Artists Aren’t Making Money The Way They Used To — By Selling Records

June 30, 2014  |  

This ain’t your grandma’s music industry anymore — nor your mother’s, for that matter. The music industry has changed so much it is nearly unrecognizable when compared with the one that existed just 20 years ago.

Music industry analyst Mark Mulligan recently examined the industry and explains things aren’t as bad as they appear. He found the since 2000, overall global music revenues have declined just three percent,  so not exactly a cataclysm, reports Business Insider.

Technology has totally altered the business. As people are turning to downloads and electronically passing around music, artists and their labels aren’t selling as many albums as they used to. Actual recorded music is now just 36 percent of the industry’s revenue stream. More money is being made from shows that product sales.

To that end, revenue from tours has grown 60 percent since 2000. And as such, record companies want a bigger cut. Industry heads have adjusted deal terms with their artists so that, since 2000, they get a larger share of the live proceeds. Because of this shift, artist income in general has been dropping for five consecutive years, according to Mulligan.

Labels now commit artists to “360 deals” that give them control over everything artists do. Prior to this, artists could take home a sizable chunk of money from performing live, nearly leaving out the record companies.

Expect more changes, says Mulligan. “Expect every traditional element of the industry to be challenged to its core, expect dots to be joined and old models to be broken,” he writes. “But be in no doubt that what we will end up with will be an industry set up for success in the digital era.”

And this new state of things shows no signs of changing. “More hours of music are being streamed than ever before, and more people are paying monthly subscriptions to streaming services than ever before. (Spotify alone claims 10 million paid subscribers.),” reports Salon. And while industry veterans used to fear the digital takeover, digital is proving to be the industry’s savior. According to agent and music industry insider Marc Geiger, in less than a decade there could be 500 million  people using streaming services worldwide and this could mean a total global revenue of $72 billion on the low end. Again, the winners are the labels, not the artists.

“They are generating hundreds of millions of dollars in revenue just from licensing, with no need to pay for distribution or manufacturing. Spotify alone is reported to have paid $100 million to the three major labels to license their catalogs,” reports Salon.

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