Press Clipping
02/25/2016
Article
The Music Industry Has 99 Problems. And They Are…

Recording Devaluation Problems.

1. The value of the music recording is plunging, and has been for more than a decade. Across the board, artists are experiencing serious problems monetizing their audio releases.

2. A decade-long decline in recording revenues has dismantled the label system, once the most reliable form of artist financing. That includes both independent and major labels, once the core of the music industry ecosystem.

3. That introduces fan-funding platforms like Kickstarter, Pledgemusic, and Patreon, all of whom have admirably filled some of that lost financing but haven’t come close to matching the overall funding source. Moreover, crowdfunding success stories like Amanda Palmer are sometimes viewed as anomalies, especially given the initial investment in her career by a major label.

4. Streaming continues to explode, but not enough to compensate for broader declines in physical CDs and paid downloads. The overall result is a music industry revenue decline.

5. Even worse, the technological evolution of formats keeps pushing the value of the recording downward. With every subsequent format, monetization deteriorates: streaming pays less than downloads; downloads paid less than CDs.

6. There is little evidence to suggest that this downfall is being made up by touring, merchandising, or other non-recording activities like ‘experiences’ (see below). In fact, many argue that artists are being forced into unsustainably long tours, or touring virtually non-stop just to survive.

7. Other attempts to make up the lost revenue have fallen short. BandPage, a pioneer in trying to monetize artist ‘experiences’ to help make up for lost recording revenues, was unable to scale that alternate revenue source substantially enough. After many years and considerable investment, BandPage was sold at a heavy loss to YouTube.

8. That introduces a number of problems, including artist burnout and an increased risk of accidents while on the road. According to NYU songwriting professor Mike Errico, the artist injury list is soaring, with Dave Grohl, Sam Smith, Miranda Lambert, Steve Aoki, Little Big Town, Meghan Trainor, Nickelback, the Black Keys and Kelly Clarkson all suffering physical, tour-related setbacks.

9. Streaming is rapidly becoming the dominant form of music consumption, though it is now widely viewed as a cashless loss-leader for artists and songwriters.

10. A big part of the problem is that most consumers now attribute very little value to the recording itself, and most consumption (through YouTube, ad-supported piracy, or BitTorrent) happens at little-to-zero cost to the listener.

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11. On top of all that, the largest streaming platform in the world, Google-owned YouTube, doesn’t think that music devaluation is even possible. “It’s amazing how often people invoke that word ‘devalue’ as if it means something,” Google executive Tim Quirk said in 2014. “It doesn’t. You know why? Because you can’t devalue music. It’s impossible. Songs are not worth exactly 99 cents and albums are not worth precisely $9.99.”

12. Even worse, some major label artists are receiving nothing at all from streaming, even with extremely high play counts. That is the case for Lady Gaga, whose manager Troy Carter says Universal Music Group paid the singer nothing despite millions and millions of streams on platforms like Spotify.

13. Worsening the situation is a circular ‘blame game’ between streaming giants and labels, with artists ultimately shorted. Spotify says they pay the labels, though this is often with huge, multi-million dollar advances and/or equity positions attached. But labels frequently don’t pay their artists, either for legitimate (ie, the artist is unrecouped) or illegitimate (ie, they’re screwing an artist) reasons.

14. A massive, decades-long shift towards free (or near-free) music means that entire generations of listeners have never paid anything for recordings. And, predictably, will continue to resist any requirements to pay for music.

15. Strategies to recover recording revenues at labels often backfire. A once-promising shift towards 360-degree models never quite generated enough money for the major labels, even though these labels generally insist on broader rights deals with all new artists.

Album Problems.

16. The album collapse has caused a massive revenue drop for both labels and artists. The reason is that fans, if they’re even purchasing anything, are no longer ‘buying the bundle,’ or collection of songs. That’s great for cherry-picking consumers, but often leaves artists unable to recoup their costs or make a decent living.

17. Perhaps more importantly, that bundled product has not been replaced, despite endless attempts to package other items together. Post-album, artists and labels have failed to establish a lucrative, reliable bundle to monetize their recordings.

18. Even success stories like Adele, whose ’25’ is now approaching 10 million albums sold, are viewed as being potentially damaging to artists and the broader industry. The reason is that Adele’s ‘unicorn’ success could cause smaller artists and independent labels to strategize around a format that is largely dying.

19. The homemade, CD-burned album, once a huge revenue-generator for smaller touring artists at merch tables, has now dropped to zero. That has put more pressure on artists to sell other merchandise like t-shirts, while decreasing available cash for touring essentials like gas and food.

20. Many music enthusiasts have argued that the decline of the album has decreased music appreciation and focus. Gone are the days of dedicated listening, fabulous album artwork, and defined ‘opuses’ that defined a previous musical generation.

