Don’t Believe the Hype — The “Music Industry” Is Doing Just Fine


Last week, the International Federation of the Phonographic Industry (IFPI) released the “IFPI Global Music Report 2016,” which used statistical research to assess the current state of the global music industry. The report spawned articles relating tales of woe for artists being “deprived” of digital revenues, and others that sniffed out the shots fired at YouTube’s parent company, Google.

But the unavoidable fact is that on the whole, the industry actually grew, and did so for the first time in almost two decades. Digital streaming revenue is finally starting to catch up with the losses incurred from the decline of physical sales. But even as total revenue plummeted from its artificial peak in the early ’00s, major labels still made tons of cash. The tech platforms they vilify (Spotify, YouTube) have never been profitable. So how are the tech platforms still being cast as the villains?

First things first: The IFPI may claim to represent an “industry” through its research and lobbying efforts, but one look at its executive board betrays whose interests are paramount. Every single executive is also a VP or Director-level executive at one of the three major label groups: Warner, Universal, and Sony. So it makes sense that they would push the narrative of streaming services robbing “artists” of rightfully earned revenues — if you look too closely, you’ll notice all the money they make that never makes it to those “deprived” artists. Ignore the many tens of millions in advances they receive from the streaming services each month for the right to stream their catalogs — there’s nothing to see here.

Let’s look at some of the claims in the report. One is an old tune, arguing that the “safe harbor” laws that protect sites and services that let users upload their own material should be changed. Right now, as long as a site takes down any copyrighted content when alerted to it by the copyright holder, it can’t be held liable for the infringement. Under pressure from the labels, Google developed Content ID, an automated system to preemptively sniff out violations. But the system’s not flawless — there’s plenty of copyrighted material on YouTube, right now, and these laws are unlikely to change any time soon.

The crux of the IFPI’s report hinges on the “value gap” between what they feel the music is worth and their return on streaming services. We have to ignore a bit of hypocrisy here, for argument’s sake, because the labels themselves own a sizable share of services such as SoundCloud and Spotify. Their main villain here is YouTube, and by proxy, Google, and its parent company, Alphabet. In addition to the copyright issues, YouTube is notorious for the low rates they pay creators for advertising served with its videos, but with the largest audience (it’s the biggest provider of streaming music by far), it’s viewed as a necessary evil. The whole point of making a video is to promote the music to as many people as possible, and YouTube is the largest audience. It’s hard to argue against them here — just because YouTube itself doesn’t actually make any money, doesn’t mean that it doesn’t help contribute to Google or Alphabet’s overall bottom line.

But YouTube is just one slice of the pie. The limits of what a record label does and profits from have expanded greatly, with labels taking cuts of artists’ performance, licensing, and merchandising deals, in addition to the recordings they financed. But even still, the IFPI report shows revenue from recorded music reached $15bn last year, a growth of 3.2% from the year before. This is the first such growth the industry has seen since 1998. Performance rights revenues went up 4.4%, to $2.1bn. The number that has the IFPI salty is the paltry $630m they pull in from ad-supported services like YouTube, even if that number rose by 11.3%.

Globally, sales in “developing” markets continue to rise. Copyright pirate playground China has been showing signs of a blossoming legal music industry, and while its overall size ($169.7m) is paltry, especially considering the country’s population, that figure represents a 63.8% growth over the year before. India’s streaming market has had trouble keeping up with the decline of physical sales, but it’s still growing.

It’s the IFPI’s job to get that paper. Ultimately, the biggest artists on major labels will benefit from their advocacy. But any artist will only get paid as well as their contracts stipulate. When royalties earned don’t meet the amount the labels received in advance from Spotify, they don’t have to pay that money back. Nor do they have to share it with the artists. When Spotify or SoundCloud eventually go public, and the labels cash out, they don’t have to share that with them either.

The music industry is doing just fine. The market values different things about the art of music than it used to, and it’s in the process of correcting itself. It might be harder for some artists to make a modest full-time career out of music than it used to. But it’s also way easier for some artists to even get a shot at a career than it used to. The record executives, like the ones who run the IFPI, have always gotten rich from their art. Had they capitalized on the platforms early, rather than fight desperately to maintain their obviously doomed business model, things would look much different. It would be wise to question their moral high ground.