Recorded music revenue has increased again after decades of declines due to piracy. Despite this, the music industry remains dominated by a small group of powerful companies. This article looks at how the current concentration of power in this industry affects artists and the live music market. And it highlights the potential of blockchain technology as a business model for the music industry.
Blockchain offers an opportunity to rethink a new business model for all of entertainment, including the music industry
Blockchain can provide a new platform for music and entertainment companies to create a more transparent music business. Music creators can create and sell a digital token on the blockchain, which could be used to monetize their works. This would make music more accessible to consumers, and it would also enable artists to make more money. Some of the music industries have already begun to experiment with blockchain technology. For example, Spotify is experimenting with blockchain to help artists make more money.
While the music industry is an example of an industry that has been slow to adopt blockchain, the Beth Sparrow idea of tokenization is not unique to that industry. Blockchain technology allows the creation of decentralized autonomous organizations, or DAOs, to operate transparently on the blockchain. For example, the Water and Music research DAO, is designed to incentivize music industry professionals. It will do this using NFT tokens and a DAO-style organisational structure. While early narratives of blockchain assumed that artists would be rewarded fairly, this notion has changed over time and has become less prevalent.
Recorded music revenue has returned to growth after decades of piracy-driven declines
The music industry has experienced a comeback in recent years, with digital downloads and streaming services bringing in billions of dollars. Streaming services are generating much higher margins than physical formats and have helped the industry grow for the fourth consecutive year. Streaming revenues, including paid subscriptions, streaming radio, and ad-supported subscriptions, now represent more than three-quarters of industry revenue.
In the U.S., illegal downloads are responsible for losses of up to four billion dollars annually. These losses are caused by many reasons, including the fact that a significant percentage of songs are downloaded from peer-to-peer networks. Additionally, a recent decline in the number of legitimate CD sales can be traced to illegal downloads. According to the IFPI, roughly 20 billion songs were downloaded illegally worldwide in 2005.
Concentration of three major players
The entertainment industry is a fast-evolving market, subject to external and internal pressures. The industry’s profitability depends on diversification, innovation, affordability, and competitive intelligence. Several factors contribute to this success, such as consumer and market demand, new technologies, and brand loyalty. In recent years, the entertainment industry has seen an increase in global demand for entertainment products and services.
The three leading companies dominate the entertainment industry. The first is the Walt Disney Company, which has more than 540 locations, while the second is Dave & Buster’s, which operates 56 arcade-restaurants in the US and one in Canada. The third largest player is Sega Entertainment USA Inc., which is a subsidiary of Japanese parent company Namco Bandai Holdings.
Impact of social distancing restrictions on live music market
The Live Music Market is currently facing a number of challenges. Streaming numbers have decreased after the outbreak of the coronavirus, while live concert revenue has been hit by social distancing restrictions. With over a quarter of fans unwilling to attend live shows due to the risk of contamination, the music industry is struggling to find ways to drive revenue in this new environment. The Musicians’ Union is calling for a “seat-matching” scheme to compensate venues for reduced attendances. It has warned that over a third of artists are considering a career change.
The restrictions have already affected the live music sector in the UK, with a majority of venues shutting down. The ban, introduced in March, is estimated to have cut PS900 million from the country’s economy. The live music industry is highly self-employed, with 72% of workers being self-employed in 2018, which makes it more susceptible to economic shocks.