Certification and Award Problems.

21. The music industry is currently battling over how to count sales. In a recent episode, the Recording Industry Association of America (RIAA) certified Rihanna’s ‘Anti’ as Platinum after its first week, signifying one million album sales. Yet Billboard and its data-tracking partner, Nielsen, only counted 460 copies during the same period.

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22. Separately, a strikingly large number of important artists have never been awarded a Grammy, including Snoop Dogg, Bob Marley, Guns n’ Roses, KISS, and Morrissey. And those are just a few of the artists never handed an award.

Vinyl Problems.

23. Vinyl LP sales are surging year-over-year, but still represent a tiny fraction of recordings purchased.

24. The production infrastructure around vinyl continues to ramp up slowly, and producing vinyl can be incredibly difficult and time-consuming for artists and labels.

25. Most pressing facilities are using decades-old equipment, though investors are fearful of investing in vinyl machines and infrastructure because it might be a fad. All of that is stunting vinyl’s growth.

Streaming Problems.

26. The leading streaming music companies — YouTube/Google, Spotify, SoundCloud, Apple and others — have been routinely accused of treating artists poorly through duplicitous contract structures, low payments, or complete non-payments.

27. That has created a low-trust environment, and confused fans over who to support. Just last summer, Taylor Swift battled Apple in a very public manner over royalty concerns; Apple eventually conceded, though streaming platforms are often painted as anti-artist.

28. Compounding the problem is that streaming services like Spotify offer very little reliable guidance on their payout structures. Artists have very little idea of (a) what they’re being paid, and (b) what they should be getting paid.

29. Against that confusion, companies like Spotify have been accused of deliberately creating complicated payout structures to hopelessly confuse artists and rights owners.

30. Even worse, Spotify is suspected of completely fabricating and/or over-stating its per-stream payout structure, based on discrepancies with extremely low rates published by actual artists (usually on Digital Music News, here, here, and here.) This issue has not been roundly addressed by Spotify, which has created an even lower-trust environment with many artists and independent labels.

31. Indies and smaller artists also complain that their rates are lower than bigger, major labels. Some have pointed to different tiers of compensation, though few have a concrete idea on exactly how payouts are structured (see above).
32. Companies like Spotify have pointed to royalty increases with scale and greater user levels, though critics like David Lowery have pointed to persistent declines in streaming royalty rates.

33. Meanwhile, services like Spotify have refused to abandon their ad-supported tiers, despite strong progress by premium-only services like Apple Music and Tidal. That makes it harder to elevate streaming royalty rates.

34. YouTube, the largest online platform for consuming music, is notorious for low-paying, ad-based royalties, with little signs of improvement.

35. Compounding the situation are ad-blockers, a major threat to YouTube’s ad-supported revenue stream. Similar add-ons exist for services like Spotify.
36. That is one motivation for YouTube Red, a premium video offering, but currently, the service doesn’t offer any music videos.

37. Streaming is surging, but its royalty payouts are low and cannibalistic towards other, more lucrative formats. Which is why artists like Adele and Taylor Swift have opted not to license Spotify. And, why Taylor Swift’s label, Big Machine Records, has indicated that no future, frontline releases will be licensed to Spotify.

38. Many artists feel that the priorities of streaming services like Spotify skew towards acquisitions, IPOs, and other liquidation events, not towards the interests of content holders and artists. Heightening those concerns are the involvement of investors like Goldman Sachs, a major Spotify stakeholder.

39. Even worse, the interests of the major labels are very similar, which explains the massive percentage shares awarded to major labels by streaming services. These percentages are awarded in exchange for content licensing (just recently, Universal Music Group received $404 million from the sale of Beats), but many artists have built-in contractual stipulations excluding them from receiving any proceeds from acquisitions, IPOs, or other liquidation events.

40. Even worse than than, major labels have been shown to pay nothing from these cash-out windfalls to their artists. Just recently, Warner Music Group changed course and offered to change that practice, though skeptics pointed to a lack of concrete plans.

DMCA Takedown Problems

41. The DMCA, once considered a reasonable method for flagging and removing infringing content while protecting online companies from liability, has now become an unmanageable and dysfunctional process for most content owners.

42. Google, the most influential company in the music industry, is actively resisting any efforts to reduce piracy across its key platforms, Search and YouTube. Despite millions upon millions of DMCA-ordered takedowns, often of the same content, Google has flatly refused to adopt ‘take down, stay down’ approaches.

43. Google may also be accelerating the problem. Searching for torrents and pirated material is not only easy, it’s frequently auto-completed for the user in Google’s searchbox. Or, worse, delivered in email as part of a Google Alert.

44. Others, like Comcast, have blatantly abused the DMCA to temporarily remove high-paying, infringing subscribers before reinstating them shortly thereafter.

