Music Industry in the Digital Era

How the Internet has Transformed the Economics and Value of Music
Introduction
Digital technology has transformed the way people all over the world consume music. The Digital Age has also impacted the way musicians, artists and producers benefit from making music. Prior to digitalization, music had to either be consumed live and in-person or through the purchase of a hard copy (disc, cassette tape, record, etc.). Now that music files can be shared digitally over the Internet or streamed over social media sites, the ability of producers to manage how their content is distributed has been diminished substantially. In other words, the technology of connectivity has impacted the monetization of intellectual property (IP) by making it easier for consumers to obtain IP without necessarily having to pay for it—and labels such as illegal downloading or piracy do not sufficiently act as deterrents. With the arrival of iTunes, Spotify, Pandora and other sites that seek to control the supply and demand of music IP over the Internet and ensure that consumers pay for music, some progress has been made in restoring order to the music industry. However, the exact nature of the economics and value of music is still very much up for debate as the music value gap is only likely to increase from here on out—so long as share sites like YouTube enable uploaders a platform for getting music content to other users for free, thus reducing the revenue stream for the original producers of that content. This paper will look at the networked information economy, non-market production, IP copyrighting, the hierarchy of exploitation and the music value gap to show how the Internet has transformed the economics and value of music in the 21st century.
Networked Information Economy
The networked information economy refers to the “series of changes in the technologies, economic organization, and social practices of production in this environment [that] has created new opportunities for how we make and exchange information, knowledge, and culture” (Benkler 2). As Benkler notes, these changes are deep, structural, and bound to be long-lasting. The impact of this new system necessarily affects the way in which producers of music go about their business: their goals, ambitions, approaches, and methods are now so vastly different from what they were fifty or sixty years ago that the entire industry appears to have undergone an evolutionary change in which gone are the days of Billboard, chart-topping hits that would create cultural sensations and here to seemingly stay are the days of pre-fab, mass-managed, mass-produced music “sensations” that are literally created by networked companies in the networked information economy.
The new reality is that today’s “artists” are picked from childhood (Disney helps) and managed over the course of their careers: many of them do not write their own music the way John Fogerty did. The pre-fabs of today serve instead as brand representatives. They are part of Team Taylor, Team Kardashian, or Team Beyonce. They don’t just sell music; they have clothing lines, perfumes, blockchain and so on. Their celebrity is their product. For actual musicians more interested in art than in representing the Entertainment Industry, their rewards are far less glamorous: as Chris Anderson notes, “the future of entertainment is in the millions of niche markets at the shallow end of the bitstream” (1)—which is to say the days of old are gone. Or, as one executive put it, “The simple fact is that music just doesn’t matter to us that much. We have many other revenue streams and products that it is much easier for us to make money on and that our customers more readily understand the value of” (Mulligan 32). In short, the networked information economy has depleted any sense of the economic value of music and turned the focus of the entertainment industry to leveraging celebrity and fame to create other more efficient revenue streams.
Non-Market Production
What happens to music in general in such a world? Music lovers still exist and one positive of technology is that it has led to the democratization of art: anyone with a few basic computer skills can obtain the technology needed to produce a professional looking video or professional-sounding music track and upload it to YouTube. YouTuber might as well now be considered a profession: get a big enough following and one can start selling “merch” and building one’s own brand. They may start off as non-market producers, for example, uploading their music videos for free to YouTube. Biting Elbows did this—their video “Bad Motherf***er” went viral and ended up launching the film career of the band’s singer-songwriter director Ilya Naishuller. Non-market production is really not much different, however, from the old indie days, when musicians like Daniel Johnston would make DIY t-shirts and hand out tracks on cassette tapes of his music that he made in his parents’ basement in the drive-thru where he worked. Independence in music or in art is not going to change—and, if anything, technology allows for really creative talent to get famous and reach more people more quickly.
Copyright and Intellectual Property
Copyright laws and ethics regarding IP is considerably more complex today than it was, say, four hundred years ago when Shakespeare could take source material, tweak it a bit and present it on the stage as something new and original. Today, hip hop artists come closest to keeping this spirit of innovation alive by sampling older recordings, but the debate about whether using or sharing someone else’s IP is a violation of copyright is not going to go way. If anything, the Internet’s transformation of the economy and value of music has only intensified the debate, as Duckworth shows: file sharing has “become so pervasive that Mladen Milicevic of Loyola Marymount University in Los Angeles placed the online sharing of MP3 files just below the distribution of pirated software and Internet porn as the three types of memes that traveled most frequently between computers in cyberspace in 2001.” Napster made it all possible in the beginning—but that was eventually shut down by the authorities. File sharing is now just as possible on YouTube as it was on Napster—virtually any album can be found there to listen to for free—yet YouTube manages to have averted any pressure from the Feds (but perhaps the oligarchic owners of the site have something to do with that). The point is that the Internet itself is only one part of the copyright/IP puzzle: ownership of the Information Highway is another part—and today that ownership has been concentrated into fewer and fewer hands.
Hierarchy of Exploitation
Those who control the highway get to exploit the travelers. Thus, the hierarchy of exploitation is perhaps the best way of understanding how the Internet has transformed the economics and value of music. The aggregators are near the top of the pyramid if not at the top: they are the ones who pave the digital roads and lay the infrastructure by working “with institutions that want to start a digital music store but are not willing to go through the painstaking process of building the infrastructure that is needed to store content” (Galuszka 265). The aggregators act as the gatekeepers essentially: they hold the keys to the industry in the digital era. They exploit the system of the virtual world by controlling the inroads, all ingress and egress. If a small, artistic peasant wishes to be part of that world, he’ll have to pay the tolls—like it or not. And this, inevitably, leads to the music value gap.
Music Value Gap
The music value gap is the gap between what the producer of the content makes in revenue and what the provider of the content makes in revenue. As Anderson points out, once content is uploaded the market decides whether its value—and each individual track is evaluated. If it is popular, it produces revenue: if not, “it just sits harmlessly on some server, ignored in a market that sells by the song and evaluates tracks on their own merit” (Anderson 11). The mass market does not represent taste or value, as Anderson notes: it represents a brand; success in advertising; appeal. It is what allows Justin Bieber to become a multi-millionaire before he has finished going through puberty. Meanwhile, local artists must make do with posting their music to YouTube or MySpace and accept the music value gap—especially if they lack the sex appeal needed in today’s mass market.
Conclusion
The Internet has transformed the economics and value of music by creating a new environment in which music is created, shared and profited by. The networked information economy, however, makes music just one of many different possible revenue streams; a celebrity musician no long need just be a musician. Non-market producers, moreover can become celebrities. The issue of who owns the IP is still up for debate, and meanwhile the information highways are controlled by a few, meaning the music value gap still exists and is likely to get wider.


Works Cited
Anderson, Chris. The Long Tail. Change This.
Benchler, Yochai. The Wealth of Networks. Yale University Press, 2006.
Duckworth, William. Virtual Music. Routledge, 2005.
Galuszka, Patryk. “Music Aggregators and Intermediation of the Digital Music Market.”
International Journal of Communication 9 (2015), 254–273.
Mulligan, Mark. Awakening: The Music Industry in the Digital Age. MIDiA Research,
2015.