How Has Music Streaming Affected the Music Industry?

Streaming music is a large part of music industry revenue

There is no debate that digital streaming services have changed how people listen to music. The music streaming industry has rapidly become a central part of the larger music industry, and it continues to grow exponentially year after year. It currently accounts for roughly a quarter of all music industry revenue.

Although most industry professionals consider streaming the inevitable future of recorded music, there is constant, heated debate over its effect on the music economy. Famous artists like Taylor Swift and The Black Keys have pulled or limited their music libraries from streaming services, demanding a redesign of the pay structure that is more beneficial for artists. Streaming is still young, and industry standards are still forming to keep all sides of the industry satisfied.

Degree candidates in an online Master of Music in Music Business and Entertainment Industries (MBEI) program will study how streaming has affected the music industry, as well as how they can play integral roles in this new economy.

The Decline of Music Industry Sales

Overall music industry revenue has declined sharply since the new millennium. Many consider the piracy associated with digital downloads, a shift in sales to single-song downloads, and the recent recession as reasons for this trend. While piracy has decreased to some extent through the closure of peer-to-peer downloading services, torrenting has increased, which perpetuates the free acquisition of music, further devaluing music in the minds of consumers.

The Negative Economic Effects of Music Streaming

As internet and cellular data speeds have increased, online music streaming services such as Spotify, Pandora, YouTube and Apple Music have taken off, and the concept of music ownership has shifted drastically. More and more, people look to the subscription-based streaming services. Instead of digitally or physically purchasing music, consumers listen to streaming services either for free or for a monthly subscription fee. These services pay record labels and artists a fraction of a cent for every song that users stream, creating a situation wherein an artist whose song gets played hundreds of thousands of times will only make a relatively small sum.

Furthermore, record labels’ royalty agreements with their artists are outdated. Typically, labels include a clause in their contracts that entitles them to additional percentages of artists’ sales revenue in order to recoup infrastructure and technology development expenses, such as compact disc manufacturing and duplication. Some labels are still deducting these percentages even though they do not incur any expense in the development and maintenance of streaming services. This is an obvious concern for artists, and many are demanding a re-negotiation of this loophole.

The Positive Effects of Music Streaming

Although these issues are clearly important to the financial health of the music industry, recent studies have shown that as the music streaming industry grows, resultant revenue is beginning to offset download sales displacement, resulting in neutral revenue overall for the industry. The increase in music streaming has also correlated with a decrease in music piracy, implying a revaluing of music’s economic worth by the consumer. Many artists, labels, streaming services and publishing companies believe this revenue stream will continue to grow the music economy as a whole.

In addition, unknown artists who release and promote their music independently benefit from streaming services that provide exposure to wider audiences than these artists could otherwise reach on their own. Arguably, this levels the playing field between independent artists and label-funded, established artists. This increased exposure has also allowed independent artists to capitalize more on live performance income, which has become an increasingly important part of the music industry as sales revenue has decreased.

If the music streaming industry is the future of listening to music, discovering artists, and music industry revenue growth, it is integral to understand and take part in the industry. Music streaming is bound to continue affecting the industry. By enrolling in an online MBEI program, degree candidates will study the pros and cons of music streaming so they might improve the industry with solid information and expert analysis.

Learn more about the Frost School of Music’s online MBEI program.


CNBC: Does Spotify Hurt the Music Industry?

BBC News: Is Streaming Good for Music?

FiveThirtyEight: Maybe Spotify Isn’t Killing The Music Industry After All

The Wall Street Journal: Spotify, Downloads and Piracy: How Streaming Affects Music Sales

Deseret News National: How Streaming Music Is Changing the Industry

PBS NewsHour: Can the Music Industry Survive the Streaming Revolution?

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