45. Others, like SoundCloud, have built entire business on DMCA-based takedowns. SoundCloud, now one of the largest music websites in the world, has been subject to massive content takedowns by major labels.

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46. Even worse, bad actors like Grooveshark have directly abused the DMCA to build massively infringing platforms while collecting millions in ad revenue.

47. Meanwhile, the music industry expends massive resources issuing DMCA takedown requests, even for sites that have already published thousands of infringing links in the past.

48. That points to a desperately needed change in law, though efforts to advance ‘take down, stay down’ legislation remain slow and out-lobbied.

Piracy Problems.

49. Artists live under the constant threat of leaks, especially popular artists. Artists are typically forced to publish their songs immediately, even if they’d prefer to wait.

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50. Despite rhetoric to the contrary, multiple research reports show that BitTorrent piracy rates continue to increase.

51. Perhaps more troubling for the music industry is the rise of BitTorrent-based streaming platforms, including a recent entrance by the Pirate Bay.

52. If an artist restricts content in any fashion, piracy typically increases in response. That was a lesson just learned by Kanye West, whose decision to restrict his music to Tidal resulted in a BitTorrent surge.

53. Major labels are now locked in an endless game of ‘whack-a-mole,’ with smashed sites like Grooveshark continuously popping up in new places (for example, grooveshark.asia). Others, like the Pirate Bay, refuse to die, while replacements like Kickass Torrents quickly fill the void.

Music Format Problems.

54. Thanks to breakneck technological evolution, the music industry is now managing a portfolio of different formats that all reach different audiences and pay out differently. That has caused the industry to consider a shift towards format windowing, despite major issues with piracy (just ask Kanye).

55. Meanwhile, paid downloads are plunging, with massive declines expected this year. That is bad news for artists and labels, given that the payouts on downloads are far higher than streaming (thanks to an upfront payment and more predictable revenue cut).

Massive Media Overload Problems.

56. It’s harder than ever for a newer artist to get noticed.

57. The artist has greater and more direct access to fans than ever before in history. Unfortunately, so do millions of other artists, a situation that often causes fans to listen to less music.

58. Indeed, the typical music fan is flooded with music, not to mention videos, games, ebooks, and porn, all of which makes it extremely difficult to win and retain the attention of future fans. And, keep them around.

59. This also puts pressure on the artist to shorten the release cycle, and pump out content at a quick pace. Even at the expense of quality.

Facebook Problems.

60. The artist currently lacks a centralized hub online that is a default for music fans, thanks to the erosion of MySpace Music. Facebook was once viewed as a replacement for MySpace Music, but never materialized as such.

61. Even worse, Facebook charges artists to reach their own fans, a move it defends as necessary given massive increases in Timeline posts that are overwhelming users. That leaves artists with another difficult decision as to how to cut through all that noise, with frustration over why they’re having to pay at all.

62. Facebook has largely been abandoned by teens (and others), creating a partial fan-connection solution for artists. BandPage, a company that attempted to address this issue with a mass-site distribution platform, has been sold to YouTube.

Artist Survival Problems.

63. 99+% of all artists cannot make a living wage off of their music, based on stats gleaned from leading digital distributors.

64. In fact, former member of Cracker and current artist activist David Lowery feels that artists are worse off now than they were in the analog era. And, he points to lower payments, less control, a shift in revenue towards tech companies, and less secure copyright protections to prove his case.

65. Most artists are overwhelmed with tasks that go far beyond making music. That includes everything from Tweeting fans, updating Facebook pages, managing metadata, uploading content, interpreting data, managing Kickstarter campaigns, figuring out online sales strategies, and fixing broken-down vans.

66. The average musician is underemployed. According to a musician survey conducted by the Future of Music Coalition (FMC), just 42 percent of musicians are working full-time in music.

67. Musician salaries remain low. Also according to the same FMC survey, the average musician makes $34,455 a year from music-specific gigs, with overall incomes (music+non-music) averaging $55,561.

68. Musicians are increasingly playing free shows, in the hopes of getting paid work down the line. According to a recently released report from the UK-based Musicians’ Union, more than 60 percent of artists have played at least one free gig in the last year.

69. Musicians remain resistant to growing revenues available from cover gigs, like weddings, bar mitzvahs, and parties (though this is starting to change with services like GigSalad).

70. Many older artists are touring just to pay the bills, including medical bills. That includes Dick Dale, who remains on the road despite his advanced age to pay for treatment for rectal cancer, renal failure, and massive vertebrae damage.

Environmental Problems.

71. Vinyl, like other higher-paying physical formats, are bad for the environment. That also goes for other revenue-generators like t-shirts and merchandise.

72. Actually, so is digital: some environmentalists theorize that the digital transition may actually be more damaging to our Earth than physical. Part of the reason is that cloud-hosting requires massive server facilities while consuming massive amounts of energy and pumping out lots of waste.

