Why reports on the evolution of the music industry should focus on earnings and not on format wars

For anyone interested in the recorded-music industry and where it is headed, it is difficult to escape the many articles and reports speculating on how music will be served to consumers in the coming years. For those living in Norway or Sweden the answer is already very clear with music subscription services leading the charge to a growth in sales after countless years of decline. Such has been the rise in music subscriptions in the two countries, streaming now forms part of sales charts published each week. IFPI Norway added streaming to album charts from the beginning of November. Previously, the album chart had only included physical sales and downloads. Sweden added streaming to its national album chart in October. IFPI Norway said by including streaming figures the album and singles charts reflected “the total consumption of music in Norway.” Streaming has been included in the Norwegian singles chart since the spring of 2011.

Adding streaming usage to a sales chart is a natural progression in the collation of music sales and recognition of how accessing recorded-music has changed. Excluding streaming from sales charts, particularly in a country where the majority of trade revenues now come from subscription services, would make those charts incomplete, unrepresentative and irrelevant.

The recorded-music industry is not a one format business
Perhaps the most important element in the change is the acknowledgment of the fact that consumers do not just buy their recorded-music from retailers and stores, but they consume it and access it. Also, because charts are based on multiple revenue streams, news reports on how popular a single or album has become may now stop focusing on the mistaken view that the recorded-music industry is a one format business.

Earlier this month, the Guardian newspaper published an article with the headline “Is the album dead? Katy Perry, Miley Cyrus and Elton John hit by dramatic US sales slump.” The article cited figures from research service Nielsen Soundscan, which showed that US album sales had fallen to a new low and sales of Katy Perry’s No 1 album Prism sold less than 300,000 copies in a week, but still sold more than the next eight titles combined. The article also said sales of Miley Cyrus’s album Bangerz had dropped off after a promising couple of weeks and new albums by Elton John and Paul McCartney were struggling. The article referred to industry analysts’ claims that a recent slump in sales had more to do with consumers turning their back on the album format than the ongoing annual decline in recorded-music sales.

While the Guardian’s article went closer than most to recognizing the possibility of two formats coexisting (last Sunday’s Observer profile of Spotify should be highlighted as a good read on the subject as well), there are simply too many reports glorifying format wars or weighing up the chances of one format replacing another in some sort of gladiatorial “winner takes all” battle for survival. While it is certainly true to say that before the emergence of digital distribution, the development of a new hard format and subsequent improvements in sound quality resulted in consumers making a switch from old to new, the simplistic analysis of one format replacing another cannot be applied to today’s rapidly evolving digital music world. In the early years, digital distribution may have opened the flood gates for unauthorized access to a wealth of recorded-music, but digital has also allowed for advances in music distribution above and beyond anything possible in the restrictive hard format world. Album sales in the US may well have been affected by rising consumer interest in music subscriptions, but they haven’t disappeared altogether and nor will they. Lower sales means some consumers have chosen not to buy a single body of work but instead spend the same amount of money each month to gain access to every album ever made. What news reports should be focusing on is not what format consumers want but whether the formats consumers are favoring are providing value for music creators.

Accuracy of information
It is fair to say that music subscription services have their detractors. A number of artists, including Thom Yorke and David Byrne to name just two, have questioned music subscriptions and the services’ value to artists and benefit to the music industry. Billy Brag recently waded into the debate coming down hard on record companies. It is difficult to argue with artists that publish their royalty statements detailing low payments for streaming services. If an artist can demonstrate that he/she is much worse off because of the transition from ownership of music to subscription access, then the question of royalty rates will require greater scrutiny. However, equally important in the debate is accuracy of information being reported. It may make for a good headline that an artist is earning a pittance from streaming, but is the artist complaining about earnings as a performer, as a songwriter, a producer or all three? In several cases known to Music & Copyright, artists and performers are not always aware of what they are owed and what use of their music they should be earning royalties from. If we are to have a full and proper debate on artist earnings from the sale or use of music, the discussions must not focus on one format or one kind of music service, but must take into account all recorded-music income streams. To achieve this, there needs to be a change in the mindset of those that are quite simply struggling to see beyond the tradition of recorded-music ownership and a one format industry.

The album has been the cornerstone of the recorded-music industry almost since the retailing of recorded-music began and so it is perfectly understandable to express concern over lower sales of the format. However, the simple fact is consumers in a growing number of countries do not want to be bound by a ten-track body of work anymore. They want every track released by every artist and are paying for the privilege of doing so in increasing numbers.

What the recorded-music industry needs to do is work out how those consumers can be served while at the same time reward the artists whose music forms the bedrock of the likes of Deezer, Napster and Spotify. New business models and an evolution in music distribution can only be welcomed if content creators are not being cut out of the digital earnings loop. Equally important, however, is that analysts and music commentators make sure they report all of the facts correctly when an artist holds up their royalty statement. If misleading and incorrect figures are presented as facts often enough, then they could become accepted as genuine, and then the recorded-music industry really will have a problem on its hands.

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