson, 5, 2017). These larger enterprises oversee a variety of major recording labels such as Capitol Records and Interscope Records. There are also such things called “vanity” labels, which act as smaller distribution companies where a producer/artist signs additional artists or producers which all gets released to the public under the same name as the larger enterprise. Essentially, because the corporate businessmen don’t have the artistic talent (artist is the one who’s making the money), they will give the power to the artist and allow them to produce what they want, yet the company profits. In this sense, the record label is exploiting the artistic genius of the artist and while they are allowing them to produce original content, they are more focused on the income that it will generate. Any album that an artist produces has to become “technically” satisfactory as well as “commercially” satisfactory in order for the label to give the “OK,” and allow for the album to be released to the general public (Jacobson, 5, 2017). To be technically satisfactory is simple, when the master has been edited to be well-made and is utilized to manufacture CDs, records, MP3 downloads, etc. However, for an album/song to be “commercially” satisfactory, the record label or the larger corporation has to step in and conclude whether or not the piece of work is going to sell, going to make profits for the corporation (Jacobson, 6, 2017). On the one hand, this is ridiculous because the definition of “what will sell well” is extremely vague, and leaves the artists’ work up to interpretation of minds’ that aren’t well-suited for making judgements about how “good” art is. On the other, it should be crystal clear that this type of language that is used in contracts for the artists that sign to Major (or Independent) record companies allows for the artist to be taken advantage of and used for profit.

Record labels are also responsible for paying their clients justly. When an artist is making a new album, they will receive an advance in recording costs so that they can oblige to the higher powers, and produce an album that will make money. If there needs to be additional funds procured, then either the artist will have to take money out-of-pocket, or the label could pay the differences (which is recoupable by the record company) (Jacobson, 1, 2017). Most of the time, the advances that the record label provide are fully recoupable (Jacobson, 2, 2017). Meaning, the label will keep all the revenue from the album sales until the original amount of the advance is paid back in full. Then and only then will the artist make his/her “fair” share. However, failing to fully recoup the advance brings along its own stream of issues. If an artist fails to pay back the record company the money that they own them, the label will pay the minimum amount listed for their next album, regardless of how good their sales were (Jacobson, 1, 2017). So, if one album underperforms then that artist is punished by a reduction in future recording advances. However, a fault in sales isn’t necessarily the fault of the artist. The job of the artist is to produce original content that they believe their fans want to hear. In actuality, it is the record label who failed their job because the only reason why an artist would need a third-party distributor, distributing one’s work would be because they don’t have the resources (money and connections) to do it on their own. Artists, for many years, have relied on record labels, who behind their back, through confusing and open-ended language in contractual agreements, exploit the “workers” of the music industry. The artists therefore, having the musical talent and having not spent time extensively studying the business portion of the music industry, rely on the corporate stooges to “take care of them.” Of course, larger corporations are going to be less-interested in satisfying the artists they have signed under binding, legal contract, and more interested in making a quick buck – they are businessmen after all.

The issue of artists being underpaid by Record Labels is a story as old as time itself, but just recently artists have begun to feel a different sort of frustration with Record labels. To frame this correctly, one must look at the music industry from the business standpoint. In the eyes of Universal, Sony, and Warners, their main priority isn’t that all their artist all produce original, well-produced, quality content, but rather to hit the quarterly. Based off of basic principles of economics, in order for a business to thrive, it must utilize its total resources while weighing the costs and benefits in order to maximize profits. This is no mere fault of the Record Labels as they are only trying to maximize success in the market for music, but instead is the fault of the entire system. The music industry should be comprised of large private corporations that dictate their artists like chess pieces, but rather it should be given back to the artists themselves. Artists should be independent from record labels. However, the question then would arise of how would an up and coming artist distribute their music? The answer lies within the internet, but more specifically music streaming services.

Music streaming, has many practical benefits for all artists to enjoy. Streaming services like Spotify offer the user an interface that gives infinite options of songs and artists alike with a constant stream of new music. This obviously differs from the traditional iTunes account, where you buy each song individually, and don’t tend to nearly have the same unlimited options as a streaming service would. Making profits as a streaming service are difficult as the services tend to either be subscription-based or supported via advertisements. Streaming services makes all available music readily accessible which gives the consumer all the available options, and allows for them to make their own decisions on what music they want to listen to. There are many benefits that artists receive as well. Soundcloud, another top name music service, allows artists to upload music directly to the site with the simple click of the button, no 3rd party distributor necessary (Spotify doesn’t, yet). There is also a feature that spotify has called “artist radio,” which allows for the user to discover new artists (Arthur, 1, 2015). For indie artists, this tool could be extremely helpful in building a reputation and having people recognize your work, as streaming services help increase fanbases (“Admin”, 1, 2014). Perhaps the most famous independent artist, who is keen on being “anti-record label,” Chance the Rapper, can attribute most of his success to the emergence and popularity of streaming services.

