The Economics Of The Disruption In The Music Industry

By | July 14, 2017

The economics of the music industry has been the contention of artists, record labels, and fans for a long time. In recent years, there has been several disruptions in this $60 billion worldwide economy. It has happened in 3 waves and has done so in rapid succession.

Back in the day, getting a new album from your favorite band was simple (or so I thought). You go to your local “record store,” find the new album, and buy it. Then you drive home, turn on your stereo with turntable, and play it through a very nice sounding analog sound system. Well, as it turns out, it is much easier now from the time you decide to buy a song, or an album (for lack of a better word) to the time you start listening to it. Now, with your smart phone, you can buy and start listening that song in seconds! The music retail industry has witnessed a disruption similar to what Amazon is doing to the brick and mortar retail industry, and for the HMV’s of the world, the disruption is all too real.

The second wave of the music industry disruption is from the likes of Spotify and Apple Music. Initially it was thought that these online subscription services was harming the music industry but things have changed. Streaming is now the music industry’s best and largest money maker. Last year, streaming music made up over 50% of the music industry’s revenues in the US according to the Record Industry Association of America. That was an incredible 68% increase from the previous year!

The third wave of the disruption in the music industry is the direct-to-fan model. With the use of Youtube and other social media outlets, a band has direct contact with their fan base and when they release a new song or come out with some news, they can ensure that their fan base will find out and with virtually no marketing costs to the artists. A company called Music Glue is one such company enabling direct to fan marketing. Now artists, promoters, and venues can use their platform to sell music, tickets and merchandise directly to their fans from one online marketplace. The music industry is huge, estimated to be worth over $50-60 billion globally, and for a long time the artist would see little of those dollars. Now things have turned in their favor. Finally!