Nancy Baym, Personal Connections in the Digital Age,2nd edition
Jean Burgess and Joshua Green, YouTube, 2nd edition
Mercedes Bunz and Graham Meikle, The Internet of Things
Mark Deuze, Media Work
Andrew Dubber, Radio in the Digital Age
Quinn DuPont, Cryptocurrencies and Blockchains
Charles Ess, Digital Media Ethics, 2nd edition
Jordan Frith, Smartphones as Locative Media
Alexander Halavais, Search Engine Society, 2nd edition
Martin Hand, Ubiquitous Photography
Robert Hassan, The Information Society
Tim Jordan, Hacking
Graeme Kirkpatrick, Computer Games and the Social Imaginary
Leah A. Lievrouw, Alternative and Activist New Media
Rich Ling and Jonathan Donner, Mobile Communication
Donald Matheson and Stuart Allan, Digital War Reporting
Dhiraj Murthy, Twitter, 2nd edition
Zizi A. Papacharissi, A Private Sphere: Democracy in a Digital Age
Jill Walker Rettberg, Blogging, 2nd edition
Patrik Wikström, The Music Industry, 3rd edition
Third Edition
polity
Copyright © Patrik Wikström 2020
The right of Patrik Wikström to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First edition published in 2009 by Polity Press
Second edition published in 2013 by Polity Press
This third edition first published in 2020 by Polity Press
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ISBN-13: 978-1-5095-3016-8
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Library of Congress Cataloging-in-Publication Data
Names: Wikström, Patrik, author.
Title: The music industry : music in the cloud / Patrik Wikstrom.
Description: Third ebdition | Medford : Polity, 2019. | Series: Digital media and society series | Includes bibliographical references and index. | Summary: “Since the first edition was published in 2009, Patrik Wikström’s book has become a go-to text for students and scholars. This thoroughly updated third edition provides an international overview of the music industry and its future prospects in the world of global entertainment”-- Provided by publisher.
Identifiers: LCCN 2019023989 (print) | LCCN 2019023990 (ebook) | ISBN 9781509530137 (hardback) | ISBN 9781509530144 (paperback) | ISBN 9781509530168 (epub)
Subjects: LCSH: Music trade--Technological innovations. | Music trade--History--21st century. | Sound recording industry. | Music and the Internet. | Music--Social aspects.
Classification: LCC ML3790 .W52 2019 (print) | LCC ML3790 (ebook) | DDC 338.4/778--dc23
LC record available at https://lccn.loc.gov/2019023989
LC ebook record available at https://lccn.loc.gov/2019023990
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For Pia
I would like to thank all the informants whom I have interviewed over the years. Your thoughts are at the centre of this work and without your involvement the project would not have been conceivable. I would also like to send thanks to my students, colleagues in academia and friends in the industry for helping me shape this book by giving me inspiration, encouragement and criticism along the way.
One Sunday in early March 2008, the industrial rock megastar Trent Reznor, a.k.a. Nine Inch Nails, released his sixth studio project, Ghosts I–IV. The project consisted in total of 36 instrumental songs recorded during ten weeks in the autumn of 2007. Things were different this time though, primarily because even though Nine Inch Nails was a global brand and Trent Reznor had millions of devoted fans all over the world, he was at the time without a contract with a major record label after the relationship with Interscope Records had ended. Reznor reflected on the termination of the contract a decade later: ‘We weren’t selling enough records to warrant the giant advances that we’d been promised; these were contracts that didn’t see the cliff coming’ (Marchese 2017). The termination of the contract with Interscope was the beginning of a period when Reznor was able to experiment freely with how to engage and communicate with his fans. Reznor announced on the Nine Inch Nails website that ‘As of right now Nine Inch Nails is a totally free agent, free of any recording contract with any label.’ ‘I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate.’
For Ghosts I–IV, Reznor decided that the appropriate distribution channel would be the official Nine Inch Nails website ‘nin.com’. He also chose to release the songs under a licence that allowed fans to remix and redistribute the work in a multitude of different formats. On 13 March, Reznor launched the second phase of the project. First, multitrack versions of a number of songs from Ghosts were added to the remix section of ‘nin.com’ where fans could upload their own remixes, listen to and review the remixes from other fans, vote for their favourites, and so on. Second, Reznor launched an Internet-based ‘Film Festival’ on YouTube where he invited fans to create and upload their visual interpretations of the songs. The fans’ reception of the Ghosts project cannot be labelled as anything but exceptional. By the end of 2008 fans had uploaded more than 2,000 videos to the Film Festival, and an unknown but large number of user-generated remixes had been posted to ‘remix.nin.com’. Besides remixing and uploading the tracks from Ghosts I–IV, fans were also able to download nine of the original songs for free from the website. They were also offered four other product packages, ranging from a ‘$5 Download’ which included all 36 songs in various formats to a ‘$300 Ultra Deluxe Limited Edition Package’ which included downloads, CDs, DVDs and glossy booklets, all signed by Reznor himself. According to Reznor, during the first week after the launch 781,917 transactions generated $1,619,420 in sales revenue. In addition, the ‘$5 Download’ version was released on Amazon MP3 Downloads and remained as one of their top-selling albums, at least during March and April 2008.1 It is notable that this result was achieved while the album, in its entirety, obviously was also available via various illegal file-sharing networks and services.
