Free Streaming is Music to the Ears: Uproar in the Music Industry

Rebecca Wang

Dec 10, 201829 min read

Abstract

Music has been around since the 1800s, providing entertainment to people everywhere, regardless of location. Its technology has since been advancing tremendously, from vinyl records to streaming apps on smartphones. Now, there is artificial intelligence not only assisting artists in their music-writing process but also creating its own, too, and musicians are considering virtual reality as it can let their fans have access to their live music even if they are unable to attend their concerts. Streaming, however, is causing on the biggest uproars in the music industry as consumers prefer to listen to free music rather than buying the actual album, digitally or physically. There are case studies analyzing music history regarding the first peer-to-peer music download system, Napster, and how its failure pushed the music industry to where it is today. Multiple journal articles also analyze consumer behavior as an effort to figure out whether consumers only desire free goods or are willing to pay for artists' products. The purpose of this paper is to explore and acknowledge the layers in the streaming industry and why it causes chaos not just the economics in the music industry but also between the different sides – consumers, artists, and companies.

Key Words

Music, Streaming, Economics, Consumers, Artists, Musicians, Marketing, Independent Record Labels, Uproar, Technology, Artificial Intelligence, Virtual Reality, EDM, Concerts, Copyright, Piracy, Perspectives

Many starting at a young age have studied or at least know the general history of music: there were the Baroque, Classical, Romantic, Impression, and Contemporary eras. The way these music eras have changed from one onto the other is through the creativity of musicians. Creativity is also the way technology has advanced throughout the years as they go hand in hand. We used to have huge computer monitors, floppy disks, stereos, etc., and they slowly progressed to lightweight laptops, iPods, and the one everybody uses, smartphones. However, people seem to not appreciate the evolution of music playing formats. The very first music playing format was the phonographic cylinder in 1877, which slowly progressed to gramophone record in 1895, also known as vinyl records. Afterwards, in the 1930s, there was the reel-to-reel, which is the form of a tape recording on an open reel. As the years went on, the cassette tapes from the early 1960s evolved into compact discs in the 1980s. MP3 players, cd players like the Walkmans came along, and iPods basically changed everybody’s lives because listening to music became portable and accessible. All one needed was one of those music playing devices and headphones.

It is all about convenience: the smartphone has everything. It has alarms, the clock, the weather, the phone, texting, and any apps people want to download, so now people can download an app to listen to music wherever they go. However, with such advancements will always come disagreements and uproars, mainly the online streaming services, and they cannot be simply seen with two sides. It involves three: the consumers; the artists; and the music companies.

Along the changes and the advancements in the music playing technology, the technology for music is also changing in general, especially the creation of an upcoming music genre, creating music without needing an actual person, and listening and being able to see artists perform.

EDM, or Electronic Dance Music, has grown rapidly since the early 2000s. It is one of the newest music styles with worldwide sales around $6.2 billion. Major artists include Steve Aoki, Alesso, Martin Garrix, Avicii, Zedd, and many more, and they all create music that became “dance hit classics” (How EDM has Changed Over the Years). Artists can create music with a just a laptop; however, if creating music can be done electronically, are creativity and uniqueness taken away by such technology? There are people who believe that creativity is dying, especially EDM artists’ creativity. He points out how they, over an hour set, will only have three to five of their own tracks, and the rest of the set is spent on playing a remix of other people’s tracks.

Brian Zucker, in “The Saturated EDM Market: Eliminating the Celebration of Creativity,” criticizes the artists for “shy[ing] away from playing their own tracks live.” He looks down on the artists because he believes that they should take risks and let their fans hear their unique music. However, “uniqueness” is the point. Over the years, there are subgroups under EDM, from trap to dubstep; however, the general genre is not just beat drops and the same bass beats. It is about “expressing the music in new ways with new sounds” (How EDM has Changed Over the Years). There are unique sounds ranging from bass house dubstep to hard trap. EDM is about pushing beyond your limits and reaching out to the listeners. Artists are applying their music styles on other artists’ tracks and making it part of them. Additionally, both artists’ fan groups will expand as consumers will be listening to the works of both artists.