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73. On top of that, digital formats only coexist alongside physical devices like iPads, iPhones, laptops, and sophisticated headphones, all of which are thrown away and replaced after a few years (or shorter).

Record Store Problems.

74. Traditional record stores have largely imploded, with holdouts like Amoeba now relics of an earlier era. A greater appetite for vinyl could reverse that, though it’s still too early to tell.

75. Record Store Day (RSD) has helped stem the decline among smaller record stores, though many complain that major labels are now flooding RSD stores with crappy products. Others regard RSD as a mere band-aid against the inevitable.

76. Either way, the biggest CD releases from the biggest stars always go to the biggest brick-n-mortar stores: Target, Best Buy, or Walmart. That helps the artist and the mega-retailer, but could be harming the industry.

77. The reasons is that these larger, ‘big box’ retailers are accelerating the downward spiral in CD sales, both by dramatically reducing shelf space and by pushing pricing aggressively downwards (often to $5 or less). This is happening even though older demographics are often still receptive to the format.

Executive ‘Brain Drain’ Problems.

78. Most people who work at major labels have very low job security. Which makes it difficult for them to develop longer-term careers, not to mention those of the artists they represent.

79. Established music companies often overpay their failing executives by a wild margin, despite massive and ongoing losses. That may have the effect of skewing the executive focus towards personal enrichment, while sending red flags to investors. Glaring examples of this include multi-million dollar salaries at Warner Music Group, Live Nation, Sony Music Entertainment, and the Recording Industry Association of America (RIAA), among others.

80. That makes it impossible to attract innovative superstars with competitive packages, especially with top-line revenues continuing to fall.

81. But even innovative executives like Rob Wells can find themselves forced out for advancing more forward-leaning approaches. That suggests an older boys’ club that refuses to accept fresh, younger approaches.

82. And even outside of pay, younger people are generally not interested in working at labels or in the traditional music industry anymore, which makes it even more difficult for more older companies to innovate.

83. One result is that very little innovation actually comes from inside the industry. Instead, it is now dictated by non-industry players like Google, Facebook, YouTube, and Apple.

Indie Label Problems.

84. Instead of enjoying some theoretical resurgence, indie labels are mostly getting squeezed by devalued and declining recordings, piracy, and far greater leverage from artists themselves.

85. Those problems are expected to magnify with ongoing download sales declines, a critical revenue source for indie labels.

Live Concert Problems.

86. A large percentage of live music fans are frustrated with high ticket prices at concerts, not to mention wildly overpriced, in-venue items like beer.

87. All of which means that fans now regard live concerts as a one-off, infrequent ‘event,’ instead of a regular outing. In fact, the average consumer goes to just 1.5 shows a year (per Live Nation Entertainment).

88. Older, arena-filling artists are starting to die.

89. Concert security has now become a major concern in the wake of the Bataclan attacks. That can increase the cost of putting on a show, especially for targeted, high-profile artists (like Bob Dylan).

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90. Despite rhetoric to the contrary, touring is actually extremely difficult and expensive for most artists. Even for more established artists like Imogen Heap, who stopped touring despite solid crowds, and Pomplamoose, who found the financials of touring to be extremely challenging.

91. And, the secondary ticketing market is often fed before the actual market, thanks to bots, aggressive scalpers, or the artists and ticketing providers themselves.

92. Fans frequently miss shows from their favorite artists, even when these artists roll into their hometowns (though this is being addressed by fresh players like Magnifi).

93. Meanwhile, service fees continue to outrage fans, even though artist guarantees and advances are often a culprit (then again, Stubhub recently found that ‘all in pricing’ led to fewer sales.)

Songwriter Problems

94. Songwriters are often paid pennies for successful tracks, even top-charting songs on major streaming and internet radio platforms. In the latest episode, it was revealed that Kevin Kadish, writer of the smash hit ‘All About That Bass’ by Megan Trainor, made just $5,679 for 178 million streams.

95. Lower royalties are killing an entire generation of writers: according to one report, Nashville has lost more than 80 percent of its songwriters since 2000.

96. Songwriters (and publishers) often have little negotiating power, thanks to government-mandated, compulsory royalty rates for platforms like internet radio, in-store performances, and covers.

97. Even worse for songwriters is that performing artists often force themselves onto the list of writers to increase their royalties, even if they didn’t write a note or lyric.

98. Meanwhile, the threat of accidental plagiarism is increasing, thanks to a hyper-connected creative world and the high likelihood of two writers composing something extremely similar.

Classical Music Problems.

99. Classical orchestras and ensembles continue to struggle, thanks to a continuing problem invigorating younger audiences. That has forced many smaller-market orchestras to downsize or discontinue, while applying plenty of pressure to bigger-city orchestras as well.