There Is No Music Industry


First, let’s be clear about something. “The music industry,” as referred to by the popular media and the popular consumer, consists of record labels. That’s it. So when you hear stories about the “decline in the music industry,” what you’re hearing is that record labels aren’t making as much money as they used to. What a lot of people fail to realize is that record labels make nearly all of their money through the sale of recorded music. As any up-and-coming musician will tell you, however, that is just a small proportion of a musician’s overall income.

SPEAK frontman Troupe Gammage estimates that of the group’s total income, the proportion comprised of CD sales is “maybe 30% when we’re touring,” and less when they aren’t. Bright Light Social Hour guitarist Curtis Roush had a much lower estimate. “Probably around 10%,” he told me, adding, “I would imagine it will be higher for next year” after their next album release. Just measuring the sales of recorded music (or, “the music industry”) only covers a fraction of the potential revenue for artists.

We can be sure about one thing. Even if the revenue from music sales has gone down in the recent past, it is certainly not going to go up in the near future. The number that will go up? Royalties from streaming services and digital radio.

In the first half of 2013, there were 50.9 billion audio and video music streams. Billion. Not only is that a 24% increase over that time period last year, but it is nearly 75 times the 682 million digital music sales that occurred in the first half of 2013. And as subscribers to these services continue to grow, they will only become more profitable for themselves, as well as the artists. Consider that only 0.5% of the potential record-buying U.S. public is on Spotify – to look at just the most popular audio-only streaming service – and it is clear that the reach of this industry will only expand.

The potential is the reality. Streaming services are no longer a possible direction for “the music industry.” They are here. And whether they take the form of YouTube, Pandora, Spotify, or Rdio, they are sticking around. “The music industry” is becoming just a subset of the tech industry.


Many of these digital streaming services are still being hotly debated in and out of “music industry” circles, because both artists and labels are worried about not getting enough of the cut. They’re worried that they are losing more of their traditional revenue stream (physical sales of CDs and vinyl) because of these streaming services. And they’re right. New revenue streams and business models have developed, and they need to get on board with that. It’s understandable that artists need to get an appropriate cut of the overall pie, but what about labels? What do they do that requires that they be paid as well? The answer, in short, is nothing.

Record labels do one thing. They lend musicians money to either record an album or tour. They are banks. That’s it, plain and simple. They decide which “creditworthy” musicians will likely be able to pay back that loan, and then they make an investment. Just like Bank of America or Wells Fargo, except that the loan can only be paid back from sales of the recorded material. In order to make that investment profitable, they help with marketing, publicity and sometimes touring (but that is all part of the debt the musician has to pay back) for the single reason that all of those things help sell more records (or digital tracks). Aside from this one thing, they are useless.

It seems, then, that any company could provide this service to a band. For inspiration, let’s look to the television industry.

Netflix and Hulu are rewriting the rules of the television industry by each offering exclusive original content, available only on their streaming services. Netflix has made the biggest splashes with Orange is the New Black, House of Cards, and Arrested Development, but Hulu has joined in as well. Their production began with Morgan Spurlock’s A Day in the Life series, and has continued with Kevin Smith’s Spoilers, Richard Linklater’s Up to Speed and Seth Meyers’ The Awesomes. Additionally, Hulu has carved out a nice niche by being the only US service provider for a slew of British programming, including the excellent Misfits.

Netflix has seen both their prestige and their subscribership grow with each additional high-profile release. Hulu continues to grow its service due to a wider selection of less-prestigious content. And while the television industry continues to undergo its own revolution, perhaps these models can provide a direction for the music industry.

What if a streaming service fulfilled the traditional duties of a record company? For example, what if Rdio (who has a smaller market share than Spotify) gave an artist an advance on a record in exchange for exclusive distribution rights? If that artist were popular enough, and if it were potentially only available to paid subscribers, it could translate into a significant increase in revenue for Rdio, and would at the very least be a huge publicity boon. Currently, artists with new releases (like the Black Keys or My Bloody Valentine) withhold those releases from streaming services in order to boost physical sales. Why can’t the reverse happen? Why can’t an artist withhold releases from physical sales in order to boost streams?

Tech companies aren’t the only corporations that could provide the banking function formerly filled by record labels. Mountain Dew has been signing artists for years. The car company, Mini, sponsored live performances from artists like AraabMuzik, Real Estate and Dale Earnhardt Jr Jr. Red Bull is building up a massive roster of artists involved with their Sound Select program. There’s no reason why corporations couldn’t devote some of their marketing budgets to sponsoring artists. It would build their brand tremendously.

Admittedly, the record companies do hold some perceived advantages. They have a great deal of experience with marketing artists, but there are also independent PR and marketing companies that could do the same thing. So could tech companies, car companies, or soft drink companies.

Marmalakes singer and guitarist Chase Weinacht asserts that record labels allow for “opportunities” for artists on their rosters, like being able to tour with other artists on the label and thus expand into other artists’ audiences. This might be easier to do with some labels, but it’s definitely not a service strictly limited to labels, as Red Bull Sound Select artists have performed together frequently and could conceivably do so even more in the future.


Getting signed to certain labels can come with some amount of cultural cache. “I’d probably prefer Sub Pop or Merge to release a record over Red Bull,” Roush said. “All other deal points being equal.” But he went on to add, “I’d probably want to avoid a major [label] these days for fear that they could go into bankruptcy, at any moment, and [we’d] end up lost in their reorganization or liquidation. Purgatory, in other words.”

Roush’s skepticism is understandable. Major labels have shown themselves to be resistant to change, clinging onto the antiquated policies of a sinking business model, and artists deserve better. We don’t need to fight against these services, as so many artists have done of late. This is an act of casting their lots in with a sinking ship; instead, artists need to leave that ship in favor of the newer, growing boat of streaming. (I think it’s interesting that younger artists seem to be much more optimistic about the future of streaming, and their methods of compensation. See this great video from NME.)

Those of us interested in the preservation of musicians’ livelihoods need to ask ourselves:
– How can we integrate streaming platforms into more peoples’ lives, and thus generate more royalty revenues for artists?
– What revenue streams can artists activate that don’t involve selling physical copies of their music? This may involve licensing, crowdfunding, live shows, merchandise, special perks and promotions for hardcore fans, and plenty of things that we haven’t even thought of yet.
– What sorts of companies might be able to provide the services once provided by labels (see Southern Threads, for example)?
– What can we learn from other artistic industries, like film, television, art, fashion, etc?

The kneejerk reaction from a lot of people in these conversations is often to think of reasons why this won’t work. And troubleshooting can be useful. But let’s think outside the box. Because there is no longer a music industry as we once knew it.

– Carter Delloro

Thanks to Curtis Roush, Troupe Gammage, Chase Weinacht, Ryan McGill, Stephane Groudle, and Adam Mandell for sharing their thoughts and experiences with me for this article.