How musicians use social media to generate revenue in the digital era

Symbiotic Relationship Between Musicians and Fans

Original Structure of the Recording Industry

Napster and Peer-to-Peer File Sharing

Artist-Fan Communication and Digital Platforms

Evidence

Recent History of the Music Industry and Changes in Revenues

Revenue Sources

Patreon

Artist-Run Subscriptions

Cassette Tapes

The music industries in the digital era are highly complex and continuously evolving. College students who listen to music today, do so by drastically different means than they would have fifteen years ago. The music industries have gone from being the most powerful and influential industries in the world, to changing their operating structure as the result of the creation of peer-to-peer file sharing software. In today's world of social media and instant communication applications, artists now have a platform of interaction and collaboration with fans. Now that many fans are involved with downloading and peer-to-peer file sharing, it is necessary for artists to use new channels to increase their revenue. Social media platforms have completely shifted the industries and have provided new opportunities for revenue creation. Using an analysis of published studies as well as research related to the computer mediated interactions between musicians and their fans, this study will argue that in order for musicians to survive in this new digital environment, they must find innovative means to generate revenues.

Methodology:

When the Internet, and peer-to-peer file-sharing services started to become popular, many people thought that the music industry, among other forms of entertainment, would never survive the industry changes. In the beginning of this trend, the industry did in fact suffer a significant decrease in sales. However, many people did not foresee new opportunities for the internet to be harnessed by artists as well. The internet as allows new ways of distributing and promoting music as well.

The increased usage of social media with the rising popularity of the Internet has been a new factor to consider in the way artist can connect to their fans. Through social media platforms, the Internet has offered many musicians an opportunity to interact with their fans on a more intimate and personal level.

Much of the prior academic literature has largely focused on the impact of illegal fire sharing and consequentially, the resulting diminished revenue streams that have resulted from this trend. The purpose of this study however is to provide insights into the new forms of relationships between musicians and their audiences that can be created through social media. The emerging social media platforms are a vital component for artist to generate revenue.

This research will identify how musicians are currently utilizing social media to promote their online presence. These mediums allow for the engagement with fans on interpersonal levels that was never previously possible. There are many cases that show how the musicians can take full advantage of new promotional techniques to get their voices heard. The research on the subject will consist of primarily a literature review in order to learn more about the nature of the music industry's engagement with social media. The literature indicates that consumers and artists can now interact in new ways that can strengthen these relationships and provide new opportunities for revenue generation.

Literature Review:

Original Structure of the Recording Industry

Patrick Wikstrom's novel, The Music Industry, provides a detailed overview of the original structure of the music industry that developed with the introduction of mass media. For nearly sixty years, the infrastructure of the industry stood as an oligopoly which was essentially dominated by six major record labels. These record labels essentially controlled all distribution and promotion of recorded music. There was considerable consolidation of power for these companies, however the revenues were distributed unevenly often leaving artists disproportionally disadvantaged. In fact, most musician were able make much money from their recordings. As a result, many artists made the majority of their income from concert ticket sales rather than actual recorded music. The distribution system was cited as being economically inefficient due to the fact that distribution through this model contained extra complexity. However, musicians had little choice to sign with one of the major record labels.

Additionally, production, promotion and distribution expenses were often incurred, at least in part, by the artists and then debited to the already small percentage of proceeds they received from their recordings. As a result of these various facets, the major record labels were able to use their oligopoly position and exclusive access to means of distribution, production and marketing to control the industry reaping the majority of the benefits (Wikstrom, 2013).

Napster and Peer-to-Peer File Sharing

William Aspray and Paul Ceruzzi are authors of the novel Internet and the American Business (2008). The book is compiled of separate essays that discuss the commercialization of the Internet and its effect on traditional business. These essays, describing challenges successfully met by some companies and failures to adapt by others, are an attempt to understand the dynamic period of American business history. Tracing the impact of the Internet since 1995 on American business and society, the book describes new business models, new companies and adjustments by established companies, the rise of e-commerce, community building, and discusses such newly created problems such as copyright violations associated with music file-sharing. The book provides a clear examination of the rise of Napster and the software created following its demise.

Many entrepreneurs tried to create Internet-based music companies, but with little success. Record labels also began experimenting into new means of distributing music, and promoting projects, through the Internet. The true impactful development came at the turn of the millennium with the arrival of peer-to-peer (P2P) file sharing technology, as introduced by Napster. The sharing of files through file transfer protocol (FTP) was one of the Internet's original applications. A very small number of early Internet users employed the application in similar fashion for MP3 files. In June of 1999, Shawn Fanning, an undergraduate student at Northeastern University, launched Napster introducing a new, convenient way to share files. While previous versions of file sharing software piracy methods were relatively easy to trace and stop, the Napster system hosted files from millions of individuals making it difficult take action on any one single individual. Instead of posting an actual MP3 files on their central server, Napster only kept a list of its users' file names and implemented a decentralized system. Using this compiled directory, individuals would search for a song and subsequently download the MP3 file directly from their fellow file sharers and not a centralized database. The fact that files were not actually held on Napster's main server gave the company some legal maneuverability as it would later argue that it could not be held liable for copyright infringement.