Artificial Intelligence is sweeping the nation in the 21st century. They are robots programmed by people to perform what people used to do. They could replace humans in manual labour and high-level production areas. What about in the arts? There are people who are creating AI to compose classical music (A New AI Can Write Music as Well as a Human Composer) and its tracks are being used in films, advertisements, and games. They created the AI with algorithms that use “reinforcement learning techniques,” loosely mimicking the human brain. The technology is able to create its own music and “capture the diversity and variation found in creative arts;” however, it still needs humans to program the orchestration and music creation into it in order to even make pieces. Artificial Intelligence and humans have actually been working together for some time now. David Bowie helped create an app called the Verbasizer, which rearranges words that can be used as lyrics. Companies even created software that made melodies; however, none of these AI are good enough to win their own awards. They however provide a lot of help to artists especially when they lack some musical skills, such as music theory, which is helpful for creating music.

One of the first computer-created song was called the Illiac Suite, a string quartet score developed in 1957, and artists during that time believed that creating music should come from within – that creating music is only unique to human because artists are using music theory to piece together a piece. David Cope, a Californian music professor points out, “Somehow the computer program was a threat to that unique human aspect of creation” (Do Androids Dream of Electric Beats? How AI is Changing Music for Good). However, AI can not only be a useful tool when artists lack the resources or the musical knowledge but also provides an opportunity for people to question whether the way of human expression is actually unique now. Human expression is not like our fingerprint anymore. Amadeus Code is an artificial intelligence songwriting assistant that was created by Taishi Fukuyama, a leader in the music technology and a major songwriter in Japan and Korea. Artificial Intelligence is slowly making its way into music industry, and its first step into it is becoming an artist’s assistant. The Amadeus Code is a “combination of both human intuition and machine intelligence” (What’s the Value of a Song When Artificial Intelligence is Everywhere?). Music nowadays is not about the music itself; it is about the song’s ability to catch the listeners’ ears, and that is where AI will create tension. It will cause artists and the music industry to become frustrated over the originality and value of the music versus the collaboration and consumption. Many do not ponder over the hours put into producing the song; they simply think about how they can increase song consumption.

Artificial Intelligence is not created to take away from the artists’ creativity – it is to speed up the production, so they can focus on consumption methods. Nonetheless, artificial intelligence can never replace artists’ creativity. Nir Livneh in “Can AI Create Better Music than Humans?” said “part of the beauty of music is the resonance that we perceive between the artist and the work … how they vibrate in harmony with the myths and stories we tell … AI might be able to replicate their sound, but I doubt it will ever replace their music.” Livneh points out that there is a human touch to music, and that is something technology can never replace. EDM artists may use technology to create their music, but they are still using a combination of chords, harmony, melodies, and beats to create a piece unique from their other songs and from other artists.

AI is not the only advancements making its way into the music industry. Virtual reality is stepping up, too, and a lot of artists want to invest in it. Virtual reality first became known through video games. People of all ages were purchasing the Oculus Rift VR set to play games, such as Until Dawn: Rush of Blood and Fallout 4. The Oculus Rift is a virtual reality headset, and it features rotational tracking, position, and headphones, providing a more 3-dimensional effect. It was not long after that musicians want to incorporate such device into their music. EDEN, Irish singer and producer Jonathan Ng, created a virtual reality music video, which involved a 360-degree shooting, computational algorithms to put everything together, and fine editing so that viewers do not become disoriented or, for those with epilepsy, get a stroke. It almost seems useless since most people will see it on their laptop unless people have the Oculus Rift on hand. However, it is the first step into a different era: experiencing music videos and seeing concerts as if you are actually there. Imagine being able to watch your favourite artist or band performing at front-row but at the comfort of your home. It definitely catches the fans’ and music and tech companies’ eyes, as one is about experience live music and the other is about getting more money. David Piece in “Music’s Salvation Might Be Selling Not Songs, But VR” conclude his writing with “Music is about connection, closeness, shared experiences.” This is true; however, if concerts were streamed because fans can watch them at the comfort of their homes, companies will have a challenge with gaining profit since it will not be coming from selling concert tickets.

