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Running Head: INNOVATION OF MUSIC LISTENING

Innovation of Music Listening


Kevin Zhou
Florida State University

INNOVATION OF MUSIC LISTENING

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Introduction

From vinyl records to cassette tapes, from CD's to ninety-nine cents per MP3, the method
in which music is being capitalized is rapidly improving and innovating. In this era, that same
innovation has led to a new medium in which songs or music can be listened to and technically
streamed through a purchased subscription account; music streaming services. A music streaming
service is an application that allows a consumer within that market to stream nearly any song that
the service has to offer. This concept can be considered as an alternative to direct digital music
purchases.
With this new service, the music community, comprised of music listeners/artists has
witnessed a vast number of changes that is altering the culture in which people listen to music as
well as huge changes in the way the music industry interacts with their consumers. However,
with these changes come with arguments; it is now being speculated whether these changes are
beneficial to the community and industry financially and culturally. Although thorough
qualitative and quantitative research has been done, the new service does come with faults.
However, when looking at the benefits, the music community and industry far is still better off
with Music Streaming Services. This is so because, with the new service, the music industry is
seeing economic improvement. Additionally, with music streaming services, the music
community went through important and essential cultural changes that benefit both consumers
and artists. Lastly, with the introduction of music streaming services comes the conclusion of
arguably one of the biggest issues the music community and industry faces; music piracy. This
paper aims to inform those who are considering migrating from conventional music buying over
to the new form of listening to music music streaming.

INNOVATION OF MUSIC LISTENING

Music Industry Financial Analysis


First, when examining how the music industry benefits from this new service, it is easy to
realize that the first thing to consider, being that it is an industry, is knowing how much profit are
they reaping financially from music streaming services. But before looking at the numbers,
Lauren Keating, a writer for Tech Times wrote a 2015 article reporting how record labels and
music streaming services make their deals. Keating explains that each music streaming service
has their own method of pricing and rates. Essentially, because most of the deals happen on the
negotiating table, deals, pricing, and contracts remain confidential between the two parties.
However, Keating goes on to report that a contract leaked from one of Apple Musics deals,
shows that the company makes 71.5 percent of its revenue in the U.S. However, it's important to
note that the approximately 70 percent will go to whoever owns the publisher rights to the
recordings In this case, it would be the music label and the contracted publishers (Keating,
2015). Knowing this, it is easy to see that the music industry is reaping the benefits from this
new medium of listening to music.
When looking at the numbers and statistics, Nils Wlmert of Vienna University and
Dominik Papies of the University of Tuebingen gather quantitative data that proves the music
industry is making financial gains from the new service. In their research, they compare revenues
made from free streaming services and, in this case, paid subscription streaming services. They
find that even with market cannibalization or the initial negative impact of a new product or
service on sales, total revenues ended up being positive. In their conclusion, they even note that
the music industry should consider the subscription music streaming service over the free one if
they want to see economic improvement (Wlmert & Papies, 2015, p. 321-324). When looking
at Keatings article and comparing to Wlmerts and Papies research, a conclusion can easily be

INNOVATION OF MUSIC LISTENING

made that the music industry, more specifically, music labels and publishers are gaining a great
deal of profit from the new method of listening to music. In fact, a very familiar company that
associates itself with the realm of music listening through the medium of downloading, Apple,
recently made an addition to their music monopoly, and their actions are all due to the new
concept of music streaming services (Sisario & Chen, 2015). Ben Sisario and Brian Chen of the
New York Times reported this on their 2015 article when they emphasize that Apple, the
technological mogul, is following the footsteps of one of the first subscription-based music
streaming company Spotify, by creating their own music streaming service platform. Knowing
that Apple, an already successful company, is rivaling a novice company truly shows the
magnitude of profit that the platform of a music streaming service can have.
Music Community Improvements
When moving on to the effects music streaming services have had on the music
community, it becomes evident that the music community experienced the most change out of
the introduction of the new service. The first positive change affected the concept of interface.
Interface can be interpreted or even defined as the relationship or point of contact between a
system and a person. Jeremy Morris of the University of Wisconsin-Madison and Devon Powers
(2015) of Drexel University wrote a journal article that gives an overview of the musical
experience in music streaming services that emphasizes this concept. Morris and Powers
summarize that with these new music streaming platforms come new interfaces, each with a
different experience for consumers. They continue by adding that the goal of these interfaces is
to make the consumer feel good. For example, they listed that Spotify had this goal in mind by
making their interface experience more personalized. They go on and conclude that the main
effect that these new service companies have had on the music community is The shift toward a