The application's usability and interface helped it gain near instant popularity; in just over a year, Napster had a user base of 80 million. By December of 1999, The Recording Industry Association of America, representing the major record labels, filed suit in San Francisco federal court for contributory copyright infringement against Napster. The RIAA was well funded and hired the top legal team that was possible. The presiding Judge Patel dismissed Napster's arguments finding them guilty of contributory copyright infringement with the reigning usage of their platform being piracy. Napster was ordered to shut down and filed for bankruptcy in June of 2002. Although the RIAA was successfully able to shut down Napster, they now faced countless other sites that use the exact same technology. The efforts of the RIAA were initially effective in combating music piracy, but it was simply impossible to eliminate its presence as technology continued to improve (Aspray and Ceruzzi, 2008).

Artist-Fan Communication and Digital Platforms

In his article, Understanding the Digital Music Commodity (2010), Jeremy Morris notes that music has largely shifted from being a physical commodity, being sold on CDs, cassettes, and vinyl- to a digital commodity. This has transformed the marketing and distribution landscape for artists and record labels, and has transformed how the public consumes music. This reality raises a number of questions, specifically, how are artists able to use the Internet to their advantage and persuade fans to purchase their music? Especially when it is easily accessible and in most cases, free? Much of the prior academic work in this field, such as Patrik Wikstrom's The Music Industry focus on the industry's relationship with technology, and perhaps pay insufficient attention to the consumer side. So there is both an interesting body of existing literature and opportunities to build a new body of literature by engaging the consumers of music on their perspective of the transformation that the industries have undergone in the Internet era, primarily the importance of artist-fan relationships.

In a separate article titled Artists As Entrepreneurs, Fans as Workers (2013), Jeremy Morris explores how even established celebrities and artists must maintain and cultivate an online presence. He focuses on the increasing integration of social media into music making and marketing to reflect on the work artists and their fans perform.

Morris places a large emphasis on success and popularity levels by means of this technology and its "blurring of roles." He elaborates on this notion by drawing on other researchers' works, "Nancy Baym's notes that artists "often feel compelled to engage in direct, proactive and increasingly interpersonal modes of interaction with their fans" and that "what used to be clearly performer-audience relations increasingly resemble ordinary friendship" ("Fans or Friends" 1). Part of the reason for this blurring of roles is technological. The technology underpinning the micro-blogging network Twitter, for example, makes celebrities and micro-celebrities seemingly more accessible than they are in other forms of mediated representation (Marwick and Boyd)(Morris, 2013)."

Social media outlets like Twitter and Facebook allow for more direct publicity and fan interaction. Key to this understanding is the idea of identity formation and creation on a digital platform. As Morris puts it, "these connections allow for artists and other famous people to perform celebrity in a way that seems more authentic and intimate than in other media." By accessing fans at an interpersonal level, these fans are able to form a stronger connection to the artist and feel a sense of responsibility for their continued success. Social media in the digital era plays an outstanding role in the success of an artist, as does the artist's relationship with their fans through these platforms.

In addition to Wikstrom's discussion of the original music industry model, there are two specific chapters that focus on fans and users, as well as the increased amount of amateur activity in music production, promotion, and distribution. The fourth chapter of his work examines how these developments have complicated the roles previously played by labels and industry executives, while Chapter 5 considers how co-production, fan-funding, and other social and creative uses of music are now becoming the norm. These chapters tie into Jeremy Morris's article Artists as Entrepreneurs, Fans as Workers, which notes the importance of social media relationships between artists and fans. For most artists in this digital era, in order to reach a certain level of success, "interpersonal" relationships created with fans through social media and various digital platforms are vital.

Evidence

Rethinking Music: The Future of Making Money As A Performing Musicians is an article written by Panos Panay in which Panay analyzes the discourse of various magazines, print media, and online forums concerning the fall of the music industry. Popular artists and musicians "are loved, even worshipped, not only for their abilities to write songs and perform them publicly, but for their ability to 'speak' to their audiences (Lull, 1987)," Panay cites in his article (2011). Digital technologies have impacted the traditional communication methods used within the commercial recording industry. Many music artists are now using the internet and social network sites to directly engage with their audience. Social network sites are defined as "web-based services that allow individuals to construct a public or semi-public profile within a bounded system, articulate a list of other users with whom they share a connection, and view and traverse their list of connections and those made by others" (Boyd & Ellison, 2007). Music artists who have established an Internet presence can now form a dynamic relationship that allows for feedback in a two-way communication mode, or facilitate fan-to-fan communication about them in a third or three-way communication mode as well (Panay, 2011).