The other challenge that companies are struggling to get past? Streaming. Streaming has not been around as long as everybody thinks. Some Millennials and most Generation X people were born in the full bloom technology era, so they had it access to all of it. Some millennials saw and experienced the shift from pre-technology era to the technology era. Streaming takes on multiple forms: radio broadcasting, television, motion pictures, video games, online video, etc, and it created multiple opportunities for companies, artists, and consumers – it was a “culture of opportunity” (The Economics of Music). With secondary music markets, there needed to be a consensus amongst the streaming services, music labels, publishers, artists, and countries. Music-sharing services included Ireland’s Tape TV, China’s QQ Video, and now international YouTube.

Specifically, YouTube, “founded in 2005,” took over the music television, MTV, and ultimately had a higher consumption than MTV. This video streaming system is a “user-generated platform and has attracted controversy over the copyright-infringing practices of users who upload content without the permission of rights holders.” They have a content ID system that identifies any copyright material and gives the creators the power to either utilize advertisements around the content or enforce deletion. Margaret Stewart used to be YouTube’s head of user experiences, and she did a TedTalk on how YouTube works with copyright holders and creators to further a creative community. She used “Forever” by Chris Brown as her example, and she said that at least 18 months after he released the song, a wedding couple used that song and danced to it. They got 40 million views and Sony didn’t block it because their video was marketing the song and bringing in a lot of revenue. The song was brought back to top 5 on iTunes, so not only is Sony getting money from YouTube but also iTunes. Thus, letting the couples use the song not only brought them a lot of views and people could see how great their wedding was, but also Sony and Chris Brown were getting more money even after a long period of time. Streaming, therefore, creates a “culture of opportunity” for everybody in the music industry.

The motion pictures had one of the biggest impacts on the music industry economy. The music was either composed for the motion pictures or pre-existing music was licensed by the companies and artists. Video games created a “relevant revenue source for music publishers and composers and function as an important music licensing market” (The Economics of Music). With such contracts for using music in other forms other than CDs and live music, they bring attention to the topic of copyright infringement and piracy laws. YouTube was not the first that attracted controversy; it was Napster.

The original Napster was established in 1999 by Shawn Fanning and Sean Parker, and it was a peer-to-peer file sharing network, specifically sharing digital music files in the form of MP3s. As long as people created their own accounts, they had access to a large amount of free audio files that any members could share with each other. At one point after the creation of Napster, there were around 80 million users registered. It got to a point where colleges had to block this site on their internet network because it was overbearing the school’s connections. One could find almost anything on this service, from recent chart toppers to bootleg recordings. However, it did not survive on this world for long because of the copyright infringement laws. The acts the service was committing in general quickly were focused on by the Recording Industry Association of America or RIAA. They quickly filed a lawsuit against them for “the unauthorized distribution of copyrighted material” (History of Napster). The law states:

“Copyright law protects the value of creative work. When you make unauthorized copies of someone’s creative work, you are taking something of value from the owner without his or her permission. Most likely, you’ve seen the FBI warning about unauthorized copying at the beginning of a movie DVD. Though you may not find these messages on all compact discs or music you’ve downloaded from the Internet, the same laws apply. Federal law provides severe civil and criminal penalties for the unauthorized reproduction, distribution, rental or digital transmission of copyrighted sound recordings. (Title 17, United States Code, Sections 501 and 506)” (RIAA)

It simply means that unauthorized copies of copyrighted music will be subject to civil and criminal liability, which could lead to at least thousands of dollars in damages towards the artists and companies. Ultimately, Napster was forced to shut down in 2001, only three years after its creation, and the owners had to pay millions to artists, companies, and copyright holders.

