Streaming Services Disruption of the Music Industry

Most recently, musicians Justin Bieber, Daddy Yankee, and Luis Fonsi broke records with their hit song “Despacito” that hit 4.6 billion streams in just 6 months (Evgenivna, 2017). This achievement would not have been possible had it not been for the disruptive nature of streaming that has taken over the modern music industry. It is a common knowledge to music fans around the world that long gone are the days when they would buy albums or MP3 files to listen to songs. Instead, music fans opt to stream the music through subscription-based platforms such as Pandora, Spotify, Tidal and Apple – just to mention a few. Over the last few decades, music consumption has notably evolved quickly. Sony’s cassette-playing Walkman was the first potable music system and prevailed in the 1970s. The system changed in the 2000s, when iPods appeared. Ever since, the music consumption industry has gone through a roller-coaster to include systems such as buying cassettes and CDs and most notably purchasing individual MP3s. In 2017, the mostly consumed music system is streaming (Evgenivna, 2017).

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Contemporary music fans consider this service as the most efficient music system since it allows the convenience of changing between the genres and artists. It also facilitates personalization and rids music fans of the need for data storage as long as they have access to Internet service providers. While the benefits of streaming in the music industry are evident to fans, drawbacks arise particularly to the effect it has on the traditional music market. Musicians also suffer as they may not earn as much as they could for their music. Streaming is a disruptive technology that has created new market and value network while at the same time disturbed the status of the traditional music industry.

Music Industry

Definition

The music industry encompasses the producing, distributing and selling music in an array of forms. It also entails the promotion of live concerts for musical performances. The industry is not only about the creation of music but also the individual and organizations that directly or indirectly gain monetary benefits from the industry based on their input. The next segment outlines the roles played by professionals and companies in the music industry. By highlighting the roles and occupations in the area, it will be easier to discern the effect of streaming on them citing which ones have been considered obsolete given the disruption created by the service (Rutter, 2016).    

Roles and Occupations

The music industry includes audio specialists such as sound enforcement engineers in live concerts, mixing engineers, and studio recording engineers. Their duty is to utilize computer software and hardware, musical instruments, as well as other equipment to record, mix and reproduce sound. Essentially, audio engineering is concerned with the practical and creative aspects of sound, which influence quality (Rutter, 2016). The booking agency is another role in the industry that deals with negotiations and contracts for music performances between singers and recorders. The music segment also has collection societies that act as representatives of the copyright rights interest of performers, sound recording producers, music publishers and songwriters. They also collect license fees and distribute loyalty to subscribed members. Other roles in the music industry include the entertainment attorney, executive music producer, music publisher, music producer, live show producer, artist manager, publicist, recording artist, set designer, song writer, stage manager and tour manager (Clawson, 2017).

Evolution of the Music Industry

The advancements in technology have brought about radical changes in the music industry over years. One form of music system has over the years been transformed into another. For instance, vinyls paved way for cassettes that in turn paved way for CDs. The CDs then transformed to become digital mp3s, which were the latest systems before the sporadic prevalence of streaming services. The latter are a product of the current boom session experienced in internet connectivity with many internet providers joining the industry. Consequently, the web access has been readily available and to some extent cheap, which boosts the use of streaming services. Music producers, labels and artists have been compelled to follow suit in the changes given the current consumer market has inclined towards streaming services as the most predominant platform to access their music needs. Currently, the music industry is in a phase of the cycle where streaming is increasingly growing into a commodity. As such, consumers in the music market expect to access their music needs for free from any point in the world at limited or no cost at all. In 2014, streaming represented a total of 27% of the revenue derived from the United States’ music industry (Lindblom, 2015). This proportion is due to the establishment of a dominant design and the stalling of the disruptive stage of streaming in the country. It may also indicate that the nature of the streaming services is yet to be explored.

The introduction of the streaming model was necessitated by a significant drop in revenue generated from the music industry, which was predominantly caused by the fact that CDs were increasingly being replaced by illegal downloads. At the time streaming through the freemium model brought revenue back to the music industry although the platform was economically unviable. Currently, the industry is at a breaking point with artists and other creators at taking different paths in the delivery of their music services to customers. They also have divergent opinions regarding the use of service as a replacement for the more traditional forms. While some are actively resisting the use of streaming platforms, others support them. Artists and other creators who feel compelled to utilize the model have resorted to releasing their work independently on online platforms. Some artists have become creative, as they are either buying or becoming partners at the streaming entities. While contemporary artists have been drawn into streaming, most record labels have resorted to hang on to their conventional business models. Technological giants such as Apple and Google have entered the music industry with their streaming services and it is only a matter of time before the music industry is completely disrupted. However, before discussing the effects of the contemporary technological streaming platforms in the music industry, it is prudent to review the age of digital disruption (Lindblom, 2015).   

