Music Industry Case Study: Making Money

We've focused on how the music industry is a money-making business so far, and this would be a good time for you to do some of your own further research into how artists and record labels make money in an ever-changing media landscape. You're going to prove you've done some research by commenting.

You need to have some awareness of the many institutions involved in the production and sale of music, so familiarise yourself with the diagram:

More info here: http://www.planetoftunes.com/industry/industry_structure.htm

We found out about some technical stuff like the difference between mechanical, performance and artist royalties and the agencies who collect the money (in the UK the PRS). We also found out that the UK industry is dominated by the 'big four' record labels - Sony, Universal, Warner and EMI. However, with Universal and Sony having been given permission to buy up many of the assets of EMI, we now have a 'big three'. This concentration of ownership is seen by many as stifling creativity and making it harder for new acts to break out.

Then we looked at the platforms used by the business. The first thing we noticed was that the broadcast and E-media platforms are merging - increasingly we want our computers to also be TVs and radios, but at the same time we are expecting our TVs to function like computers and new 'Smart' TVs make this possible. As we learned at the o2, our mobile phones are also expected to function in multiple ways. The posh media term for this way in which devices are expected to do more and more is convergence. Eventually, will individual gadgets become extinct? Will we just use one piece of equipment for every media need? Convergence affects the music industry because it changes the way we access music, so it needs to be considered in any money-making plan for any artist.

Secondly, we decided that the E-media platform offers the greatest range of ways to listen to, watch or read about musical artists. This is something else which throws up money-making challenges for the industry. On a positive note, it makes it easy and free to promote your music, and cuts down the need for a huge team of people needed to help an artist succeed. However it could potentially make it harder to make money once you achieve success. We said that the main ways music would be accessed online would be:

• iTunes downloads - but as an artist, you will only receive 9-10p per 99p download, and initially this will go into paying off the money the label invested in you.
• Illegal downloads - as an artist you won't make any money from this, unless the downloader likes your single and decides to pay to download the album or pay for a concert ticket.
• Streaming - via sites like Spotify. However, your royalties will only be minimal and only payable if the song is listened to all the way through. The infographic below estimates how many streams you would need to make the US monthly minimum wage. You might have to zoom in or view its original source.

Image from:
http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/

We looked at the good and bad side of music piracy, summed up here.

However you look at it, it's clear that any artists who relies on iTunes downloads to make money is going to struggle.  We came up with some other money-making ideas, from merchandise sales (remember how Darren told us that Glee made more money from merchandise sales at the o2 than ticket sales?) to use of sites like Kickstarter to raise sponsorship. Add to that fragrances, clothing lines and gig ticket sales, and you could still make millions. The article from Rolling Stone is here if you're interested. It points out that the best money-making method will depend upon your target audience and genre. One Direction fans come to gigs with parents, parents have credit cards and an inability to say no, therefore having lots of 1D-emblazoned pencil cases/mugs/calendars/hot water bottle covers  on sale after the gig = winner.

So, to survive, artists need to be innovative and keep up with technology - this will bring us on neatly to our next topic, music and technology. For now, to conclude this topic, I want you to find out about a creative way an artist has made money or promoted their products, and post what you've found out in the comment box. Everyone needs something different.