INNOVATION OF MUSIC LISTENING

branded music experience and how the new focus is driven towards stimulating the
listeners relationship to music in the presentation and curation of that music (Morris & Powers,
2015, p.111-117).
The next positive effect that is shown in the music community with the introduction of
music streaming services is a new effort in branching music to social networking. Mark Glantz
wrote a journal article in 2016 highlighting the human touch of internet radio and streaming
services by reviewing twelve different companies specializing in music streaming. Out of those
twelve, he reviews how the company, Grooveshark, followed this innovative trend by creating
and incorporating a community option into their interface. With this option, users can connect
their accounts to social networks to let their friends know what about they are listening to, or
what playlists they have made (Glantz, 2016, p.42-43).
When considering the next positive impact that music streaming services have had on the
music community, it is important to note that one of the most sought-out goals in the music
community is to earn a Grammy. A Grammy is an achievement or award that is handed out by
the Recording Academy annually to recognize an artists achievement in the music industry.
Typically, to be nominated, an artist would have to sell music physically through the medium of
a CD, tape, etc. This essentially meant the artist would have to be signed to a music label for that
to happen, thus, leaving independent artists who do not have access to that resource at a huge
disadvantage. However, with the introduction of subscription-based music streaming services,
independent artists with influence are now able to stream their music on these services. Knowing
this, the Grammys Awards made a major amendment in their nomination process. John Lynch of
Business Insider, reports on 2016, that the Grammys Awards are opening the nomination
requirements to streaming-only" music that exists only on services with "paid subscription, full

INNOVATION OF MUSIC LISTENING

catalogue, [and] on-demand/limited download platforms." This amendment to the guidelines of


nomination thereby fixes the issue of independent artists feeling like they are forced to sign with
a music label to achieve a Grammy (Lynch, 2016).
Overall, with the new service of music streaming, the music community sees several
positive impacts that benefits artists and consumers in the long run. These benefits being an
improvement in marketing-based interfaces to give consumers a better music listening
experience, an improvement on social media connectivity, and a major change in how artists who
are not signed to music label can receive the prestigious honor of a Grammy Award.
Music Piracy
One of the biggest issue that artists in the music community and the especially the music
industry faces is Music Piracy. Music Piracy is an activity that disproportionally harms music
artists and proportionally harms the music industry by sharing, copying, and downloading music
digitally through illegal means. However, with the introduction of subscription-based music
streaming services, comes an apparent conclusion to the act of Music Piracy. Dr. Jonathan Drr,
Dr. Thomas Hess, and Thomas Wagner of the Munich School of Management, as well as Dr.
Alexander Benlian of the Darmstadt University of Technology wrote a journal article in 2013
claiming that music pirates began using MaaS or subscription-based music streaming services
and subsequently given up illegal downloading (Drr, Wagner, Benlian, & Hess, 2013, p. 384).
Following this, Gary Sinclair of The University of Stirling and Todd Green of Brock University
write a Journal Article in (2016) that provides an explanation for why music pirates are slowly
giving up illegal downloading for music streaming. In the article, Sinclair and Green conduct
multiple interviews on Ex-Downloaders or ex-music pirates and why they chose to migrate
over to the music streaming. They found that all the interviewees referred to Spotify when

INNOVATION OF MUSIC LISTENING

answering the question, and explained how Spotifys option between free music with the
restriction of advertisements or ten dollars a month for unlimited music with no advertisements
was the reason they migrated over to music streaming. Essentially, music pirates found more
utility from the new business model found in music streaming services such as Spotify, than
having to download music illegally all the time (Sinclair & Green, 2016, p. 9-11). What this
means is that the introduction of this new form of listening to music shifted the paradigm in
which songs, tracks, and albums are no longer interpreted as product. Wagner, Benlian, and Hess,
in another journal article written in 2014 explains the relationship between the business model
and the consumers. They explain that through the two options of having advertisements or not,
music streaming service companies can easily persuade consumers to pay for the premium plan
by offering limited trials. This gives music pirates a taste of unlimited music, which thereby
encourages them to treat music as if it were a utility to be paid for (Wagner, Benlian, Hess, 2014,
p. 267) So, because music at its digitally primitive state was so easy access and share before,
peers in the music community found no worth in buying the music because it was just more
convenient to download the tracks illegally. However, the introduction of streaming services
added much more to the table; this essentially became the fine line between worth buying and
music pirating.
Conclusion
With every innovation comes with benefits and conflicting issues. So far it has been
examined that music streaming services has provided direct and indirect benefits for both the
music industry as well as listeners and artists in the music community. However, Kate Swanson
of the MEIEA Journal wrote an article in 2013 reviewing public disapprovals for the new
service. She reports that popular music artists such as Taylor Swift and The Black Keys spoke out

