How The Music Industry Is Putting Itself Out Of Business

This is an interesting article that i wanted to share following the recent music industry post from me.

There was once a time when mid-level bands with a modest following could make a pretty decent living playing music. They’d put out a record, sell a couple hundred thousand copies and then go on tour to promote it – which would drive additional sales, even as the tour itself was lucky to break even.

For the largest acts, this formula was a bona fide moneymaking bonanza, lining the pockets of all involved, including the musicians, managers, promoters and record labels. For everyone else, it didn’t produce vast riches but nonetheless supported careers and promoted the creation of new music.

Times, however, have changed. Besides a handful of superstars, it’s impossible for bands and musicians to generate significant revenue taking this approach. And the reason is simple: Consumers won’t pay much for music.

Napster jump-started this trend back in the 90s, pirating content and making it available online, producing a generation of listeners who didn't value music because they were able to download it for free. Then, streaming services basically continued the practice.

The likes of Pandora and Spotify don’t steal content, but they still offer it for free with the support of ads. Others such as Apple Music and Amazon Music obviously aren’t stealing either and do charge users, but it’s a nominal fee. Both models result in most artists getting the shaft, receiving, in most instances, less than a penny per stream.

Incidentally, from an investment perspective, the streaming services themselves aren’t faring much better. Pandora and Spotify have always struggled to turn a profit, while Apple Music and Amazon Music are money losers, in place as part of broader distribution play that merely supports other parts of their company’s other businesses.

The reason for these struggles is pretty simple. As music shifted from a product-based business (CDs and individual downloads) to a service-based business (streaming), no one was able to create a model to support that transition adequately. At roughly $10 a month these companies have been giving away music at a loss, and until that price point rises, perhaps as high as 100%, there’s no reason to expect any of them to achieve profitability.

A great irony of all this is that music has become devalued at a time when there are more ways than ever to promote it, thanks to social media platforms like Facebook, Twitter, Instagram and Snapchat.