Invented in Africa in 800 BCE, music is one of the earliest forms of social entertainment in the world. Music is considered a universal culture as every type of society and ethnic group has its unique form of music, thereby making the industry a universal culture (Rose et al., 2015). Similar to other industries, like the agriculture industry and technology industry, the music industry has greatly evolved and undergone key development in the past and recent times. Music was used to relay messages and information, imparting knowledge, entertainment, religious ceremonies, wedding ceremonies, and cultural storage medium for the society. The paper examines salient development in the music industry, like introducing new and active music licensing systems like the Music Modernization Act and developments in live music.
Origin of the Music Industry
Society’s culture, religion, tradition, economic organization, social organization, and technology influenced the type and theme of music. Periods and regions define the ideas and emotions music expresses to different groups of people playing and listening to the music. With its genesis in the geological period, prehistoric music is the earliest form of music presented as traditional folk and indigenous music (Rose et al., 2015).
Natural occurring rhythms and sounds are the main composition of prehistoric music that is also known as primitive music, with the main musical instrument being the human voice. The succeeding form of music is the ancient music discovered in Ugarit in Syria almost 3400 years ago, with cuneiform being the first written song (Rose et al., 2015). Seikilos epitaph is the first complete known example of music in the early AD century with musical notations and compositions.
Western classical music is the modern type of musical culture comprising early music, medieval music, renaissance music, baroque music, classical music, romantic music, and the recent 20th and 21st-century music. The current music industry comprises two segments: live music and music publishing segment (Rutter, 2016). The live music industry features live performances whereby music lovers, enthusiasts, and people just curious about music gather to listen to music and watch musicians perform their art. The music publishing industry features the reproduction and distribution of music in the forms of papers, compact disks, and the internet.
Developments in the Music Industry
Introduction of New and Active Music Licensing Systems
Music licenses ensure that music owners are compensated for their musical work through the use of music copyrights. The rise in the digital era poses a threat to the music industry in terms of piracy and patent rights issues. The music industry, especially in the United States, has gone through key developments. In October 2018, the federal government passed a music licensing act that made it illegal to use sound recordings prior to 1972 (Temple, 2021).
In the same year, the federal government enacted the Marrakesh Treaty Implementation Act that provided legal protection to print disabled, visually impaired, or blind musicians. These developments in music licensing in the music industry made legal through the enactment of the MMA (Music Modernization Act) is considered significant developments in the industry after the 1988 enactment of DMCA (Digital Millennium Copyright Act).
Musical analysts argue enactment of the Music Modernization Act and the Marrakesh Treaty Implementation Act were much needed in the music industry of the United States. Musicians, songwriters, distributors, and major stakeholders in the music industry acknowledge the music licensing sector needed salient development and reform as the sector is considered complicated (Chandler, 2019). Progressive developments in technology additionally have complicated the process of setting music rates for songwriters, song publishers, song labels, and artists. Sound recordings prior to 1972 had no clear legal protections that further made it complicated for music listeners, music libraries, and specifically music digital services (Temple, 2021). Thus, it became vital for the music industry’s major stakeholders to improve licenses in the music industry with rapid technological advancements. Development in music licensing makes the music industry more anachronistic and esoteric.
The existing music license system is complicated and discontented and did not effectively address the online distribution of music online. The United States copyright office shares these sentiments as the office highlights that the industry still adopted old, outdated legislation.
The copyright office mainly advocates key developments in the music licensing sector. Advancement in music provision and creation necessitated changes in protection laws for copyrights to effectively balance users’ needs in the digital world as testified by United States copyrights’ register Marybeth Peters in 2004 (Temple, 2021). She further advised the need to establish a century music reform act that aligns with 21st-century technology in 2005. Copyright and the Music Marketplace 2015 comprehensive study conducted by the United States copyright office focused on music investors, music creators’ needs, and music licenses.
In efforts to address the old, outdated licensing systems, the copyright office introduced new reforms like regulation of sound recordings and musical works. Secondly, the office proposed the establishment of homogeneous music rating standards for the music industry. These new reforms were successfully enacted with the legislation of the Music Modernization Act. The Music Modernization Act, passed in the two United States Congress chambers and signed into law by President Donald Trump, the act aimed to address music policy issues like the perspective from music makers, the scope of copyright protection, and the part I and II of the title 17 music licensing (Chandler, 2019). Essentially the Music Modernization Act, despite introducing new licensing laws for sound recordings and musical works prior to 1972, determines how sound engineers, sound mixers, and music producers distribute their royalties in the digital market.
The consequences of introducing new music licenses in the music industry have increased revenues in the last fifteen years. Development in media industries and the introduction of new and active music licenses are the key instigators of increased revenues experienced in the music industry for musicians, engineers, and producers (Temple, 2021). For example, the evolution of the media industries like the television and radio industry resulted in the use of music as the primary and secondary media content. New and active music licenses guarantee that music owners effectively benefit when their music is used in these media outlets, thereby guaranteed revenues.
The second way that the introduction of new and active music licenses has improved revenue in the music industry is by ensuring music owners benefit when their music is used in commercial advertisements. Advertisement evolved from the traditional ways to a more aesthetic value and entertaining methods that greatly use music to create an audience appeal (Rutter, 2016). Growth in commercial advertisements subsequently resulted in increased revenue for music owners with legal patent protections of new and active music licenses like the Music Modernization Act. Thirdly, development in the video game industry resulted in more use of music in cinematic cutscenes and during the game to create more tension and appeal to the games. Enactment of new and active music licenses guarantees that music owners benefit from the acquisition and sale of their music.