Trent Reznor continued experimenting during the years that followed, both with his own projects and with others, but in September 2012, Reznor announced that his band How to Destroy Angels had signed with the Sony Music label, Columbia Records, to release a number of their upcoming albums (Reznor 2012). Reznor concluded in a Facebook post that ‘complete independent releasing has its great points but also comes with shortcomings’. When Nine Inch Nails’ eighth album ‘Hesitation Marks’ was released by Columbia Records in 2013, it marked the formal conclusion of Trent Reznor’s experiments with independent distribution and promotion.
Reznor reflects on his time as a DIY musician: ‘It took the wind out of my sails as far as thinking of direct-to-customer as a sustainable business for a musician. In a way, that experience gave me a pre-emptive look at music today. You’re not making money from albums; instead they’re a vessel for making people aware of you. That’s what led me to thinking that a singular subscription service clearly is the only way this problem is going to be solved. If we can convert as many music fans as possible to the value of that, in a post-ownership world, it would be the best way to go’ (Marchese 2017).
Reznor’s bruising experience of the disruption of the music economy during the first two decades of this millennium is a striking parable of the journey that the industry has taken since Shawn Fanning2 released peer-to-peer file-sharing to the masses in 1999 and changed the music industry forever. The insights gained during this turbulent process have been both costly and painful, but it was during this period and through experiments such as Ghosts I–IV that the contemporary music economy was forged.
While Ghosts I–IV was not as financially viable as Reznor would have liked; it was a creative and fundamental break with the twentieth-century music industry model where vertically integrated multinational music companies controlled how, when and where their albums are released, promoted and distributed. The core of the Ghosts I–IV project was not the set of tracks recorded in Reznor’s recording studio in the outskirts of Beverly Hills. Rather, it was Reznor’s relationship with his fans and in the thousands of remixes, videos, comments and blog posts uploaded to nin.com, YouTube, ninremixes.com and a host of other more or less shady places in the Cloud.
‘The Cloud’ has been used as a metaphor to denote the Internet since the late 1960s and early 1970s, when Vinton Cerf, Robert Kahn, Robert Metcalfe, Leonard Kleinrock, Larry Roberts and many others invented the technologies behind the network of networks. A cloud was considered to be a useful and vague enough symbol that could be used to summarize all the resources, cables and gadgets connecting the computers at the nodes of the network (Figure 0.1). These days, ‘The Cloud’ is still used as a metaphor for the Internet, but it also conveys other meanings. For more than twenty years, the computer company Sun Microsystems (acquired in 2010 by Oracle) pushed the slogan ‘The Network is the Computer’. Sun suggested back in those days that the resources in the Cloud would soon become so powerful that the computers at the network nodes would no longer have to be sophisticated and expensive but could be made extremely simple and cheap. Eventually, technology did not choose exactly that path, but today, the Network (or the Cloud) is indeed the Computer and a considerable proportion of the resources we use on a daily basis for computation and data storage are provided by large ‘server farms’ or ‘data centres’ owned and operated by the world’s dominating technology firms (see, e.g., Carr 2008).
Figure 0.1 The Cloud as an Internet metaphor
In this book, I apply the concept of the Cloud to the field of music in an attempt to capture how the music industry has been affected by this technological development. I examine how the industry during the first two tumultuous decades of the twenty-first century completely shifted its centre of gravity from the physical to the virtual – from the Disc to the Cloud. At the turn of the millennium, an average young party-goer in a large and mature music market such as USA, Japan, Germany or Australia mainly relied on CDs for their music listening. 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’.
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.
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.
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, into the realm of ‘the digital’.
The number of technological innovations related to this third period of change has literally exploded: Bandcamp, Amie Street, iTunes, YouTube, SpiralFrog, Qtrax, SoundCloud, last. fm, LimeWire, MySpace, Guvera, MOG, Rhapsody, Pandora, Spotify, Shazam, WiMP, QQ Music, rdio, are only a few out of an overwhelming number of music technology brands that have been part of this disruptive era for a brief, or in some cases an extended period of time. Although many of these initiatives may be relevant as markers of the new music industry dynamics, this book does not analyse the details of any such specific venture, technology or innovation. My ambition is rather to stay above the level of these ‘technological ripples’ and try to discern the long-term patterns that are created by the innovations in aggregate.
