Making money moves in the music industry

Jonathon Lynam

After years of decline, the music industry is finally finding its footing in the modern world of streaming according to the latest annual review from the International Federation of the Phonographic Industry (IFPI).

In the latest review for 2018, the IFPI states that music sales from around the world generated $19.1 billion and means that the music industry is finally making more money then it was back in 2007 when it earned $18.4 billion. But despite this minor victory for the industry, it is still far from its peak at the beginning of the millennium.

According to the report released at the beginning of the month, 37% of the industry’s revenue came from the 255 million users of paid music streaming services like Spotify and Apple Music with this figure rising to 47% of the total revenue when you include ad-supported streams.

The music industry has changed a lot since 2007, Spotify had yet to even launch and wouldn’t do so for another year and the industry was believed to be dying after seeing revenues fall for three consecutive years in a row and continued to do so for a further four more years after that.

However, the music industry begrudgingly learned to adapt to its new surroundings and has embraced streaming after being backed into a corner by the digital world.  The music industry’s resurgence isn’t only due to the success of streaming but also the industry’s ability to adapt with performance rights also increasing steadily over the years from 1.2 billion in 2007 to 2.7 billion in 2018.

With these recent figures, there can be no argument that the music industry’s revenue resurgence is due to anything but the popularity of streaming and that the industry is going in the right direction. But despite this, the music industry is still facing serious problems, with the main problem being that for the majority of music artists, streaming services aren’t a reliable source of income.

Due to the pro-rata model used by the majority of music streaming services like Spotify to calculate royalties for artists many will still struggle despite what the global revenue figures may say.The pro-rata model means that instead of dividing up a users monthly subscription depending on who and how long the users listens to that artist, Spotify puts all the money minus their cut into one big pool and distributes it among all artists depending on where they fall in the overall play counts off the platform.

A report by Digital Media Finland in 2016 titled Pro Rata and User Centric Distribution Models: A Comparative Study found that under the current system songs recorded by the top 0.4% of popular artists on Spotify earn 9.9% of the money and called for a more user-centric model which gives the user “more direct power to users to target the money they pay for the service to the artists or tracks they favour compared with the pro rata model,”.

The user-centric model would mean that the distributive portion of your subscription to the streaming service would go to no one other than the artists you listened to compared to being dumped in a big pot to be divided among all artists.

This is unlikely to happen anytime soon, but fortunately for us, the music industry doesn’t seem to be going away just yet so there is still hope for your favourite smaller artists.

Jonathon Lynam 

Image Credit: BeyonceJayZYoutube