Digital Technology in Music Business: The Ultimate Game Changer!
By Akapo Emmanuel – Director, Tenstrings Music Institute, Nigeria.

There is no better time other now when our ‘almighty’ sectors such as Forex/Stocks and Oil and Gas are crashing woefully, to begin to explore possibilities in abandoned sectors such as music and entertainment in general. The entertainment industry is one sector that is relatively stable no matter the weather, it continues to thrive no matter the storm. Irrespective of what situation the nation is in, comedy shows and concerts will continue to hold, lounges and bars are always open. Huge sectors like Telecoms and the media thrive and survive majorly on entertainment - music in particular.

However, potential investors coming into the music industry must understand the current dynamics before diving in. In the past ten years, the music industry has metamorphosed immensely; the supply and value chains have taken new dimensions. The advent of digital technology has changed everything; the way we create music to the way it is been consumed.

Digital technology has transformed the world and the music industry as we know it. Before everybody was hooked up to the World Wide Web, the music scene was a very different place. Twenty years ago, consumers relied more heavily on CDs, The Charts and the radio. It was a time when mix tapes were widespread and people brought CDs or cassettes to parties.

Advancements in technology meant that hard copies of music were no longer a necessity- the introduction of the digital mp3 pushed out the requirement to own CDs. Similar to mix tapes, listeners would borrow a friend’s CD, copy the music to their computer and have an electronic copy of the CD.

The Internet shook things up further, as connection speeds increased, file sharing became more common. Consumers illegally used programmes like Napster and Limewire to pirate music. Pirated music became a widespread problem for record labels as there was no way to police the music duplication.

The advent of social networking also brought a whole new element to the music industry, with MySpace providing a platform for users to follow musicians and discover new bands. YouTube has meant that consumers no longer have to rely on MTV or purchase a band’s video or DVD to watch their music videos. In Nigeria, streaming services like Notjustok.com and Jaguda.com give listeners access to any music from anywhere with an internet connection.

Over the same time frame as this massive industry transformation, income from music royalties (income from songs including public performance, mechanical royalties and synch fees) has been stagnant. Although performance revenue has increased, income from record sales has dramatically declined.

However, research shows that music consumers of today do not spend less money on music compared to a decade ago — they simply spend that money differently. All in all, the last decade has certainly transformed the basis of the music industry, but the value of music remains strong, both from a business and from a cultural perspective.

The only part of the music business that is more successful now than in the pre-digital era is live performance. Tours by leading artists, such as U2, Lady Gaga, Beyonce and Jay Z, easily gross over $100 million, and celebrity DJs can earn well over six figures for appearing at a festival. Digital music, even when it’s free, can never replace the live experience, even if it costs so much for a tiny seat, or a spot on a field surrounded by thousands of fellow fans.

I predict that income generated by the recording and music publishing industries will modestly increase in the next several years. On the other hand, tours and concerts by famous performers will generate even more money for them, the promoters, venues and ticket sellers. Unfortunately, the big money will still flow almost exclusively to the best-known acts. Indeed, the disparity between the haves and have-nots among creators will only increase, with rich artists getting even richer, from concerts and branding (e.g, endorsements and more subtle forms of partnerships between big companies and celebrity artists). Even with respect to monies generated from streaming services, it has reported that only the most powerful artists with the most leverage have been able to negotiate a meaningful pay-out from the labels.

For new and unsigned artists, digital technology has had, and will continue to have, very mixed results. Anyone can now produce a record on a laptop and get their music before the ears of the masses via CD Baby, iTunes, or other digital middlemen. But the aggregators are the ones making most of the money. It turns out that these new “bosses” (such as the aggregators), social networks such as Facebook and web stores like iTunes, which all allow an artist to reach a worldwide audience, are even worse for artists than the old guard (the big record companies).
Tech companies give an artist the opportunity to reach a worldwide audience, but they don’t provide any of the positive things that major record labels used to (and still do, but for far fewer artists). For instance, none of these companies pay for recording costs, including hiring talented producers. They also don’t help an artist make great looking videos, get their music on commercial radio, book them on TV shows, and most importantly, give them up-front advances so they can quit their day gig.

Unsigned artists should also continue to be wary about using any of the thousands of digital "tools" offered by various online services that will take their money while offering no guarantees of getting them to "the next level." At least the bad old record companies would give artists money up-front -- not the other way around.

The digital era, in summary, has created real opportunities - but those opportunities have turned out to be more significant for entrepreneurs than for musicians. For instance, when Dr. Dre and Jimmy Iovine launched Beats Music at the beginning of 2014, they seemed almost foolish; streaming services have hardly made a profit, pretty much across the board. But a few short months later, they sold the service, (and its profitable namesake headphone business) to Apple for $3 billion, making a great deal of money for themselves and their partners.

Digital technology, once accused of nearly destroying the music industry, is now being hailed as its saviour.

Article by Akapo Emmanuel
Renowned Music Educator and Entrepreneur
www.akapoemmanuel.com
info@akapoemmmanuel.com
+2348039190021