Direct artist-fan engagement online can also help create multiple revenue streams for the music artist through live performance, in which the artist creates an unique experience for audience members, sponsorship and marketing, in which brands and companies effectively serve as arts patrons, providing in-kind and/or monetary support in return for affiliation with the music artist, and fan-generated and merchandise revenue in which fans help support the artist through crowd-sourcing websites as well as merchandise related purchases (e.g., album credits, unique artist-fan experiences, concert tickets, etc.) (Panay, 2011). Also cited by Panay, Chiou, Huang, and Lee (2005) found that "purchasing and using the merchandise produced by or named after the celebrity can enhance the identity of a fan toward the celebrity" in their study of music piracy antecedents. Meanwhile, traditional recorded music industry revenue streams still remain in place, which includes licensing and performing rights monies generated through the use of music in advertisements, films, products, television and video games (Panay, 2011).

Recent History of the Music Industry and Changes in Revenues

The Future of Music Coalition, a public policy organization, conducted the recent Artist Revenue Streams project. The purpose of this study was to analyze how U.S. based musicians and composers currently generate their income. The organization also examined how artists' earning capacity has changed over the past five years. The research design involved three method components, including an online-survey of over 5,000 U.S. based musicians, approximately 80 individual artist interviews, and a detailed review of ten musicians' financial data (DiCola 2013). The study results concluded with a discussion of how the former challenges of distributing a musician's work to their audience is now "essentially solved" through the use of numerous digital platforms. Audience building and fan communication were also considered to be easier than it had been in the past since there are now a variety of tools musicians can use to help promote their work.

A new consumer research has shown that music fans are expecting a closer and near constant relationship with artists in exchange for their attention. "Music To The M. Power" shows how social media has dismantled barriers between artist and fans creating a "zero-distancing" effect. But that doesn't necessarily mean they'll pay for the music that they say they love. According to the study, buying music is little more than "symbolic patronage" for Millennial fans. The Survey concluded with few assumptions;

1) Zero-distancing:

Artists are expected to be constantly accessible, especially on social media, offering unique and intimate moments to their fans.

2) Artist As "Friend":

Fans have an expectation for direct interaction between fans and musicians.

75% of Millennial say they feel a stronger connection to musicians who are open about who and how they are.

53% say the more an artist shares online about themselves, the closer they feel to them.

91% say it's OK if an artist has some flaws -- it makes them human and likeable.

3) The Daily Feed: Fans have different expectations from different communication channels.

Facebook - the formal and official outlet" for tour updates and information.

Twitter - a "blow-by-blow feed."

Instagram - "seeing the world through their eyes."

Tumblr - an intimate glimpse into an artist's psyche/spirit.

Website -- an official showcase for production details, costs of CD/DVD etc. And upcoming event updates.

4) Co-creation: A fan-artist symbiosis - working together on social media as one another's branding machines.

1 in 4 Millennial has made his or her own parody of songs, artists or music videos.

64% like to be the source for new music for friends and 58% say they are motivated to post and share music when they get feedback.

5) Music is on shuffle:

85% agree that "among people my age, it's cooler to listen to a diverse range of music vs. one genre."

6) There's no such thing as selling out:

As savvy marketers of themselves, Millennial understand that the system of getting free music/streaming means artists have to make their money somewhere.

7) Buying music is symbolic patronage for Millennial:

When they buy, it's because they want to support an artist that they respect and connect with.

Revenue Sources

With album sales nowhere near what they used to be and streaming not yet a truly viable source of income for musicians, a lot of artists are looking for new ways to distribute their work that will both reach their fans and result in some remuneration. A few examples of emerging revenue generation models have been identified in an industry blog (Bernard, N.d.):

1. Patreon

Many artists have tried to use internet services like Kickstarter, Indiegogo, or PledgeMusic to launch new campaigns. However, one of the drawbacks is that the artist continually have to lauch new projects for support. To provide a customized service that is well-suited to the music industry, a service named Patreon has created a new platform to streamline the process.

The creator of Patreon was Jack Conte. Conte had struggled to promote his YouTube videos to an extent that would provide the financial reward he was hoping for. He realized that if he could offer something more than a one-time campaign, then he might benefit. As a result, Patreon became a platform that request that the fans contribute a set amount per project. For example, a fan of any particular artist can pledge $1 per song that the artist creates, then when the artist creates a new song or album they receive their pledges.

Patreon has become a popular solution for many artists who were struggling to fund their music. This service can even be used for up-coming artists to help cover their basic expenses and offers many advantages for musicians over the traditional YouTube model. Patreon can basically be thought of as a version of a fan club in which the members contribute financially. One popular example isPentatonix who is a cappella group that is famous for creating an intimate relationship with their fan base.