Change the music industry; where to begin?

Jul 21, 2017blog

Change the music industry; Where to begin.

I play guitar since I am ten years old, never aimed to become a professional musician but I love to play singer/songwriter music alone or just play songs with our coverband. A couple of my friends and colleagues are also amateurs in the music business and some of them are even making a living out of it. It makes that I experience the music industry from different perspectives.

Since a couple of years I started investigating the music industry from a hobby perspective because we were already planning to create an application aimed at starting musicians. So where to start? I worked my way through the basics, things like; How do royalties end up at the right person and where are the checks and balances? How do YouTube, Shazam, Spotify, SoundCloud, and Apple approach these problems, especially because they changed the business? It quickly became apparent that things were not as clear cut, and not that pretty as I had hoped;

1) it is pretty complicated to understand the very basics in the first place. With a large amount of actors and intermediaries; a archaic system lagging proper global digital infrastructure for the music industry; a few large entities aggregating artists, services and therefore also obscuring information; and more parameters than first anticipated (e.g. songs & covers, different kind of ownership rights).
2) The large companies technology companies only started thinking about the real change in business and the royalty-distribution after they grew bigger.

Thus, it looked like a challenge: There is too much power at companies without easy access to their data to even check if we would break the law relating to royalties… No APIs to integrate with, no serious alternatives proposed by the newcomers. So how could we, as three young entrepreneurs, create an app that covers all legal aspects, is beneficial to the artists, and viable for us as well?

That would remain an unanswered question for a couple of years. But, we can take a quick look into how the large players evolved over time; YouTube, SoundCloud, Spotify.

During the last years YouTube has fought different battles. They only started paying royalties when they were already an established company. There has been a moment where a large part of the content related to the rights of the Universal Music Group has been taken down. Without consulting with creators of content and end-users. [youtube & fair use] [youtube royalties]

Spotify has a subscription model and therefore a payed plan of which they can fund royalties. At least, one would assume so. But what we are seeing is that Spotify does not aim to put the artist at the centre of the industry as the pay-per-stream goes down while their gross revenue goes up. And then we do not even count in the amount of money resting in a ‘black box’ because the owners cannot be traced. Spotify implicitly says people are getting screwed by the label. But as long as a company like this is aiming for an IPO wherein shareholders have to benefit, and when the three major labels have a 15% stake in the company, we will not see a different approach at all.[spotify & lower rates]   [spotify & pay out royalties]

Then SoundCloud, it has laid-off a large part of their employees. The once so booming start-up focusing on independent artists is in demise.. Why? Probably it is part because they are not able to find a way to monetize their business model in a sustainable fashion. [soundcloud & lay-off]

Thus, being a large player does not make you a good guy. It does also not make it easier to connect the different actors. And it shows the difficulty of the industry if even the big ones still struggle. So how would we survive? What can we learn from the above?

The first lesson is that this royalty-thing is a big deal.. for everybody; it shows the complexity of the industry, it shows the state of the ‘mid-office’ of the industry, it shows the power struggles within the industry. The second lesson is that there is no dominant business model that works for everybody.

And while these discussions revolve around musicians and their work, we are not hearing them, we are seeing the large intermediaries; the record labels and the technology giants.

This leaves us with three focus areas;

  1. The globally coordinated technology infrastructure of the industry with all actors involved
  2. Business models (on every level)
  3. Artist-centric approach


Next blogposts we will explain why we think that being a musician is close to manage a business, how a sustainable business model might look like, and how blockchain is part of this solution.


The Moosty Team