By Luminari
LumiQ

The Changing Economics of Music with Alan Cross

We sat down with renowned Canadian music historian, Alan Cross, to discuss the evolution of the music industry from a business perspective. From vinyl and cassettes to CDs to Napster and Spotify, Alan covers the changing business of the music industry worked from a business perspective back then and today.

Let’s start at the beginning…

Back when record labels were the gatekeepers of music…

Artists’ deals would typically cover 7 albums (very few actually did all 7) where they received a small advance to cover expenses and cede the exclusive rights to distribute and market the music to the label. If an album was successful, the label would claw back the advance from album sales, before paying out their share to the artist.


Eventually, CDs were introduced to the general public in early 1983…

This was the golden era for labels and music stores alike. The stores loved CDs’ larger margin, which at $24.99 was significantly higher than tape cassettes. Everyone was making money hand over fist. Around this time, music videos became a huge part of an artists’ release plan. Labels invested heavily in short films with the aim of recuperating the cost in increased album sales.

FYI – Michael and Janet Jackson’s “Scream” music video cost $8 million to produce.

 

When digital file-sharing for music began (1990-1991), no one really cared…

Record labels were passive about digital file-sharing and they didn’t believe it had any chance of becoming mainstream (in hindsight, we’re thinking they probably regret this…)

napster is coming

 

iTunes played a huge role in disrupting Napster, but the record labels felt they had lost too much…

So when Spotify started in 2006, they convinced a bunch of labels to invest in the company, hedging their bets against iTunes becoming the dominant streaming player.

 

Today, digital streaming services like Spotify and YouTube dominate the market…

Spotify adds 1.2 million songs per month – or 83 days of music. YouTube uploads 500 hours of content every minute, adding to its collection of 5.2 billion videos, many of which are music.

*Fun fact #1 – 20% of the songs on Spotify have never been heard once.

 

Interested to hear the full conversation, and get some verifiable CPD in the process? Click here to check out this episode on LumiQ

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