Many artists were not fond of Napster because they felt as if they were being cheated by their listeners since they were not being paid. Musicians saw the service as a thief because consumers were not paying for their music. However, some believe that Napster pushed the music industry into its next era. In “15 Years After Napster: How the Music Service Changed the Industry,” Alex Suskind pointed out that Napster “deserves credit not just for being the first, but for revolutionizing a new frontier in music consumption. Even today, its legacy and its effect on the industry are still very much in play.” Suskind interviewed multiple people and asked their opinions on the original Napster, and not only did many of them have similar ideas but also they had interesting comments regarding the service and its hand in the current music industry. Kurt Loder, a former MTV News anchor, pointed out how Napster was a major marketing service for both new and old artists because people would share music files with each other. Additionally, Loder pointed out that consumers sometimes did not want to buy the whole album just to listen to only two songs. With Napster, they were able to choose the songs they wanted and nothing more. Brian Hiatt, a senior writer for Rolling Stone, said that Napster could have been the current Spotify - the RIAA missed their opportunity to make Napster into a paid service. Spotify is one of the major services now that changed the course of business and music industry history, regarding royalties, and Napster could have been that. Napster itself proved that people not only like free goods but also love easy accessibility. Dan Reilly is a freelance journalist who was also a former editor of AOL Music’s Spinner. He said, “To blame Napster for all the industry’s ills is a reflection of people’s unwillingness to let go of the status quo and not admit to a lack of foresight of how the digital universe would change music, not to mention other ‘dying industries’ like print news and book publishing.”

Napster created not only a music-sharing community but also the desire for free goods, music specifically. It threw the music industry into a conundrum – satisfy their consumers or satisfy the suppliers. The “culture of free” spawned from that system, and it has influenced other industries, such as newspapers, magazines, books, etc. It built a generation who “believes that the written word, whether on processed wood or in pixels, should come without charge” (Grappling with the ‘Culture of Free’ in Napster’s Aftermath). Despite a few artists seeing Napster as the enemy, there were some who saw it as an opportunity to find prospective fans. Even though the original Napster was taken down by the law, one thing was for sure: people will not give up their desire for free products. Apple created the iTunes store, where people could purchase songs for only 99 cents. Although artists were not getting paid the whole album, they saw this better than their music being given away for free. The music business was once again reshaped by the improving technology. Streaming services, such as YouTube and Spotify, simply gave companies a migraine as listeners can just listen or watch their favourite artists and music. The only difference between them and Napster? They are legal. They paid music companies to stream music to consumers, and they get cash from advertisements and through the services’ subscriptions, which usually include no commercials and subscribers-only music. Through this, album sales, physical and digital, dropped by 15 percent and individual track downloads also dropped 13 percent. However, the results “culture of free” were not all positives; the negative aftermaths included a spike in the music industry’s unemployment rate – “workers who make the discs, wholesale buyers, salespeople, stockroom clerks, accountants and others” (Grappling with the ‘Culture of Free’ in Napster’s Aftermath). Artists were simply not getting the appropriate pay for every song plays, resulting in a music royalties war, which will be discussed later on.

Spotify is a peer-to-peer music streaming service that has music ranging from major and independent record labels. How is Spotify different from Napster? It is legal. Many streaming services after Napster were searching for ways to be a part of the music industry without violating the piracy laws. In 2006, Daniel Ek launched Spotify. He made peer-to-peer (P2P) technology legal, which caught the music industry off-guard because Spotify and other services are forcing the industry to rethink and change its business rules again. P2P “is a distributed network architecture which popularized by file sharing” (Legal P2P File Sharing is Possible: A Case Study of ‘Spotify’), and it altered way people communicated with each other and enabled the Internet resources to be a product supplied and consumed. Spotify over a decade ago was and still is the future of the music industry. Napster was also a P2P system, and it revolutionized the idea of free consumption. Sadly, they violated the piracy laws and was forced to shut down; however, if it were not for their system, Spotify would probably have never been born. Spotify changed so many listeners’ lives because they can listen to the music before deciding if they want to purchase the actual album. The price of albums and CDs are pricey, so with streaming services, consumers do not have to force themselves to purchase a CD just to listen to their two favourite songs. Additionally, searching for songs and albums have never been easier. These three things were the top characteristics of Napster and Spotify. Spotify, luckily, got to learn from Napster’s mistake, so it is currently thriving, even though major record labels and artists are not fond of the amount of royalties they are getting. However, at the same time, Spotify relies on the support of the major record labels in the music market: Universal Music Group, Sony Music Entertainment, EMI Music, and Warner Music Group. If it were not for them, Spotify would not have lasted this long.

