The Impact of Technology on the Music Industry

The music industry is one of the most profitable in the world. Global music revenues were over $47 billion while the US market accounted for $16.7 billion in 2016 (Statistica.com).The business model has seen songwriters, composers, record companies and artists recording high revenues. The industry is majorly made of music publishers and distributors.  The major record labels are Sony/ATV, Universal group and Warner Bros (Statistica.com). Sony has 24% market share of the music market in the US (Statistica.com). Approximately 169.1 million albums were sold in the US in 2016 (statistica.com).The growth on the internet has positively impacted the growth of music industry. However, there is a debate on whether technology is positively or negatively affecting the sustainable growth of the music sector. Furthermore, increasing repeal of major internet regulations that strengthen the industry such net neutrality ha cast doubt on the future of the sector particularly for performing artists.

Music copyrights have for long been responsible for the majority of revenue streams but the internet is slowly changing that. The purpose of this assignment is to exp lore the viability of music copyrights, the impact of internet laws (net neutrality) and cryptocurrencies on the music industry.

Copyrights

Under copyright laws, no individual or an entity can make copies of music without consent from either an independent artist or a record label that signed that particular musician (Stoops 26). In Europe, recording artists and performers enjoy copyright protection of up to 75years from the date of the release of an album (Stopps 27). In commercial music production and distribution, there are two set of intellectual property rights to keep in mind (Stopps 29);

•    Related rights in performances and recordings

•    Copyright of work involving composers, songwriters or lyrics.

Royalties from copyright protection are one of the major ways artists/composers/songwriters make money from music. Other ways include touring and sale of merchandise.  However, the rise of the internet has led to sceptics argue that copyright protection is no longer viable as a source of income for the music industry (Gamal 6). The logic is that the increase in popularity of peer-to-peer file sharing platforms promotes piracy of music that negatively impacts the financial performance of the music sector (Gamal 15). However, reports indicate that music sales from retailers via online platforms such as iTunes do not anyway compromise copyright protection laws (Gamal 20). For example, in 2010, iTunes store had a collection of 12 million songs and has just sold over a billion songs on the platform (Gamal 20).

Each source of revenue in the music industry is directly or indirectly related to copyright law. Royalties, sales and licensing revenues from compositions and sound/video recording comprise a huge chunk of money from copyright protection(Gamal 32). Revenues from live performance and merchandising have an indirect relationship to copyright rules (Gamal 33). However, musicians can use copyright recordings as a promotional mechanism for their live shows/tours and merchandise (Gamal 33). Salaries that recording/performing artists, personal managers, publicists etc earn from their record labels are also directly related to copyright (Gamal 33). For composers, songwriters, music producers, sound engineers revenues they get from teaching at various institutions of higher learning has no direct bearing on copyright law (Gamal 34). However, it should be noted that some artists especially women may earn less income from royalties and licenses but earn more during live performance shows (Gamal 36).  For example, artists in pop and rock music genres earn over 40% of their revenue from live performances. On the other hand, composers and songwriters get 24% of their revenues from teaching jobs (Gamal 36). The perception of technology on the music industry revenues is varied. For example, composers/songwriters use less web-based tools to produce and sell their music (Gamal 43). This is because the composition of music is a highly personalized art where technology is viewed as a deterrent rather than a facilitator. Performing artists have a higher adoption rate of technology particularly the internet as a distribution and communication channel of their music (Gamal 43). However, there is a consensus in the industry that the internet has made the music business to be very competitive (Gamal 44).

There are many cases when performing/recording artists feel that they are not making as much money from copyright protection as they should. The reason is that majority of them sign exclusive rights to their record labels which reap any extra income that results from the sale of music as envisioned in the recording agreement (Stopps 33). There are cases where a consumer does not need the permission of copyright for certain uses of music either directly or indirectly. This is known as fair use and fair dealing in copyright law (Stopps 36). Fair use and fair dealing are very common when consumers use music in either film or advertising, making money in the process at the expense of the record label or individual songwriter/composer.

The best way for the music sector to continue making money is to increase the scope of copyright, improve enforcement of copyright infringement and strengthen copyright protection laws(Di Cola 2). The action will prevent significant loss of revenue for music publishers and also retailers. Recording artists who are backed by record labels enjoy more copyright protection than independent artists. This is because most record labels have resources and policies that ensure intellectual property laws are frequently monitored to seal revenue loss loopholes than independent artists/songwriters. There have been allegations that the current copyright laws do not meet the new challenges in music after the new millennium (Herlihy & Zhang 393).Furthermore, the copyright laws in existence in the US are not specific to the music industry (Herlihy & Zhang 393). The issue of technology has not been adequately addressed in copyright laws in relation to music publishing and distribution (Herlihy & Zhang 397). The US Copyright Office has yet to prioritize digital music in its bid to advance intellectual property protection in the sector. The licensing process is still very bureaucratic, no fair compensation for composers/songwriters and the payment information is not transparent (Herlihy & Zhang 397). Therefore, music copyrights are still a viable source of income in the music industry.

