How has the music industry changed

analysisHow Spotify changed the music industry

How has streaming service changed the music industry?

The phenomenon has long been known: Consumers spend less and less money on music, because they are "free" on the Internet.

It all started in the 1990s with the large file sharing networks such as Napster, where films, music and software were passed around for free on a large scale. Now there is Spotify as the number 1 streaming service, followed by Amazon Prime and Apple Music.

What are the consequences for the music industry?

CD sales are falling. That is why musicians find it increasingly difficult to live from their music. The advances from record companies are also much lower, because the record companies, in turn, are taking less and less risk. This also means that the studio times for young bands are no longer so generous. As a result, the albums have to be created faster - that is, significantly worse production conditions.

Most artists have to make their living with live concerts and this market is booming! The range of concerts is large, as is the demand - that's why ticket prices are rising.

Who benefits from having Spotify if the streaming service is not in the black itself?

Clearly the record companies and only the big ones: More than 75 cents of every euro that Spotify collects goes to three record labels: Sony Music, Warner, Universal. But also to the listeners, because they have the catalog of music history with them more or less with their smartphone in their pocket.

A blessing for the record companies, for whom is the streaming service more of a curse?

Clearly: the musicians!

The three big labels hold over 80 percent of the rights to the musical content that is distributed on Spotify. And they often did not even have to question the artists, whether music may even be offered there, on Spotify. Depending on the contract, the artists no longer hold the rights to their songs, the rights are held by record labels or music publishers.

The second aspect is the financial compensation: Depending on the contract, musicians receive 0.6 to 0.84 cents per song played - and only if this song has been played for at least 30 seconds, only then does the song count as played. That's just $ 60 to $ 84 for 10,000 streams.

A few figures can illustrate the dimension: Ed Sheeran is one of the "big fish" with "Shape of you". That was the most played song on Spotify in 2017 with 1.7 billion plays. Another successful artist is Drake with over a billion plays, and Justin Bieber played "Love yourself" to a similar extent.

Older hits like "Beat it" by Michael Jackson, however, achieved 360 million plays, "Stairway to heaven" by Led Zeppelin 190 million. Spotify is interesting for younger consumers who are no longer used to buying a CD or even LP. In the classical music market, Spotify is still practically irrelevant

Will Spotify become profitable at some point - also for musicians?

To do this, you would first have to make sure that there would still be musicians by then - because they not only want to make art without a job, they also want to be able to pay bills.

The big stars could help Spotify to be profitable, but many more people also have to pay for the service - because you can also be a "user" with the free version with advertising. At the end of 2017, a good 70 million people were subscribers.

However, there are many young people who do not want to or cannot spend money on music and who can find almost everything they are looking for on YouTube.