Our label services team takes a look at the ever-changing history of music distribution, and how we’ve arrived at where we are today.
Long before the advent of recorded music or live radio transmissions came reproduced sheet music, allowing those able to read music and play an instrument to recreate the most popular compositions of the day. The first machine-printed music appeared around 1473 – about 20 years after the invention of the printing press – effectively setting in motion the beginnings of a music industry that was about more than just performers, events and instruments. Composers could now create pieces intended for amateur musicians to reproduce, and popular composers’ fame could spread much faster and in a more tangible way than before. By the 19th Century, the music industry was largely composed of sheet music reproduction.
The legacy of reproduced sheet music lives on in the form of the term ‘mechanical royalties’ – which refers to payments made by record companies to the music publisher for the reproduction of copyrighted musical compositions. The word ‘mechanical’ was used because sheet music was mechanically reproduced via printing presses. Beck became one of several artists to bring the format back to prominence in the popular music sphere when he released his 2012 album ‘Song Reader’ as sheet music only.
It’s somewhat surprising to think that the first iteration of the record player – the phonograph – was invented in 1877 by Thomas Edison, and that people were visiting ‘phonograph parlours’ in the 1890s, which were a rudimentary equivalent of a jukebox. Poor-sounding records made from brittle, scratchy shellac became popular in the first few decades of the 20th Century – but it wasn’t until the more durable vinyl records were introduced in the 1930s that the format started to become seriously popular and a big money-spinner.
Vinyl remained the dominant format until the late 1970s, when the sound quality of cassette tapes had improved sufficiently to allow them to rival records. ABBA’s ‘The Visitors’ became the first commercially released music compact disc in 1981, and by the early 1990s, CDs had become the dominant format.
The advent of the digital era
As internet connections improved and hard disk space became cheaper, the illegal sharing of music through the internet became more and more prevalent, with little provided in the way of comprehensive legal services. It’s estimated that worldwide revenues for recorded music fell by 50% between 1999 and 2009, which would force the industry to adapt in ways it had never previously imagined.
Before labels had a chance to chance to adjust to the emerging model of digital music, Napster arrived and disrupted the industry like nothing had before. Crucially, the industry at large failed to acknowledge the changing tides, largely choosing to stick their heads in the sand until they really felt the effects.
Napster’s peer-to-peer application launched in June 1999, focusing on the sharing of MP3 music files and allowing users to search for and download tracks with relative ease. It was the first widely used music downloading service of any kind, with 80 million registered users at its peak. It was particularly popular for sharing hard-to-find recordings, such as live sets, demos, unreleased mixes and so on.
Metallica, Dr. Dre and the Record Industry Association of America all filed lawsuits against Napster for copyright infringement in 2000, setting the wheels in motion for the service’s demise. Napster lost, and after failing to comply with court orders to monitor and restrict access to copyrighted music files, shut down in July 2001. The company announced itself bankrupt in 2002, and its intellectual property and trademarks were purchased by another company. After changing hands several times, the name was eventually merged with music streaming service Rhapsody.
Torrents & download sites
After Napster came a plethora of other sites and services allowing people to download music and other copyrighted files for free. Downloads sites such as Rapidshare, Zippyshare and Megaupload began taking chunks out of record label sales, as did torrent services – which allow users to download different sections of one file from multiple sources at once to enable faster download and upload speeds.
While many artists and labels worked to prohibit websites which distributed links to torrent files for their works, some embraced the new mechanic as a distribution mechanism. Artists and labels to have distributed music and videos via torrents include Sub Pop, Nine Inch Nails, Aphex Twin, The Libertines and DJ Shadow – who became the first artist in history to sign a deal with BitTorrent to receive payment every time someone downloaded his new release through the platform. Around 2014, courts around the world issued notices requiring internet service providers to block sites that were knowingly aiding in the dissemination of copyrighted works through torrents (and other means).
Digital download stores
Apple’s iTunes Store arrived in April 2003, heralding the beginning of the download era proper. At the time, it was the only digital download store to offer the catalogues of all five of the major record labels, and aimed to provide a legal alternative to illegal peer-to-peer filesharing sites. By 2008 it became the biggest music vendor in the USA, and by early 2010 it had become the world’s largest.
Beatport was launched the following year, in January 2004. It quickly became the leading electronic music download store, and continues to be to this day. It was purchased in 2013 by Robert F.X. Sillerman’s SFX Entertainment for a reported $50 million. It took some time for the digital download market to mature. In the US, revenues from digital music sales surpassed physical sales for the first time in 2012, while in the UK it took until 2014 for this to happen.
Spotify launched in 2008, allowing users to listen to uninterrupted music of their choice from a huge catalogue for a monthly subscription fee – or to listen to a limited amount with adverts played between every few songs. It soon became the most popular fully licensed streaming service in many of the markets it operates in. At the time of writing, Pandora leads Spotify in the US, while Spotify leads in many other countries around the world.
Spotify – and indeed other streaming sites – have faced criticism for the low revenue-per-stream the service generates for artists. In their defence, Spotify have stated that 70% of their revenues go to rights-holders and argued that their service diverts people from illegal download and streaming sites which don’t generate revenue for artists. It has also been suggested that artists should compare revenue-per-stream rates to publishing royalties accrued from radio play of a song, rather than that of downloads. Thom Yorke and Taylor Swift are amongst prominent artists to have pulled their entire catalogues from Spotify.
YouTube remains the biggest music streaming platform overall across the world, although a huge proportion of music on the platform has been uploaded without the rights holders’ consent or without generating revenue for them. Their Content ID system identifies uploads of copyrighted music through waveform recognition, and allows rightsholders to place adverts on uploads containing their works – or have them blocked.
After much debate on whether (legal) streaming services ‘cannibalise’ sales, a report by published in October 2015 by researchers at the University of Minnesota concluded that their effect is more or less ‘revenue neutral’. It’s hard to know what the future of the music industry holds, with an ever-diminishing marginal value for recorded music as streaming services battle it out to offer the lowest subscription price. However, online advertising models continue to mature and the ease of legal services slowly attracts people away from unreliable illegal ones. People are becoming more accepting of the moral argument around pirating music from often struggling musicians. What’s for sure is that labels and artists who refuse to adapt to the changing times stand to lose the most.
MN2S works with over 400 independent labels. For more information about how our label services and digital distribution team can help manage and grow your label, get in touch.