Why the music industry is ripe for disruption

Why the music industry is ripe for disruption

 An interesting history thread for those inclined…

Over the last 40 or so years, the music industry has been through it’s ups and downs. In the late 1980’s the Compact Disc took over the throne of music formats, knocking Vinyl off its perch, which had sat there comfortably since 1867 (!) , a good 80 year run. Vinyl enthusiasts screeched and moaned that CD’s did not have the sound quality of vinyl, and if you mean they didn’t skip and scratch then that was all very true. The digital sampling rate of a modern stereo music track is far beyond the resolution of the standard human ear to actually hear any real difference from an analogue reproduction. A greater difference could be heard between a $5 speaker and a $100 speaker, but don’t tell the vinyl enthusiasts that.

The issue was that new and interesting technology disrupted the music distribution industry to a point that an entire suite of companies were about to be put out of business for good. And so, CD’s and their cousins (the laserdisc, minidisc, and other digital laser readout formats) became the king of the music world for at least 15 years.

Smug in their ownership of the music kingdom, thousands of CD record stores sprouts across the globe, I mean, who over the age of 30 has never been to a Virgin Records Megastore? It was the place to be, to hang out, it was the epitome of coolness and to get the latest hit album from your favourite band or singer.

And then in the internet dot com boom of 2000 came the next disruptive technology…..Napster.

Napster and the invention of the MP3 file format blew the CD industry clean out of the water. The king is dead. Long live the king. CD aficionados couldn’t claim that MP3 qualities from Napster were worse. They were exactly the same digital format as CD’s, a copy of a CD to MP3 was literally the same amount of binary zeros and ones as the original. (For you engineering nerds like me we will ignore lossy compression rates for the time being for the point of this story)

Suddenly, music was, almost, free. No longer did you have to pay for the latest album or a song, if you were tech savvy enough and could connect your computer to Limewire or any other early stage torrent protocol without blowing your computer up with a thousand computer viruses, then sure, you could “own“ a catalogue of all musical artists known to humanity on your iPod shuffle.

The music industry, rightly so, was up in arms. Artists weren’t getting royalties, songs and content were effectively being stolen. Live concerts remained the only true source of artist revenue that could not be copied. The music industry was in a decline, and panicking.

10 years later, in the early 2010’s the next disruptor enters the scene. Spotify, the Swedish streaming service, debuts. For one low price per month, get all the music you want on the platform. Forget the virus ridden pirates, for a few cups of coffee get real licensed songs, curated playlists, and anything you wanted to listen to.

Hooray, the music industry was saved! However.. was it? Research has shown that the top seven artists in the world earn over half a million dollars a year streaming their content on the Spotify platform. 99% of all remaining artists (IN THE ENTIRE WORLD) earn an average of $25 per year. I’ll let that sink in a bit for you. Basically, if you are Ariana Grande, Drake, or Justin Bieber, life is good for you. For everyone else? Not so much.

In its quest to save the music industry and to get customers to actually PAY for music, the streaming services have funnelled musical tastes into bland and commercialised offerings that reward a handful of musical artists only. And that brings us to… today.

10 years after Spotify, 20 years after Napster, 30 years after CD’s, the birth of non Fungible Tokens as the ability to digitally own goods is the next major disruption point of the music industry. It will not knock Digital Streaming Providers of their perch. It however will finally level the playing field for artists.

In the last 20 years, the decline of physical merchandise (the CD) has severed the link between the artist and the fan. The fan could buy a CD, own and read the CD liner notes, display it on their shelves, and have something TANGIBLE that connected the fan with the artist. Fully digital releases on Spotify and other streaming platforms disassociates the fan from the artist, the artist is just another line on a playlist.

"e-Vinyls", a digital downloadable high quality song file of the same quality as a master recording, certified by NFT certificates of receipt, will bring that connection back. Musicians will be able to sell exclusive content to their fans. Limited edition releases, remixes, behind the scenes interviews. To 95% of an artist’s fans, they don’t want this or care for this. However for the top 5% super fan base of an artist, this is digital gold that they will pay any amount of money for, to show they are the artists’ “biggest fan”.

Additionally, e-Vinyls can come with smart contracts. For instance, fractionalised sales of an artists’ masters (if not owned by a record company), are possible. This means an artist can launch an “initial song offering”, basically selling their song master (or entire catalogue), piece by piece, to their super fans, almost as if they were a publicly listed company. For whatever fraction they sell, the fan gets the same fraction of royalties. The artist gets money up front to record their next album, the fan gets ownership and social recognition as being an armchair record producer.

The disruption e-Vinyls bring is not to knock off the Streaming Providers. They will always remain. The disruption here is the potential death of the record label. Because this medium will become the main way that artists raise money for their next release, keep control of their masters, and reward and connect with their fans.

To be sure, the largest record labels will survive. They serve a purpose of filtering out the great artists from mediocre ones. But as the great artist Prince struggled in his record contract with Warner in the mid 90’s, going to the length to scrawl “slave” on his face and in his shows and videos, demonstrating that the music industry is slavery, the once indomitable record label will no longer have the upper hand in dealing with artists. And that is a very good thing, and only possible with crypto technology.

 

 


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