Impact of repealing net neutrality rules on the music industry

In 2017, the Federal Communications Commission voted to repeal the net neutrality rules that came into effect in 2015 (Kang para.1). The rules were put in place to regulate broadband network providers and protect internet consumers from unnecessary charges (Kang para 2).  It is also clear that some people do not understand the concept of behind net neutrality protections. According to Ludwik (para 1), net neutrality means that internet providers should not discriminate any data that results in higher charges on the user, platforms or websites. By repealing net neutrality regulations, large broadband providers such as Comcast and AT&T will charge for any content that flows through their websites (Ludwik). The action by FCC has sparked outrage from technology companies, music publishers and artists as witnessed by various protests in different parts of the country (Kang). Those who argue against net neutrality laws say that it reduces the quality of service offered by broadband providers. Such firms argue that the regulations also hinder innovation in the provision of digital services by making the internet market free and accessible to all.

Net neutrality protection laws were aimed at making the internet a free marketplace but the repeal will jeopardize that p urpose (Moss). Therefore, the repeal has the potential to give corporates an opportunity to monopolize distribution of content and also determine the price charged (Moss para 10). Such an action will result in anti-competition that will see consumers get poorer services for content while being charged exorbitantly for it (Kang). This means that publishing firms will be charged higher by broadband providers such as Comcast and T-Mobile in their bid to sell music to consumers (Moss). Even before the official repeal of the laws by FCC, internet providers were already flaunting regulations that impacted negatively on recording artists. For example, T-Mobile has been accused of lacking transparency in unlimited streaming of content and choosing certain subscription services that threatened the survival of competitors (Schewick 10). Furthermore, record label companies will incur higher internet costs to distribute music which will result in fewer revenues for artists signed to those labels (Ludwik para 6).

Music streaming has been a major source of revenue for record labels and artists in the digital age (Stopps 155).The most adversely affected stakeholders in the music industry due to the repeal of net neutrality laws are the independent artists/songwriters. They are likely to make less money because few consumers will be able to pay the extra chargers for streaming from Spotify, Pandora among others (Moss). Independent artists sell their music directly to fans hence; will find it extremely difficult to break through the audience, hence preventing them from going mainstream (Moss). Independent artists/songwriters cannot depend on live performance and merchandising fees since they are yet to reach consumers(Moss para 8). The only avenue they have is live streaming which cannot be possible without net neutrality protection. Studies show that interactive streaming services such as Spotify increase album sales (Aguiar 30). Furthermore, repealing of the laws is likely to gag digital music distribution which guarantees fewer chances of piracy, hence more sales through streaming on platforms such as iTunes (Giletti 10). Some music requires large bandwidth to download, which will be less affordable because of the extra charges (Giletti 15). Net neutrality laws help strengthens copyrights which will be adversely affected if those rules are changed (Leblois 54).

Effect of Cryptocurrencies on the music industry

Blockchain technology has led to the emergence of cryptocurrencies. They have not only disrupted the finance and commerce industry but also extended to the music sector. Blockchain technology allows for peer-to-peer payments without the need for third parties (O’Diar et al. 7). Such payments can be through Bitcoins, the most popular cryptocurrency. Bitcoin technology and others have a significant impact on the music industry. The following are the effects on the music sector;

•    Alternative sources of funding: Blockchain technology has allowed people to invest in the music industry through cryptocurrencies (De Leon & Gupta 15).

•    Database for music copyright information:  Blockchain serves as both a database and a network where copyright information both sound recording and perfuming artist can be retrieved by the user(O’Dair et al.8).

•    Transparency: there is lack of transparency in sharing of revenues in the music industry major deals have Non-Disclosure Agreements (O’Dair et al.12). With the use of Bitcoins, when a track is downloaded or streamed, revenue is automatically shared between the record label and the artists who are both involved in the transaction(O’Dair et al.12).

•    Promoting piracy: it’s difficult to enforce copyright laws on a blockchain due to a high degree of privacy and anonymity guaranteed to the user (De Leon & Gupta 26). Copyright infringement is rife with the use of blockchain technology as users viciously pirate music. This leads to loss of revenue.

•    Fast payments: in the hierarchy of payments in the music industry, record labels get paid first while artists are the last. However, with the use of bitcoins and other cryptocurrencies, payments will be much faster leading artists to earn on time (De Leo & Gupta 22). Furthermore, transactions cost with bitcoins are much lower than conventional currency (O’Diar et al.10)

Conclusion

Copyright is the major source of revenue for music artists, songwriters, composers etc. Despite challenges brought by the net neutrality laws, copyright remains a viable source of income for musicians. Blockchain technology can help the music industry by improving transparency in sharing of revenues, faster mode of payments and as an alternative source of funding. It, however, promotes piracy due to the anonymity involved.

Works Cited

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