During this period of change I have been able to meet a large number of music industry professionals and to discuss with them their understanding of the new dynamics. I use quotes from these interviews to illustrate and strengthen the reasoning. In order to ensure the anonymity of the informants, I conceal their identities in relation to their quotes and introduce them by their profession – for example ‘product manager’ or ‘producer’. I conducted interviews with professionals from the US, the UK, Australia, China, Norway and Sweden. Why these countries, one might ask? The Anglophone countries warrant the attention of this study since they constitute some of the largest and most influential national music markets in the world (IFPI 2018), in terms of both consumption and production. Norway and Sweden are relatively small music markets, but they have been bellwethers for other countries in the transformation of their music economies. Norway and Sweden are countries with advanced information technology infrastructures and copyright legislations that initially were slow to adapt to international treaties (Keller 2006). This technological-regulatory combination nurtured an environment that at one point established Sweden as ‘a haven for copyright infringement’ (BBC News 2006; Reuters 2006) but that also allowed the Swedish capital Stockholm to serve as the seedbed for both Spotify and SoundCloud – two online music platforms that have had a profound impact on the shaping of the digital music economy of the twenty-first century. Sweden is also a nation with a ‘fantastically rich music culture’ (BBC News 2006) and a history as a strong exporter of popular music (see, e.g., ExMS 2005). It is one of only three countries in the world that are net exporters of music and is the world’s biggest music exporter measured in terms of exports per capita (ibid.). Lastly, China is among the most dynamic of all national music markets, primarily due to a number of key government policy initiatives that enabled the establishment of a formal economy based on recorded music (Osawa 2015). In early 2019, the growth of the Chinese music economy was expected to continue and firmly establish China as one of the ten largest music markets in the world.
While I recognize the idiosyncratic nature of these and other national music markets, most mature music markets are still dominated by the same small set of large multinational organizations. These international economic structures allow innovations, practices, people and routines to flow easily across national borders. For that reason, I argue that the findings presented in this volume based on research in the aforementioned countries are transferable to other music markets, at least to those mature music markets in countries that are members of the OECD.
This is the third edition of this book. Throughout all three editions the book analyses the ongoing digital transformation of the music industry. I argue that this increasingly Cloud-based industry is characterized by high connectivity and little control; music provided as a service; and increased amateur creativity. The third edition captures how the recorded music industry in the early 2020s is dominated by access-based music platforms and analyses novel ways for promotion and music discovery via these platforms. Chapters 2, 3 and 5 have been essentially rewritten to provide a clearer historical context for the evolution of the Cloud-based music economy; how access-based music platforms transform the interaction between music and the media; and how these platforms continue to mould music fans’ social and creative listening practices.
In Chapter 1, I start out by labelling the music industry as a ‘copyright industry’ and I discuss characteristics and features that distinguish these industries from other, ‘non-copyright industries’. I outline the debate about the possible tension between profit maximization and creativity and lastly, I present a theoretical platform, based on frameworks from organizational theory, social learning theory and the sociology of culture, that support the understanding of the dynamics of the digital music economy.
In the second chapter, I turn the attention to the inner workings of the music industry. It is important to understand the traditional music industry in order to recognize the significance of the change that has created the twenty-first-century music economy. I use well-established models to explain and discuss the music industry and its three sub-sectors: recorded music, music publishing and live music. I give an account of the history of the twentieth-century music industry and present some of the organizations that are currently dominating the different industry sectors.
After having introduced and contextualized the music industry, I use the next three chapters to analyse different aspects of the transformation of the industry. In Chapter 3, I analyse the relationship between recorded music, media and audiences. I start out by presenting a model of this relationship used to support an analysis of the changes in the media environment. I focus on how the increased connectivity of the audience–music firm network shapes the digital music economy and I introduce concepts such as ‘audience fragmentation’ and ‘option value blurring’. This part of the analysis is particularly focused on the recorded music sector and the music-licensing sector. In the area of music-licensing, I examine the changing roles of music publishing and the music publisher in the digital music industry dynamics. In the area of the recorded music sector, I focus on a range of online music business model innovations and how they have emerged over the decades. I examine the models’ viability (or lack thereof) in the light of the shifting levels of connectivity and control.
Chapter 4 is focused on music-making. I have already noted in this introduction that a significant characteristic of the digital music economy is the lowered barriers to enter the music economy, the rise of amateur creativity and the increase of so-called user-generated content. However, in Chapter 4, I will focus on the professional making of music, both in the studio and on stage. I explore the changes in the production system of popular music, primarily related to the roles and careers of songwriters, artists and producers, and to the changes in the institutions and structures of that system.
In Chapter 5, I focus on the role of music fans, and how this changing role touches every aspect of the digital music economy, including distribution, promotion, production, funding and talent development. I examine how fans’ desire to listen to music, use music and express themselves through music is sometimes in conflict with copyright legislation.
Finally, I take the discussion into the future and reflect on how the trends of today will shape the music economy of tomorrow.