How Social and Digital Media Have Changed the Music Industry

The Life and Death Of The Record

The music industry will always have barriers and obstacles for artists to overcome. In the days of the gramophone the obstacle was the “Big Six.” For nearly 60 years, six major record labels dominated the industry, and while the system was profitable for these conglomerates, revenue distribution for artists was rather disproportionate. To overcome the scratch in the vinyl, artists took advantage of the revenue and exposure that they received from live shows. In the 80’s and 90’s, with the invention of the compact disc and emergence of new technology, artists were able to use more robust and affordable equipment to record albums themselves. The compact disc served as the launching pad for digital age of music, and the next stop would be peer-to-peer (P2P) file sharing, also known as “the beginning of the end for record sales.”

At the end of the millennium Napster, a technology launched to create music piracy sharing, became the first platform to promote P2P file sharing. Followed by many similar platforms such as KaZaa, Limewire and more, this new format for music consumption began to hinder record sales. Fast forward a few years to iTunes, a platform launched in 2003 that allowed Mac users to purchase music without any subscription fees, iTunes became the first music retailer to sell single songs, revolutionizing the way we consume music. Now, back to the present, we live in a time where an artist can create a song, upload it to a third-party host and share it through social media, all from their living room couch. While the emergence of digital platforms such as iTunes, YouTube, SoundCloud and Spotify have opened doors for artists who are trying to make it; these platforms have also contributed to the inconsistent profit growth of the record industry. So, how do we keep social media and digital music platforms from destroying careers? We use them to our advantage.

Launching Musical Careers With The Click Of A Button

20 years ago struggling artists had to play for empty bars and strangers on the street, YouTube is the new empty bar. With the click of a button musicians can upload their content and A&R execs can discover new talent. Possibly the most successful YouTube sensation of our time is Justin Bieber. From his cover of “So Sick” by Ne-Yo at a local singing competition to the first time he sang for his idol and mentor Usher, Bieber’s videos got him where he needed to go. With over ten million subscribers and five billion total views, YouTube made us all “Beliebers.” Artists such as Mac Miller, Carly Rae Jepson and even Adele, who was offered a record contract after a friend posted her video to MySpace, have all gotten their start on the web.

Music Chooses You

So your video is on YouTube, your Facebook and Twitter pages are active and you are all ready for the world to fall in love with your music, what now? Lucky for today’s artists many streaming services and music retailers do some of the heavy lifting there. By suggesting new music to consumers based on past tracks they have listened to, the music industry does a great cover of the ad industry’s go-to jam “suggested ads.” Spotify, possibly the most powerful app for new music discovery, even has an entire page where it will categorically catalog music suggestions for its consumers when they need a new tune. A few years ago during an Ivan and Alyosha listening binge, Spotify suggested that I check out a new band, similar to my current listening habits called The Lone Bellow, two albums and four live shows later, I would like to thank Spotify for introducing me to what may be my favorite musical act of all time. Phillip Seymour Hoffman’s character in Almost Famous, Lester Bangs, said it best:

“Music, you know, true music, not just rock ‘n’ roll, chooses you.”

Maintaining Music Careers

So if Spotify is the new demo tape, helping artists get their start, what can music streaming platforms, digital technology and social media contribute to a successful artist’s career? Sharing music on social media wouldn’t be profitable and while music suggestions might be helpful, it is safe to assume if you are listening to Kanye, you already know who Jay-Z is. These artists need to be much more strategic with how they use social media; they need to operate like a brand. Artists are some of the most talked about topics on social media, these celebs need to use this to their advantage and start to listen. Social media can offer them a slew of information about their fans and haters alike.

According to a Nielson study, younger millennials (18-24) are driving music consumption in the U.S., spending more than six hours per week listening to music. 24 Billion songs were streamed on-demand in 2012 (the year in which Spotify reached 20 million users) and, lucky for the music industry, on-demand music streamers are on social and spend big! These listeners are over 90% more likely to follow and engage with celebrities on social media, including sharing content. They are 90% more likely to be heavy spenders on music and 50% more likely to be heavy spenders on event tickets. So while many claim that music streaming services can take revenue away from artists, the numbers tell a different story, in fact, 29% of consumers are likely to purchase new music after hearing it through a streaming service. A little math equation for you; if 29% of the songs listened to on-demand in 2012 (24 Billion) were purchased on iTunes (at $1.99 a pop), the music industry would have raked in, $13.9 billion, and that ain’t exactly chump change.

Who Got It Right?

Mac Miller came knocking on the music industry’s door when he became the first artist since 1995 to release an album independently and top the charts. The local Pittsburgh artist developed clout on the hip-hop scene by releasing free online “mix-tapes,” and posting music videos to YouTube. After getting the nod from several notable music bloggers, Miller built up a solid fan base and 400 million views on his channel. Along with the release of his chart-topping album in 2011, he played over 200 shows and collected an average of $40K per night, putting him on the same level as such veteran hip-hop acts as Common, Ja-Rule, Rick Ross and T-Pain.

Amanda Palmer, a 25-year veteran of the music industry and a whiz at social media turned a boring Friday night into an entire movement. The punk rock artist came up with the hashtag #LOFNOTC (The Losers Of Friday Night On Their Computers) and thousands joined the conversation. After a follower suggested a t-shirt for the movement, she quickly designed a logo and threw up a website to sell t-shirts. Palmer was able to rake in $11,000 in just two hours. Now that is the power of social media, profits in an instant. Advertising Age was quoted saying, “Palmer is more sophisticated than almost anyone on the Internet – musician, brand or otherwise – when it comes to gathering her audience around her and keeping the conversation going.”

As The Record Turns

The glory days of waiting in line outside Sam Goody for the new Justin Timberlake are gone, but then again so are the glory days of the Big Six, so maybe it’s a trade off. Artists make their real money from their live shows, just like they did 60 years ago. The industry will continue spinning on the turntable and every few years we will move onto the next track. We started with the vinyl, moved onto 8-tracks and cassette tapes, then came CD’s, followed by MP3’s and now streaming music. Most cannot imagine what will come next, in the 90’s we thought nothing would ever top the CD, boy were we wrong.

– Sara Fogel, Senior Associate Consumer Insights