Spotify has a few groundbreaking characteristics: downloading music is unnecessary now. Music streaming apps are created, so people can listen to their music through their earbuds or headphones and smartphones. The service is also free and user friendly: people have to option to listen to music with the exception of ads or they can pay for the premium service, where there are no advertisements to disturb them from enjoying their favourite songs and artists. Lastly, it is legal, which is the major difference. Artists and companies were furious with Napster because so many people were downloading and listening to music for free without regards for the artists who need to be paid for their work. Spotify, although there are music companies and artists like Taylor Swift who are unpleased with the payment, signed contracts with the companies to avoid repeating history again and promising to pay royalties to the artists and the labels.

The music industry generally has always been resistant to change. Companies and some artists have never been fond of the streaming services because they believe that that are stealing from them – that they are not receiving as much as they provide. However, the streaming industry is not as simple as supply and demand. There are three roles the music industry in general: consumers, artists, and the companies, and their perspectives and decisions play a major role in the music market.

There are the false ideas that consumers only want free goods; however, that is not completely true. “An Analysis of Music Fan Towards Music Streaming Purchase Intention of Thailand’s Music Industry” reveals that it is the fans’ love and support for the music and the for musicians that continuously brings in revenue for the artists and the companies. They increase sales for concert tickets, merchandises, and music tracks, such as CDs, digital albums, etc. At times, it seems as if the music industry forgot that it is the fans that are making their world go around. A lot of labels and artists tend to only focus on their self-image and forget that they need to keep up with their fan communication, even at concerts. In this study, it points out that the reason why there are people willing to buy their products is that the “artist’s passion for their music fans is the key factor in music lover’s intent to download and pay for digital music.” For a long period of time, the RIAA, music companies, and artists struggled with consumers illegally downloading music – getting music without purchasing it. However, there are fans who continue to support their artists by actually paying for their goods because it may benefit the artists. The study also suggests that “entrepreneurs and music industry leaders” should be aware of the different types of fans because that can also make a different in the consumers’ willingness to buy their music. In a different study, “I Worship, so I Download? Idol Worship, Music Purchase and Piracy by Young Consumers in Taiwan,” two objectives were assessed: “the effect of parental peer norms on idol worship and the effect of idol worship on the intention to purchase and obtain the idol’s music products legally and illegally.” The results suggested that “social worship and personal worship have a significant and positive impact on the intention” to buy music. Person worship tends to have a negative effect on buying pirated music whereas social worship leans more towards the positive side, so social worship actually benefits the artists and companies. Social worship is simply basic interest. Fans tend to learn about, read about, and listen to their idols, whereas for personal worship, fans have intensive and compulsive feelings that lead to infatuation. The researchers claimed that the “more extreme dimensions of idol worship lead to compromised identity structure in some individuals,” so as seen from the results, personal worship had a higher percentage of piracy than social worship’s percentage.

Artists stand in the middle of the music industry struggles. A lot of musicians struggle with creating music that resonate with them and their fans and creating music that will bring in a lot of profit. Artists want to be paid more than they currently are getting if they are using the streaming services to market their music. The problem with streaming services, such as Spotify and YouTube, are that the amount they are getting for every view and stream cannot be compared to the amount they are receiving from album and concert sales. One artist, for example, is Taylor Swift, who was fed up with Spotify and took all of her songs off of it for a period of time. She pointed out that there was not a value on her art. Swift was basically saying that she was like an artist on the street – people listening to her music for free until there are some people who are willing to pay for her music. Swift said that her music is still on iTunes, Beats Music, and Rhapsody, where you pay in order to get her music and albums and “that places a perception of value on what [she] created” (Taylor Swift on 1989, Spotify, Her Next Tour and Female Role Models). While artists struggle with royalties, they also want to maintain their interactions with fans, which is a form of marketing, because that way, the consumers are more inclined to continue to support them and purchase their music – physically and digitally. There are definitely artists who create music just for the money – money projects – but for the purpose of this research, we are focusing on artists who value their art and their fans.