The Development of Access-Based Music Services
Several firms in the 21st century tried to design a legal music service platform that enabled its users to have free access to music and generate income for the music owners. According to Wikstrom (2021), most of these companies failed to find a striking balance in creating free access to music while generating revenue for music owners. Nonetheless, some companies became successful in the creation of an access-based music services platform. Spotify, for example, effectively found a way to offer its customers access to free music while generating income for the music owners. This marked a salient development in the music industry in the 21st century.
Founded by Martin Lorentzon and Daniel Ek in 2006, Spotify’s objective is to create a music service that is ad-supported and offers access to free music to its users while generating revenues to music owners with adherence to music patents and copyrights (Wikstrom, 2021). The skepticism and complex nature of access-based music services in the music industry inhibit significant development in the sector as companies like Spotify are encouraged to further develop their online music projects. Spotify, however, took a bold step and expanded its distribution services to European countries after negotiation with leading patent and copyright holders in the music industry in 2008.
Expansion of distribution services to an international market coerced Spotify to change its business model and offer most of the company shares to leading patents and copyrights holders. Moreover, the company introduced an advanced music service version that runs on user subscription charges to supplement the existing advertisements-funded service platform. Spotify users can either register freely for the basic package (sometimes referred to as the freemium package) that is free but has limited features with a lot of ads running between songs (Wikstrom, 2021). Users that subscribe to the premium package have unlimited access to music on Spotify, and no ads running in between songs but have to pay a monthly or annual subscription fee.
Despite the freemium package generating very low revenue for the Spotify company and music owners, Spotify considered it an effective service as it enables the company to attract more users. Music enthusiasts and listeners easily subscribe to the basic package as it does not require any subscription fee (Rose et al., 2015). Emotional and behavioral investments of freemium package users persuade them to switch and subscribe to the premium package of Spotify after a while, thereby increasing the user network for the company and subsequently increasing revenue profit margins (Wikstrom, 2021). Spotify purposefully introduces features like ‘annoying advertisements’ in the freemium package to persuade freemium users to switch to premium packages.
The conversion rate of Spotify’s freemium users to premium users is 20 percent. The low conversion rate has put the company under immense criticism and scrutiny of the feasibility of the freemium package. Business analysts considered the freemium package a short-term company sustainability strategy and that Spotify needs to develop it for the long-term sustainability of the company (Wikstrom, 2021). Spotify, however, is greatly criticized for its differing distribution of music revenues to music copyright holders based on their value chain.
The music industry previously used the royalty model whereby a license holder pays a fixed amount to play a song, purchase the song or use it for any purpose. However, the access-based service complexity makes it challenging to use the royalty model as revenues generated from the services rely on the number of users on the service and not the number of songs played or sold. Thus, music services access-based providers prefer to share the revenue generated from their company with music copyright holders at differing rates.
Music copyright holders resist the revenue allocation technique as they argue that revenue should be allocated based on the number of songs distributed to users rather than relying on the success of the sales advertising team of the company. Providers of access-based music services in the music industry were required in the past to legally sign documents that ensure that they pay fixed royalties to music copyright holders.
This feature is the key reason why many access-based music services failed, as it led to many companies incurring losses as copyright holders gain the little profit revenues attained. With over one billion dollars worth of revenue generated for copyright owners in 2013, Spotify provided proof that their business model, despite criticism, still works in the current music industry (Vonderau, 2019). Spotify’s success and sustainability are based on the fact that it successfully convinced leading copyright holders to buy shares in the company, thereby sharing its revenue rather than the company having to pay music royalties.
The development of access-based music services has some positive and negative consequences in the music industry and significant stakeholders of the music industry. The first positive impact of the development of access-based music services is increasing the distribution of music to international markets (Wikstrom, 2021). For example, Spotify effectively ensured that originally based music in the United States can reach the global markets.
This positively affects musicians as it increases their popularity by increasing their fan base. Additionally, it is beneficial to global music enthusiasts and listeners as they have a variety of music genres from different parts of the world. Secondly, with expanded customer reach and international markets, access-based services result in increased profit margins for the company and copyrights holders. However, access-based services have been criticized for offering differential revenues to copyright holders depending on their value chain. Music composers and artists have heavily criticized the music services companies for paying the majority of the royalties to music brands, production companies, or publishers and not to them directly.
In conclusion, the music industry has existed since the earliest form of socialization. The industry has greatly evolved and developed, especially in the recent 21st century. The introduction of new and active music licensing systems like the MMA and the introduction of access-based music services are recent developments in the music industry. Music licenses ensure that music owners effectively benefit from using their music, especially in the digital era characterized by a lot of piracy and patent rights issues. Access-based music services like Spotify provide legal, free, and paid access to music to its users while generating revenue to copyright owners.
Reference List
Chandler, K., 2019. The Times They Are a Changin’: The Music Modernization Act and the Future of Music Copyright Law. Tul. J. Tech. & Intell. Prop., 21, p.53.
Rose, S., Tuppen, S. and Drosopoulou, L., 2015. Writing a Big Data history of music. Early Music, 43(4), pp.649-660. Web.
Rutter, P., 2016. The music industry handbook. Routledge.
Temple, K., 2021. The United States modernizes its music licensing system. World Intellectual Property Organization. Web.
Vonderau, P., 2019. The Spotify effect: Digital distribution and financial growth. Television & New Media, 20(1), pp.3-19. Web.
Wikstrom, P., 2021. The Music Industry in an Age of Digital Distribution. OpenMind. Web.