INNOVATION OF MUSIC LISTENING

on how music streaming services undermine them as artists due to the unfair royalties and
cannibalization of their album sales. (Swanson, 2013, p. 208-209). To concede, it is true that as
the concept of music streaming services continually becomes the norm, artists who solely rely on
album sales are losing money as the music industry is making more money ever than before.
However, there are three points that explain why the new service should be considered even with
this existing flaw.
First, even with this issue it is undeniable that this new service is a new function of the
music industry. Swanson in her article even states Whether we like it or not, Spotify and related
music streaming services represent a window into the future of the music industry.
Secondly, it is impossible to forget the new service provides benefits that outweigh the
issue, such as the end of Music Piracy. When comparing music streaming services and Music
Piracy and their effects of album sales, it is easy to suggest that artists are better off with the
services as they still get paid even if their album sales are being cannibalized.
Finally, referencing to a previous source, Keating in her 2015 article briefly spoke about
how contracts with these music streaming services occur in an individual case by case process
essentially meaning that each artist has their own contracts with different deals and different
royalty agreements. Taylor Swift and the Black Keys in their case truly did not receive fair
royalty deals. However, when viewing this issue in a utilitarian manner, many other artists are
getting royalty deals that they do see fair which is obvious as to why the service offers a wide
range of popular artists.
From the Records, all the way to the creation of the MP3 file format, entrepreneurship
always found ways to innovate the capitalization of music. Today, music is being capitalized

INNOVATION OF MUSIC LISTENING

through the means of a streaming service. Through in-depth review, it is seen that although music
streaming services can potentially harm artists in the music industry through unfair royalties,
these services provide a variety of benefits that impacts the music community and industry
positively and thus paves the way for a new future in which consumers listen to music
differently. These benefits being an increase in music industry revenues, an improvement in
music listening experience through innovating interface, a new path for independent artists to be
nominated for a Grammy Award, and a long-awaited conclusion to Music Piracy. With all these
benefits, an underpayment from the new services seems miniscule so when wondering if the
music industry and community is better off with subscription-based music streaming services,
the answer is an easy yes.

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References

Drr, J., Wagner, T., Benlian, A., & Hess, T. (2013). Music as a service as an alternative to music
piracy? Business & Information Systems Engineering, 5(6), 384.
Glantz, M. (2016). Internet radio adopts a human touch: A study of 12 streaming music
services. Journal of Radio & Audio Media, 23(1), 36; 36-49; 49.
Keating, L. (2015). The business of music-streaming services: How deals with record labels and
publishers are made. Retrieved October 31, 2016, from
http://www.techtimes.com/articles/81895/20150910/business-music-streaming-servicesdeals-record-labels.htm
Lynch, J. (2016). The Grammys made one big change to their rules and now this rapper has a
chance at winning. Retrieved October 31, 2016, from
http://www.businessinsider.com/grammys-make-streaming-only-music-eligible-for-awards2016-6
Morris, J. W., & Powers, D. (2015). Control, curation and musical experience in streaming music
services. Creative Industries Journal, 8(2), 111-112.
Nils, W., Dominik, P. (2016). On-demand streaming services and music industry revenues
insights from Spotify's market entry. International Journal of Research in Marketing. 33(2),
316-325.
Sinclair, G., & Green, T. (2016). Download or stream? steal or buy? developing a typology of
today's music consumer. Journal of Consumer Behaviour, 15(1), 9-11.

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Sisario, B., & Chen, B. X. (2015, March 25). Apple and Beats Developing Streaming Music
Service to Rival Spotify. Retrieved October 31, 2016, from
http://www.nytimes.com/2015/03/26/technology/apple-and-beats-developing-streamingmusic-service-to-rival-spotify.html?_r=0
Swanson, K. (2013). A case study on Spotify: Exploring perceptions of the music
streaming. MEIEA Journal, 13(1), 208-209.
Wagner, T. M., Benlian, A., & Hess, T. (2014). Converting freemium customers from free to
premium--the role of the perceived premium fit in the case of music as a service. Electronic
Markets, 24(4), 259-268.

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