Internationality of music industry in the internet era

Arafat-Al-Yeasin | Published: 00:00, Jun 23,2019


- Gartner

Like every other thing in life, music industry is also becoming dependent on the internet. From the glorious days of record sales, all the music in the world is available at our fingertips now. The convenience of listening to any genre of music according to mood at any place does come with serious cost though. This is eventually creating a serious monopoly in the music industry as 72 per cent of the industry is owned by only three big multinationals — Universal, Sony Music and Warner, writes Arafat-Al-Yeasin

When was the last time you buy a music CD? I know most of you, if not every one of you, will say you don’t even remember. Before the internet era, if we wanted to listen to music, we had to buy it from CD shops. In less than 20 years, record sales have almost disappeared. In the year 2000, more than 900 million CDs were sold just in the USA. 18 years later, this number has dropped to just 90 million. That’s less than a tenth of what it used to be. 

The reason, of course, is internet downloads. Platforms like Napster, Emule and Torrent have completely changed the industry. And of course, you might think that, how can they even survive the entire illegal internet downloads and file sharing platforms?

Well, the truth is exactly the opposite. As an example, Universal Music Group turned over an average of $17.5m per day in 2017 as the company’s annual sales hit record $6bn. 

Companies like Sony Music or Warner are in the same situation. Streaming platforms such as Pandora, Deezer and Spotify are not enough to explain this phenomenon. For example, Taylor Swift is one of the most famous singers of the western world and she makes hardly 400,000 dollars a year from her Spotify listens. It might look like a lot but this is pennies if we compare it to the mega money Michael Jackson made in his sales.

In 1935, more than 8000 professional American musicians had lost their jobs because of the so-called Jukeboxes. A jukebox was a big record player that was placed in bars and restaurants. You could insert a coin and choose a song you wanted to be played.

In that year, more than 135,000 Jukeboxes were sold throughout the states. Prior to this, musicians lived off with the money they made from concerts. In fact, the first music records were used as advertising for live performances.

Now, 90 per cent of their income was coming from record sales. The way we listen to music changed forever as well. All of a sudden, some local music genres started being enjoyed nationwide. For example, jazz music was a typical genre in New Orleans but it ended up expanding all across America. And not only that, this changed the way people understand music.

Before the technology of recording music, musicians could only do live performances. Their maximum audience was hundreds of people. Suddenly, radios and records allowed them to reach millions of people. This meant much more money. This is how a new genre was created — jazz — a genre that was originated in America and ended up expanding across all parts of the west.

The record label paid for marketing campaigns, organised massive concerts and even negotiated advertising deals for the rockstars. Meanwhile, the rockstars gave the whole industry a young, fresh face. This is why artists as Elvis Presley and the Beatles became millionaires and the big companies became bigger and bigger.

Since their music was not just being listened to all across the western world, a record of Michael Jackson could sell more than 66 million copies in a brand new market that stretched from America to Japan. By the year 1999, the music industry reached its zenith. More than 1200 million records sold. The music business was bigger than the GDP of a country like the Dominican Republic.

So, what happens when an industry generates so much money? Well, big companies started buying small companies. At that moment, 78 per cent of the industry was concentrated in just five big multinationals. Then, something surprising happened. It’s Napster! 

Napster was the first software that allowed users to download songs in Mp3 format in a fast, free and, of course, illegal way. From one day to the next, those records that cost several dollars could be found free online. Even though Napster lost a case in the courts, it was already too late. The music business had already changed forever.

At the end of the day, why would you buy something if you can get it free? However, despite a dramatic decline in record sales the profit for companies like Universal Music Group haven’t changed that much.

In the year 2000, Universal Music Group fired 4000 people practically overnight. This was 34 per cent of their staff. At this point, record sales were almost 90 per cent of their income. And those sales were falling by 20 per cent per year. If they wanted to survive, they had to make a 180 degree shift. They had to stop being a record label and start becoming a music label.

In the first decade of the 21st century, Universal got rid of everything that was not making money, as an example, the record manufacturing factories. With all the money they got from selling the factories, Universal bought all the music labels they possibly could. The main goal was to expand its music catalogue as much as possible.

In the 1930s, the music industry was limited to the United States. Then, in the 80s, it had expanded throughout the west. Nevertheless, tastes and music genres change again. For an example, now we have K-Pop, with songs like Gangnam Style. This was a popular genre in South Korea that now ended up expanding to the rest of the world. Now, music is a one hundred per cent global industry.

However, no matter how many labels they buy, if people don’t buy music anymore, their income will fall inevitably. In fact, the music industry today is nothing but a shadow of what it used to be.

But, now, despite the cake being smaller, there are way fewer people eating. 72 per cent of the industry is owned by only three big multinationals — Universal, Sony Music and Warner. 

As I said before, Spotify gives very little money to the artists. One million listens only means about 7000 dollars. However, when they have the rights of 25 per cent of the music produced in the world, even if they make 0.006 dollars per listen, still it’s enough to become a millionaire.

As you can imagine, this is not so good news for the musicians. It’s harder and harder to make money with music and this is why you need to be extremely popular to make any money out of internet listening. On the other hand, those three big labels aren’t willing to risk what they have by experimenting with new formulas.

But in the end, music listeners are now more open to listen to different music from different countries, language and culture. The era of the internet also widened and opened the door of music to a variety of culture, society and taste.

Arafat-Al-Yeasin is a student of University of Dhaka.

More about:

Want stories like this in your inbox?

Sign up to exclusive daily email