How the Internet Transformed the Economics of Music

Introduction

Digital technology has transformed the way people all over the world consume music. The Digital Age has also impacted how musicians, artists, and producers benefit from making music. Prior to digitalization, music had to be consumed either live and in person or through the purchase of a physical copy — a disc, cassette tape, record, and so on. Now that music files can be shared digitally over the Internet or streamed over social media platforms, 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 platforms 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 — so long as sharing sites like YouTube enable uploaders a platform for distributing music content to other users for free, thus reducing the revenue stream for the original producers of that content. This paper examines the networked information economy, non-market production, IP copyright, 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.

The 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. Gone are the days of Billboard chart-topping hits that created cultural sensations; seemingly here to stay are the days of pre-fabricated, mass-managed, mass-produced music "sensations" that are literally created by networked companies operating within the networked information economy.

The new reality is that today's "artists" are often identified from childhood — Disney has played a notable role in this — and managed throughout their careers. Many of them do not write their own music the way John Fogerty did. The pre-fabricated stars of today serve instead as brand representatives. They are part of Team Taylor, Team Kardashian, or Team Beyoncé. They don't just sell music; they have clothing lines, perfumes, blockchain ventures, and more. Their celebrity is their product. For actual musicians more interested in art than in representing the entertainment industry, the 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 the economic value of music itself and shifted the entertainment industry's focus toward 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 basic computer skills can obtain the tools 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 — build a large enough following and one can start selling merchandise and constructing one's own brand. Many creators begin as non-market producers, uploading their music videos to YouTube for free. Biting Elbows did exactly this — their video "Bad Motherf***er" went viral and ultimately launched the film career of the band's singer-songwriter and director, Ilya Naishuller.

Non-market production is not fundamentally different, however, from the old independent music days, when musicians like Daniel Johnston would make DIY t-shirts and hand out cassette tapes of music recorded in his parents' basement at the drive-through where he worked. Independence in music and art is not going to disappear — if anything, technology allows genuinely creative talent to achieve recognition and reach larger audiences more quickly than ever before.

Conclusion

The Internet has transformed the economics and value of music by creating a new environment in which music is created, shared, and profited from. The networked information economy, however, makes music just one of many possible revenue streams; a celebrity musician no longer need be only a musician. Non-market producers, moreover, can themselves become celebrities. The question of who owns IP remains unresolved, and meanwhile the information highways are controlled by a handful of powerful entities — meaning the music value gap persists and is likely to widen further.

Works Cited

Anderson, Chris. The Long Tail. Change This.

Benkler, 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.