Chance the Rapper, now one of the most famous artists of his time, has risen to the height of fame unimaginable by most, independently. Chance is a case study for independent artists aspiring for success, and using music streaming as a means to do so (Silvey, 2017). Chance the Rapper’s first appearance in the world of rap was with his mixtape 10 Day, which was published on the mixtape-sharing platform Datpiff (Silvey, 2017). Chance became fairly popular after this mixtape, and was faced with the option to take a record deal or continue to work independently. Ultimately, Chance made the decision to have his music easily available to his fans for free. To this day, he still releases his music online for all to enjoy. His latest album, Coloring Book, featured a song titled “Mixtape,” where Chance explores this paradigm of record label versus MC, “How can they call themselves bosses/When they got so many bosses?” (Hogan, 2016) Here, Chance is mocking the fact that so many rappers pride themselves on being someone who doesn’t get bossed around, yet when that person is paying you checks for millions it’s different. Then, you will do whatever it is they tell you to do. Chance makes the majority of his money touring, where he usually is selling out venues. He chose to take the independent route because he felt that even if it took time, he could reach his full potential. In response to Carly Chery of Apple Music claiming that his own independent success is “misleading,” he says via twitter “it’s only unrealistic because of the conditioning all artists are exposed to by different forms of media creating the narrative that you need to be discovered or put on in order to be successful. We wouldn’t seek out deals if [we] knew there we other avenues.” With new and improving features to streaming services, such as Spotify, there could be hope for future independent artists to have access to these types of avenues.

Spotify is beginning an initiative that will begin to cut out the need for record labels. Beginning in late September of 2018, Spotify has implemented a new initiative for several hundred independent artists to bypass 3rd party distributors (otherwise known as evil record companies) and upload directly (much more like soundcloud, but you must have an invitation so not as free-will). The new “self-upload” platform was designed with the help of other current indie artists for indie artists. This new system will give artists the benefit of not having to go through major record companies, and any money earned will go straight into their bank accounts. However, when it comes to getting paid from streams, the artist tend to lose money. Essentially, for any song that an artist will produce, Spotify will pay anywhere from .006 to .0084 cents per stream (Sehgal, 2018). So, for example, an artist that releases a song on Spotify, for every million hits it has, the artist will receive around $7,000 (depending on the exact stream cost). Taylor Swift, perhaps one of the most recognizable names in Pop music, earned $290,000 to $380,000 (46.3 million streams) for her song “Shake it Off,” resulting in her decision to remove her work from streaming services all together, so she could maximize her earnings (Sehgal, 2018). Also, this money almost never goes to the artist first – it is distributed amongst the music rights’ holder which often tends to be these big record labels. Record labels can take up to as much as 70% of all money royalties earned from an artists streaming success (Sehgal, 2018). However, this has nothing to do with the record labels because they do not control what gets distributed on these streaming services. Per this new platform, Spotify would own a small portion of the intellectual property, but would not have to pay the third-party labels – which could allow for streaming services to pay artists cash advances, so they could make a more immediate income (and then pay back the advance when the royalties from the records start flowing in). As music streaming services gain more and more popularity, and begin to push even the major record labels out of the music industry, it is clear that these services are gaining market power in the music industry and should use this power to aid the artists.

Spotify has always been relevant as a supplier of music for the fans, but has recently made major steps to becoming a dominant power in the music industry. The new initiative to allow independent artists to upload and receive royalties instantly for their music directly completely revolutionizes the music industry, and how artists can succeed. Circling back to Chance the Rapper’s plea “we wouldn’t search for record deals if there were other avenues,” well it appears that there are avenues for independent artists opening up. The ultimate dilemma is that Spotify needs content, and artists want proper distribution. The age of iTunes and record stores is over, and is paving way to the streaming services that release music freely. Daniel Ek, Spotify’s CEO was quoted saying that “we are not acting like a record label,” while they are taking over the “distributing responsibilities” a label would have, here Ek is referring to the fact that labels try to control their clients, something Spotify will not do. Spotify holds the power of the music industry in its hands, and it is time for them to surrender some of that market power to the likes of artists.  



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s