Age of Digital Disruption

The 21^st century has so far been full of surprises owing to the capacity of people to share information over connection tools such as cell phones. As at 2010, approximately 50% of the global population had a combined access to internet and cell phones. Almost 5 billion users had access to cell phones, while 2 billion users had access to the internet (Schmidt and Cohen, 2010). With the current upsurge in streaming, it is most likely that the value has grown dramatically. The digital era led to the “interconnected estate” concept, where any person with web access possesses the power and the voice to bring about change regardless of their nationality and standards of living. The growth of interconnected estate created more opportunities for the development of different sectors of the global economy including business, marketing and music industry. The overall concept, herein, constitutes digital corruption. 

By definition, digital disruption refers to changes resulting from emerging technologies as well as business models, which affect the value of products/services that exist in the market. The devastating nature comes from the fact that the emergent products/services caused by changes in the digital world disrupt the prevalent state of the market, thereby, necessitating re-evaluation by existing market players. Digital disruption sheds light on the tussle between incumbents and new entrants in the market, in terms of establishing themselves in increasingly competitive markets (Skog, Wimelius and Sandberg, 2018)

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The interconnected estate discussed earlier is in line with the theory of sharing economy as presented by Geissinger, Laurell and Sandström (2018) in their article. The digital disruption age has brought about revolutionized economic processes. In traditional economics, focus has been on scarcity of resources as an assumption in theorizing market dynamics. On the contrary, western economies have been seen to gradually move to adopt the abundance concept in the recent decades. This trend is in line with increased shifts in IT technologies such as readily available computing power and internet connectivity. These technological changes have yielded novel business frameworks and competitive turbulence in the global markets. The result is the emergence of the sharing economy that entails information communications technologies (ICT)-enabled platforms used for exchanging goods and services following both market logistics such as selling and renting as well as non-market logics, for instance, swapping, grifting, lending and sharing. This is a typical example of a discontinuous technological change innovation that has led to increased abundance. The idea behind the sharing economy is the generation of abundance by lowering of transaction costs and activating access to underutilized assets, thereby, facilitating exchanges through a platform logic that creates scalability (Geissinger et al., 2018).

Geissinger et al. (2018) conducted an empirical study to assess sharing economy as part of digital disruption experienced in the global economy. The data was derived from the Swedish media landscape that is made up of two main companies – Uber and Airbnb – as the main actors. The outcomes of the study revealed that sharing economy has stretched to sectors that were traditionally not considered part. They include food delivery, fashion and clothing, and on-demand services. A long tail was also observed to touch on other non-related sectors. The research shows the impact of digital disruption in the re-modelling of business models in the global economy. Digital devastation encompasses three key elements, namely: digital innovation, digital ecosystems, and value logic. Digital innovation encompasses the design process where technologies are invented, tested and selected for incorporation. Digital ecosystems are the organizational networks. Value logic entails architectural frameworks that organize digital innovation (Skog, Wimelius and Sandberg, 2018). Typical examples of the age of digital disruption include the fall of the Kodak cameras that created a, hitherto, unbeatable monopoly in the 20^th century. The fall was attributed to failure to acclimatize to the changing customer needs with the rise of the internet age. In the 21^st century, disruptions have been seen in the music industry, most notably.

Platforms Disrupting the Future of Media and Entertainment

Radio and TV broadcasters as well as cable TV companies are increasingly facing stiff pressure to keep up with new digital platforms that have been the most-sort by the consumers in media and entertainment sector. The digital outlets that have threatened to put traditional outlets out of business are social networking sites and live streaming services. Social networking sites include social networking sites, namely, Snapchat, Instagram, Twitter, and most recently, Facebook Live (Kofoed and Larsen, 2016). On the other hand, live streaming sites include YouTube, Spotify, Apple and Google are also lining up their streaming services. 