There are continuous struggles between these services and creators, but there are no signs of any improvement because nobody is stepping up to make a difference until recently. Jack Conte is the creator of Patreon, and he saw that problem between content creators and streaming services. He created Patreon, which is also a streaming service, but fans have to pay to have an account. Fans pay for a subscription option, and they receive special content that is exclusive on Patreon. With this site, creators receive at least 25% more than they do from Netflix, Spotify, YouTube, and Amazon Prime, so the total money received that fans pay, the cash is split into three groups: 5% as a transaction free; 5% for the Patreon creators, so they can keep the service up and running; and 90% for the creators. This is great, too, because Jack Conte personally is also an artist who struggled with royalties, and he pointed out that artists who upload on YouTube are not paid half as much as the money gained from concerts, even if they get 20,000 views on YouTube versus the 20,000 people at a concert. If people think of this to the very extreme, take BTS for example. Their concert tickets can be from 250 to 800 dollars, which means the total amount of money they get from their concert would be $5,000,000 to $16,000,000, excluding the merchandise sold there. However, with YouTube views, they will only be getting $2,500,000 to $8,000,000, which should be eye-opening to everybody. Artists need to and should be getting paid more than they are with these streaming services.

Music record labels respond to the rise of streaming services differently from artists and consumers. They react very negatively towards them even though they are technically marketing their artists’ music because one main argument: they are not making as much revenue as they would through physical and digital album sales. There was a case study on the controversy between streaming and artist royalty, focusing on independent labels and musicians. These online streaming services are utilizing the same expansion concept as major record labels, “The success of major labels has always depended upon ‘consumption-based’ rather than ‘unit-based’ profits” (‘Let’s Keep Music Special. F – Spotify’: on-demand streaming and the controversy over artist royalties). Although major music companies are bothered by the streaming services, they are still making some profit; however, independent record labels are struggling as they have different rules that they live by; thus, Spotify’s payment is targeted towards major labels. There is actually a lack of transparency in the music industry; nonetheless, nobody is trying to resolve the issues. Some concerns regarding Spotify is similar to the record industry past. It seems as if the music industry simply has concerns with the improving technology while they are not moving anywhere. They had problems with the record industry and now with the streaming services that, from certain perspectives, is actually helping the artists and companies with the advertisements, “The recorded music landscape in the streaming era is beginning to bear many similarities to that of the CD era: financial success depends upon scale and catalogue, the major labels have a stake in music distribution networks, and the vast majority of artists do not make money.”

However, independent records are also benefitting from streaming because having the opportunity to upload their music onto Spotify will help build their fanbase. They focus on the marketing aspect rather than the revenue because they want to get more consumers to listen to their artists’ music. Additionally, the difference between major music companies, such as Sony, Warner, and Universal, and indie record labels is that major music companies want music or artists that will attract the most people, hence pop music; whereas indie labels focus on artists who create music that matches their ideals.

Overall, the music industry is just like any other industry: they are seeking ways to find a balance. Some artists and the major music companies want to be paid the appropriate amount for their music being streamed. Consumers do like free music; however, depending on their worship towards their artists, they are willing to purchase their albums or music online. Technology is only going to continue to progress, and the music industry has always been very stubborn with change. They only reason why they continue to thrive is because there are always artists who create music not for the money but for their fans and because they simply love music. Additionally, there will always be consumers who search for good old records and albums. People will never stop listening to music, so the music industry simply cannot act on their own interests; they must think of their artists and their consumers.

Acknowledgements

Special thanks to Ryan Sloan for guiding me along this journey, always providing the best advice, and giving insightful tips on improving my writing. To my fellow classmates, thank you for giving me great advice and your helpful feedback that shaped this whole project.

My Research Process

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The Economics of Music

The Ends of Music History, or: The Old Masters in the Supermarket of Cultures

The Future of Music Careers

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