Why the Music Industry Doesn't Care About Selling Music Anymore.

[soul oasis]

source


http://www.digitalmusicnews.com/perm...edium=facebook




The following guest post comes from Jeff Price, founder of both spinART and TuneCore. His latest company, Audiam, has a mission to get artists paid for the use of their music on YouTube.

In today's new music industry of peer-to-peer file sharing, download stores, and on-demand streams, it's hard enough for an artist to make money by selling their music. So what happens when the world's largest music distributors and stores carry all the songs in world but don't need to sell any of them in order to make money?

The answer: revenue from the sale of music goes down for the artist, while simultaneously there is no negative financial impact on the new stores and distributors.


Interests are clearly misaligned. Artists have been reduced to replaceable cogs in a teeming mass of other undifferentiated music creators used purely as a commodity to represent breadth of choice for the consumer. In short, artists are used to financially fuel these new companies, but they are not reaping the same financial reward in return.
The old music industry may have had a lot wrong with it, but at least it was clear how everyone in the food chain — the artist, record label, music distributor and physical retail stores — could stay in business. The music had to be created, recorded, manufactured, distributed into stores and... SOLD.
Not so in the new music industry. Now it is only the artist who must sell their music in order to "stay in business". And artists are fending for themselves against a tidal wave in a sea of technology companies and venture capitalists. All sectors of the music industry are no longer being run by people from the music industry. This glaring misalignment does not bode well for the future of music.
Let's start with the music stores.

Music Stores/Services


Unlike the physical music store of yesteryear that needed to sell the CDs and vinyl sitting on their shelves to make money, the digital music stores and services of today (Pandora, iTunes, Amazon, Spotify, and others) can make money without ever selling -- or even streaming – all the music they 'stock'. In this digital age, amongst the new ways music is being utilized for profit, the sale or streaming of music is almost an afterthought.
Take iTunes, currently the obvious substitute for the traditional record store. If Apple happens to make money from the sale of the music (which, some suggest they didn't for many years ), all the better — but, the main purpose of iTunes is to make money for Apple by selling Apple products and gaining market share for its operating system.
Amazon is more or less in the same boat, using music as an enticement to motivate people to create Amazon accounts, buy other products that are not music (including their own Amazon Prime service), sell more Kindles, and gain market share. This explains why it sells music for less than it pays for it. Music acquires those customers for their other products and services.
And it's not just Apple and Amazon. Take a look at Spotify and other interactive streaming services. How is it possible that a company like Spotify, whose sole business model is to make money from the streaming of music, is not prioritizing makingmoney from the streaming of music?

The answer: Spotify doesn't need to stream the music it carries, nor be profitable from those songs it does stream, in order for its investors and owners to reach their financial finish line of selling the company or taking it public to make billions.


To reach their goal Spotify believes they must have:
(1) a huge number of subscribers, a vast catalog of artists,
(2) a user experience that customers find pleasing, and
(3) ubiquity.
Making money off the music, or having the music it carries being streamed is, at this time, an afterthought. And when the inevitable financial exit for Spotify does come, the artists will make no money from it despite being at least half of the equation. This may explain why the major labels, all of whom own a piece of Spotify, do not appear worried about Spotify's royalty rates.

Their eye is focused on the true financial prize: owning a percentage of a company that gets bought for billions.


Just look at Pandora: its shareholders made a fortune when the company went public, despite it making little to no profit. It was able to IPO off the artists' music despite the music not ever needing to be played, nor paying themusic creators a royalty they deem reasonable.
At the 'music store,' the point of economic intersection where art truly does meet commerce, the entity selling the music generates revenue without selling music or can lose money on the sale or stream of a song and still reap a profit while the artist makes little or nothing at all.

The interests of the artists and the music stores are no longer aligned.