Of the live streaming, YouTube is influential in changing the future of media and entertainment. YouTube posted its first ever video “Me at the Zoo” back in April 23, 2005. The video received 34.5 million views in just over a decade (11 years) (Wharton School, 2016). This has changed in the recent passed with videos getting as much as 4.6 billion views in a small period, say 6 months, in the case of the song “Despacito” (Evgenivna, 2017). YouTube has become and is still growing to be the ultimate hub for the videos that people want to upload or watch. Since the streams are free, YouTube attracts customers who traditionally followed other mainstream media such as TV, radio and cable TV. Nowadays, anyone can get uploaded videos of their favourite TV shows on YouTube. The service has allowed companies running their TV broadcasts to utilize the platforms and facilitates users to stream videos without necessarily needing a TV set, as long as they have Internet connectivity.

YouTube and Facebook Live are the future of media and entertainment. This view is based on their unique feature of allowing users open interactivity, where they can comment on videos and even upload their own. These two platforms typify the user-generated content that act as direct competition to traditional media – whether online or otherwise. When it comes to the music industry, YouTube is one platform that has initiated and continues to cause disruption. Nowadays, artists gauge their fame by the number of YouTube views that the song has received. Additionally, consumers in the music industry nowadays opt to access trending new songs as well as their favourites on YouTube before they decide to download or buy traditional CDs of the same (Wharton School, 2016). Regardless, it is apparent that consumers use YouTube as the first point of contact for their music needs before deciding on whether to purchase copies to listen to offline or not. YouTube has had competition from streaming companies such as Spotify with Google and Apple keen on entering the market. Predictably, the future of media and entertainment will be predominantly the use of live streams given the upward surge in clouding power and Internet connectivity. However, file sharing devices such as memory cards and USB drives will still be available as they will be used to save files to listen or view them offline.

Although the discussion points to a complete disruption of traditional media and entertainment, the study by Nguyen, Dejean and Moreau (2014) shows a contradicting outcome that would be used as basis for future recommendations. The research assessed the effect of streaming on music consumption, and the outcomes indicated that streaming did not affect offline sales. This might be attributed to the fact that consumers often purchase music to be listened online when they have no internet connectivity. The results also showed that streaming positively affects attendance to music concerts of international artists and not local artists. This is the case since local artists have limited capacity to upload their video online and they also have fewer fans for live streams, hence, they would not be trending. Essentially, streaming cannot completely affect music sales (Nguyen, Dejean and Moreau, 2014). It may only render some of the roles and occupations of the music industry illustrated earlier on obsolete.

Conclusion

The paper highlights an illustration of the music industry and the components in terms of the players and the role they play. It then addresses the digital disruption in the music industry and also highlights the age of digital disruption. The paper assesses contemporary digital disruption platforms with emphasis on the manner in which they would affect media and entertainment in the future. As realized, streaming services are potentially the most disruptive in the future of media and entertainment given the ready availability of clouding power and Internet connectivity. Therefore, streaming is a disruptive technology in the music industry that has created new market and value network while at the same time disturbed the status of the traditional music industry.

References

• Clawson, M.A., 2017. When women play the bass: Instrument specialization and gender interpretation in alternative rock music. In Rock Music (pp. 151-168). New York, NY: Routledge.
• Evgenivna, D., 2017. The impact of streaming on the music industry. [Online] Available at: https://www.thriveglobal.com/stories/12286-the-impact-of-music-streaming [Accessed 23 Oct. 2018].
• Geissinger, A., Laurell, C. and Sandström, C., 2018. Digital disruption beyond Uber and Airbnb—Tracking the long tail of the sharing economy. Technological Forecasting and Social Change. https://doi.org/10.1016/j.techfore.2018.06.012
• Kofoed, J. and Larsen, M.C., 2016. A snap of intimacy: Photo-sharing practices among young people on social media. First Monday, 21(11).
• Lindblom, S., 2015. A framework for disruptive innovation in an industry where everything is innovative. Linköping, Sweden: Linköping University.
• Nguyen, G.D., Dejean, S. and Moreau, F., 2014. On the complementarity between online and offline music consumption: the case of free streaming. Journal of Cultural Economics, 38(4), pp.315-330.
• Rutter, P., 2016. The music industry handbook. London, UK: Routledge.
• Schmidt, E. and Cohen, J., 2010. The digital disruption-connectivity and the diffusion of power. Foreign Affairs, 89(6), pp.75-85.
• Skog, D.A., Wimelius, H. and Sandberg, J., 2018. Digital disruption. Business & Information Systems Engineering, 60(5), pp.431-437.
• Wharton School, 2016. How platforms will disrupt the future of media and entertainment. [Online] Available at: http://knowledge.wharton.upenn.edu/article/platforms-will-disrupt-future-media-entertainment/ [Accessed 23 Oct. 2018].